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ASSESSMENT OF FACTORS AFFECTING CONTRACTORS SELECTION

TABLE OF CONTENTS

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background to the Study 1

1.2 Statement of the Problem 2

1.3 Research questions 4

1.4 Aim and Objectives of the Study 4

1.5 Justification of the Study 5

1.6 Scope and Limitation of the Study 6 CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction 7

2.2 The Nigeria Construction Industry 7

2.3 Construction Procurement Methods 8

2.3.1 Traditional method 10

2.3.2 Design and Build method 12

2.3.3 Management Contracting 13

2.3.4 Construction Management 13

2.3.5 Develop and Construct 14

2.3.6 Turnkey System 14

2.3.7 Partnering 15

2.3.8 Joint Venture 16

2.3.9 Package Deal 16

2.3.10 Direct Labour 17

2.3.11 Public Private Partnerships 17

2.4 Hallmarks of a good Public Procurement 20

2.5 Factors affecting the Selection of Procurement Method 21

2.5.1 Speed 22

2.5.2 Time Certainty 22

2.5.3 Price certainty 23

2.5.4 Flexibility 23

2.5.5 Quality 24

2.5.6 Complexity 24

2.5.7 Responsibility 25

2.5.8 Price competition 26

2.5.9 Risk allocation/avoidance 26

2.5.10 Familiarity 27

2.5.11 Government Policy 27

2.5.12 Dispute and Arbitration 28

2.6 Factors for Measuring Project Performance 29

2.6.1 Time Performance 30

2.6.2 Cost Performance 30

2.6.3 Quality Performance 31

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction 32

3.2 Research Population 32

3.3 Sample Frame 32

3.4 Sample Size 34

3.5 Data Collection Method/Techniques 34

3.6 Data Analysis Method and Presentation 34

3.6.1 Percentile/ Frequency Table 35

3.6.2 Relative Importance Index 35

CHAPTER FOUR

4.0 DATA PRESENTATION AND ANALYSIS

4.1 Introduction

4.2 Data Presentation

4.3 Discussion of Results

4.4 Summary of Findings

CHAPTER FIVE

5.0 CONCLUSION AND RECOMMENDATIONS

5.1 Conclusion

5.2 Recommendations

REFERENCES

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The purchase of everyday items is relatively simple and usually involves some form of evaluation, selection and payment. However with the acquisition of a building or construction facility, there are significant factors associated with the choice of procurement method which will impact on the success of construction project (Office of Building and Development, 1997).

The procurement of construction project is vast in scope because it involves the gathering and organizing of separate individuals, firms and companies to design manage and build a project for specific clients. Procurement comes from the word procure which literally means to “obtain by care or effort; to bring about and to acquire”. System is about

“organized method, approach, technique, process or procedure” (Rosli, Ismail, Asrul, Zainab Wan & Wan, 2006). In this context, procurement system or method can be said to be the management of the total process involved in the construction project delivery i.e. the management of design and production from inception to completion (Ogunsanmi and Bamisile, 1997).

Onwusonye (2007) refers to project procurement as a subset of project life and that which represents the overall methods used by a client and/or representatives to arrive at a tender figure and other operations towards the selection of a contractor to deliver a project at an agreed time and other conditions. Therefore, it determines the overall framework and structure of responsibilities and authorities for participants within the building process thus, a key factor contributing to overall client satisfaction and project success (Love, Skitmore & Earl, 1998). The selection of the most appropriate procurement method is consequently critical for both clients and project participants, and is becoming an important and contemporary issue within the construction industry (SC Quantity Surveyors, 2012).

Since procurement of construction projects cannot be excused from any facet of life whether as individuals, organizations, government at all levels or governmental parastatals and the method used is a key factor that determines project success and satisfaction of both client and other contracting parties, it therefore becomes imperative to evaluate the factors affecting the selection of a procurement method with a view to establishing a simple set of criteria that will help public clients in choosing a procurement method.

1.2 Statement of the problem

It has been observed however that many clients have been selecting procurement systems in a cursory manner, and some clients even use a specific procurement system by default without making a deliberate choice (Thomas, Duc Thanh Luu & Swee Eng Chen 2002); without proper consideration of the procurement method that will best suit their needs and that of the project. Others base it largely on their familiarity with a particular procurement method (Okunlola, 2012). This has resulted in the construction industry’s poor performance (Maizon, Mellisa, Tay, Shim, Ng & Ng 2006). Employing an inappropriate procurement system may also lead to project failure in terms of time and cost overruns (Thomas et al., 2002) which is presently a bone of contention in the Nigerian construction industry.

