EXPLORATORY STUDY ON THE EFFECT OF LOCATION ON PROJECT COST WITHIN THE GHANAIAN CONSTRUCTION INDUSTRY

ABSTRACT
The cost of a project varies from one place to another and the effect of this variation is due to the difference in pricing of construction resource input from one region to the other. The study embark on an exploratory study on the effect of location on project cost within the Ghanaian construction industry. In achieving the aim for the study, perception of construction professionals regarding the effect of location on project cost in Ghana were gathered. The method selected to collect data for this study is survey questionnaire. A research population considered 41 quantity-surveying professionals who directly deal with cost of construction resource input in various quantity surveying institutions as the targeted group for information. Frequency tables, percentages, pie charts, and relative important index (RII) was used to present the results. Results from the study noted that location of a project has effect on the cost level of Construction resource input. In addition, Cost of transportation is the most influenced factor affecting cost of construction resource input. The study recommends that Ghana Institution of Surveyors (GhIS) and Architectural and Engineering Service Limited (AESL) should come together to outline the process and method, as well as providing information for developing this new index.


CHAPTER ONE 
INTRODUCTION 
1.1 BACKGROUND OF STUDY
The construction industry could be defined as an integral division of economy, which take care of planning, designing and constructing of physical infrastructure such as roads, hospitals, schools, housing and enhanced facilities for other industries. Construction is a service market, responsible for the obtaining its inputs from various sectors which are mostly interrelated and interlinked in a complex manner (Ofori, 1980). Construction has its end products to be site related and include deliverables that go through various process of putting together resources such as materials, labour and plant over an expected duration (Owusu-Ansah, 2014). Quartey (2013) asserted to the fact that the industry can be responsible for up to 20% of the national economic growth and employs up to 12% of the total labour force.

The total cost of construction projects is mostly established by summing the cost of materials, construction plant and equipment, labour, overheads and profits (Seeley, 1995). Normally, potential clients depend on construction expertise to determine the possibility and practicability of an intended project. Cost estimation serves as one of the essential activities performed in order to satisfy clients’ search for project cost (Rowings, 2003). If the initial cost estimate is expensive, it will discourage the client from continuing further with the project and if it is too low, it is perceived that no quality works would be done and most cases it may end up in dissatisfaction on the part of the client (Kissi et al., 2015). As soon as project ideas are conceived, cost estimation is used to define the necessary financial commitment needed to build the facility. Estimates are not just prepared but reviewed frequently as the project scope and demands increases, and for most situations, used throughout the entire construction process.

To answer the most asked question, “What would be the cost of this project?” estimate must be prepared. Obviously, the exact cost of project cannot be determined unless the project is completed. For investors to be aware of the extent of their investment, some form of approximate expected costs of construction project should be established. The success of most construction project someway-somehow relies on the accuracy of construction costs estimation. Conventionally, cost estimates play an important role when it comes to measuring construction costs before their occurrence and evaluate their feasibility and profitability.

According to Abdou et al. (2004), construction cost estimation is an important task in cost management processes but it is often carried out under settings of uncertainty. The costs accompanying construction projects of tomorrow around the world are both varied and unpredictable. The erratic conditions of commodity prices change of government and currencies fluctuations conspire to make project investment and development decisions highly complicated and burden with risk (Neal and Rawlinson, 2016).

The more negligible an estimate’s variance with respect to the actual cost of the project, the more reliable the information provided becomes and the better decision-making processes can be tackled on the project site. The accuracy of cost estimate will rely on available information and tools used at each phase of the project (Kehinde et. al, 2006). The performance of every construction project is dependent on its cost models. Therefore, in order to make good judgement on project design and cost, it is necessary to use an appropriate cost model (Hakan and Elcin, 2007).

Additionally, the Cost Indices endeavour to ascertain the mean variance in the project cost incurred by clients for a fixed resource (Gonglin and Xiangrong, 2010).

Kyeong et al. (2008) asserted that though construction projects’ do not change in terms measure and use, their final account is changed by location, client’s specification, economic condition, time, site, technological advancement and alternative components. With regard to time, building cost indices may be used to assess the differences in cost of project at different dates (Gichunge et al., 2010).

1.2 PROBLEM STATEMENT
Rising cost of construction input resources has been one of the major setback for indigenous contractors in Ghana. However, it is a well-known fact that instability and uncertainty in the prices of construction resource input increases the risk of contractors in fixed-price contracts and may settle at bid inflation as well as price speculation (Ilbeigi et al., 2014). According to Hakan and Elcin (2007), as the construction sector matures, projects are getting more sophisticated and their sizes are getting bigger. Hence, it is becoming more challenging to complete the projects within estimated cost limits and on time. Construction professional are faced with risk and uncertainties during the construction process which have resulted in some difficulties, thus the decisions to be taken on project may be deferred (Hakan and Elcin, 2007).

The Building and Road Research Institute (BRRI) a divisional department of Council of Scientific and Industrial Research (CSIR) which was established 1968 provides updates on relative price changes of construction input resources. Adorbor (2014) asserted that CSIR-BRRI used to publish monthly construction cost indices developed with the local price adjustment formula (LPAF) using four component parameters of the unit rate. These component parameters are; foreign exchange of all inputs, local raw material input, local labour input and fuel cost. The Ghana Statistical Service (GSS) on the other hand published the Prime Building Cost Index (PBCI), used by Consultants in evaluating fluctuation on abandoned or delayed construction project.

There are indeed several timeline approaches in adjusting cost of construction. These construction cost fluctuations adjustment procedures are mostly influence by time but not location. To gauge the reasonable construction cost adjustment escalation in relation to variation in major building material, plant and labour prices, it is therefore essential to investigate into locational factors affecting project cost.

The Researcher strived to find out if location play a role in project cost variance using data from professionals within the construction industry with in-depth knowledge regarding construction resource input that best reflect the actual cost to the stakeholder.

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Item Type: Ghanaian Postgraduate Material  |  Attribute: 73 pages  |  Chapters: 1-5
Format: MS Word  |  Price: GH50  |  Delivery: Within 30Mins.
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