In addition, there are various procurement systems, as will be discussed later in the literature review, available in the construction industry now days and coupled with the rapid increase in number of differing procurement systems; there exists a need for more systematic method of selection (Hibberd and Djebarni, 1996). Also, since each procurement method has its distinctive characteristics in terms of pre-tender and post tender activities and processes, division of risks between client and contractors, and the effectiveness of project monitoring and control, advantages and constraints which will have effect on the cost, time and quality of the project i.e. the project performance (Rosli et.al, 2006). In the same vein, the selection of procurement system is a very important task for clients and its importance cannot be under-estimated. This statement becomes apt when viewed against the fact that despite the various and ever increasing number of procurement methods, no single system best satisfies the needs of a client in all situations and neither that of different clients in the same situation (Maizon et.al, 2006). Each project has its own characteristics and requirements. According to Al Hazmi and McCaffer (2000), for a project to be successful, the procurement method must address the technicality of the project alongside the client’s needs.

Also, various selection models have been derived to help clients and consultants in choosing the right procurement system. For example, the Project Procurement System

Selection Model (PPSSM) (Al Hazmi and McCaffer, 2000), Multiple Criteria Decision

Support System (MCDSS) (Mahdi, Riley, Fereig & Alex, 2002), Procurement Method Analysis (PROMA) (Okunlola, 2012). However, despite the usefulness of these models, they are highly accompanied by complex and comprehensive mathematical techniques and thus require a high level of user’s experience.

Thus, in view of the cursory manner that many clients have imbibed in choosing method of procurement, the ever-increasing variations of procurement method now available to choose from, talk less of the fact that no single procurement method best satisfy client’s need in all situations, it may be a daunting task for clients to carry out a study of the procurement method that best suit the project circumstances. It is thus important to evaluate the factors affecting the selection of a procurement method with a view to establishing a simple set of criteria that will help public clients in choosing a procurement method.

1.3 Research questions

The following research questions will serve as a guide in the course of this research work:

What are the various procurement methods used for construction works in Ondo

State, Nigeria?

What factors should be considered in the choice of procurement methods for construction works in Ondo State, Nigeria?
What relationship exists between procurement method used and the cost and time performance of the construction project?

1.4 Aim and Objectives of the Study

This research aims to evaluate the factor that affects the choice of procurement method with a view to helping clients and consultants to be more selective in their choice of procurement system.In order to achieve this aim, the objectives of the study are to:

identify and asses the various methods of procurement used for construction works in Ondo State, Nigeria.
identify and asses the various factors that affect the choice of procurement methods for construction works in Ondo State, Nigeria.
establish the relationship between procurement method used and the cost and time performance of the construction projects in Ondo State, Nigeria.

1.5 Justification of the Study

Various researchers have made a lot of efforts on procurement method selection. For example, Love et al. (1998) concluded from an empirical research finding that similar clients do not in general have similar needs in their procurement objectives which may of course be due to the different nature of their individual projects. The study approached the topic from the client, consultant and contractors viewpoint. However, in its findings, contractor respondents were found to have a bias towards design and construct methods of procurement system and thus were excluded from the analysis. This is due to the fact that the perspective of client, contractor and consultants may vary when it comes to factors to be considered in choosing a procurement method. Thus, this study aims to narrow down its focus on clients only since an accurate identification of the client’s requirement largely determines the procurement method to be used. In a similar study, Maizon et al (2006) presented various factors influencing the selection of procurement systems by clients in

Malaysia. The study took a holistic approach of these factors from client’s perspective. However, clients can be divided into two types. There are the public clients and private clients (Maizon et al, 2006). The public clients consist of Government Funded Agencies, Ministries and Local Authorities. The private clients consist of property developers, owneroccupiers and investors. Thus, this study aims to narrow down its focus on public clients only because they by far represent the largest procurer of projects in the country (Chima and Ofong, 1999).

Thus, this study aims at assessing the various construction procurement methods available in the Nigerian construction industry with a view to evaluating the factors to be considered before employing any type of procurement method.

1.6 Scope and Limitation of the Study

This study focuses on evaluating the factors that has to be considered in the choice of procurement method for clients. The area of work of the study focuses on governmentfunded organizations namely Ministries, Agencies, Local Governments and Tertiary Institutions in Ondo state responsible for carrying out the procurement of construction works through a procurement/project/works department within their organization. Ondo state was chosen as the scope due to its proximity to the institution where this research work is being carried out. Thus, projects executed or financed by individuals, property developers, owner occupiers and developers are not bounded by the findings of this research.

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