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International Journal of Civil Engineering and Built Environment
Vol.1, No.1, 2014; ISSN 2289-6317 Published by YSI Publisher
30
Factors affecting construction cost performance in project
management projects: Case of MARA
large projects
Aftab Hameed Memon1, Ismail Abdul Rahman1, Mohd Razaki
Abdullah2,Ade Asmi Abdu Azis3 1Faculty of Civil and Environmental
Engineering, University Tun Hussein Onn Malaysia, Malaysia
2Majlis Amanah Rakyat (MARA) 3Universiti Tun Hussein Onn
Malaysia, 86400 Parit Raja - Batu Pahat
Corresponding Author:[email protected]
Abstract
Aim of Study This study has focused on investigating procurement
strategies
adopted in MARA large construction projects. It also identified
various factor affecting construction cost performance of MARA
large construction projects.
Need of Study Very rarely MARA projects are finished within
estimated project
cost. For improving cost performance, it is very important to
identify the reasons affecting cost performance of MARA projects.
Hence, there is a need of study in understanding the reasons and
factors affecting project cost performance of construction
projects.
Research Approach
The project was carried out through interviews and survey using
the questionnaire among the personnel involved in handling MARA
large projects. Gathered data was analyzed statistically using SPSS
software package.
Research Findings This study revealed that fluctuation in price
of the material, cash
flow and financial difficulties faced by contractors, shortage
of site workers, lack of communication between parties, incorrect
planning and scheduling by contractors are most severe factors
while frequent design changes and owner interference are least
affecting factors on construction cost performance in MARA large
projects.
Limitations This study was limited to large construction
projects
administrated by Majlis Amanah Rakyat (MARA) Malaysia.
Importance and Contribution This study has highlighted various
issues causing poor project
performance in MARA large projects. Ranking of the factors will
enable the MARA engineers for taking appropriate actions in
improving the performance of cost in construction projects.
Keywords: Construction Industry, Construction Cost, MARA
Projects, Cost performance, Cost Overrun
I. INTRODUCTION In recent years, Malaysian construction industry
has
recorded an average growth rate of 0.7% [1] compared to GDP
growth of 5.46%. However, the industry is facing a lot of
challenges in achieving satisfactory cost performance [2-4].
Government formed MARA (Majlis Amanah Rakyat) to
strengthen the Bumiputera (Malays and other indigenous
Malaysians) in the areas of business and industry. MARA currently
placed under the Rural and Regional Development Ministry after
briefly controlled by the Entrepreneur and Cooperation Development
Ministry plays an important role in implementing the government
policy. MARA has spent about RM 12 billion in its development since
1st Malaysian plan [5]. A portion of this allocation was spent on
construction. The major issue in MARA large construction project is
the delay in completing its projects. An interview with Tech Art
Executive Director revealed that more that 90% of large MARA
construction project experienced delay since 1984. Most frequent
effects of delay in MARA projects are time overrun and cost
overrun. Studies revealed that time and cost overrun has a linear
relationship with each other [6].
Keeping construction projects within estimated costs and
schedules requires sound strategies, good practices, and careful
judgment. To the dislike of owners, contractors and consultants,
however, many projects experience extensive delays and thereby
exceed initial time and cost estimates. This problem is more
obvious in the traditional or adversarial type of contracts in
which the contract is awarded to the lowest bidder, which is the
strategy in the majority of public projects in developing countries
[7]. In order to manage and control construction projects, there
are various procurements strategies being adopted. Most popular
strategies include traditional, management, integrated services and
in-house teams [8]. These strategies contain various methods of
managing projects as shown in Table 1.
TABLE I. TYPES OF PROCUREMENT METHODS &THEIR VARIATIONS
Procurement Strategy Methods/Techniques
Procurement Strategy
Traditional Lump Sum System/Traditional System/ Design- Bid-
Build/Open Tender Contracts Negotiated Contracts Best Value
Procurement Incentives Contracts
Management Construction Project Management/Contract Management
Construction Management at Risk/Management Contracting
Integrated Design and Build Turnkey System
-
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In-hou
Inbuild/Manaprocu(1) exProjeperfothis sprojeconstbudgethis
consifocusstratecollec
II. A. B
Prconstthat adistinprocumana
1) applieA clicivil the cproduselectspeciappoiof othto
gechoosVariavalueUSAnegotnegotto UKConsadminrelatiand F
2) traditand c
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use
n Malaysian, t/turnkey syagement/Contraurement strategxamine
variousects, (ii) identormance in MAstudy include, cts only.
Alttructions, but iet of $1 milliostudy, project idered as largeses
on projectegies only. Thiction were pers
RELATED W
udget Planningrocurement mtruction procesare used to manct
advantageurement approagement, integr
Traditional Ped to ordinaryent employs anengineering
wconstruction seuce drawings ated after a clfication. Norminted on
fee baher members aet the best posse any suitabations such as e
procurement, while variattiated contractstiated contractsK.
Sometimes,ultant (PMC) nistering the onship and se
Figure 2. Management
tional procuremcomplexity, m
I
Self-PerfoIn-House Job-OrderSeparate C
traditional lumystem and act Manageme
gies [1, 9]. Thiss procurement tifying factors ARA projects.
firstly this pathough, it isin a study of Vn were conside
of budget Re construction s with projectirdly, targeted sonnel
of contr
WORKS
g and Control method is a strss. There are a anage the proces
and disaoaches are wrated services a
Procurement: B projects of mn architect (fororks or other
separately. A and specificatilient is satisfmally, an arcasis as a
leade
and have directssible result, itble variationsdesign-bid-bui,
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incorinto this procu
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mp sum systemConstruct
ent are commos study has beestrategies adopaffecting conHowever,
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aper focus largs difficult to Vietnam projecered as large p
RM 5 million project, seconts managemenrespondent in
ractor firms and
rategy to mannumber of pr
cess where eacadvantages. Iidely discusse
and in house tea
Basically, this moderate size an
r a building) ostructures) and designer is hion while contfied
with the chitect or enger to coordinatt access to the t is normal
fo
s that suits tild, negotiated ontracts are wopen tender
alaysia, both oely adopted andrporates Projecurement to assi.
The typicaeration is show
nt: Basically s focusing on ocurement is p
ournal of Civil
m, design andion Projec
only adopted inen conducted topted in MARAnstruction cose
limitations oge construction
define largects with a tota
projects [10]. Inand above is
ndly, this studynt procuremenncluded in datad client.
nage the entireoven strategiesch has its ownInitially, foured;
traditionalams [9].
procurement isnd complexity
or engineer (forcontractors forired earlier totractors will
be
drawings andgineer will bete the activitiesclient. In order
or the client toto their plancontracts, bes
widely used incontracts and
open tender andd this is similarct Managemenist the client inal
contractuawn in Figure 1
Compared tomoderate size
preferred to be
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tegrated Prment is where other subtasks ganization, oftenals
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Vol. 1 No. 1, 20
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any behalf) workand represent
The typical con is shown i
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Basically construction, aect, are perfortracting firm. S
on managers, mbined togethevices. This procsticated
projectexperience, or
014
company is manage the ment (CM) before any substantial s with
the ting client contractual n Figure 3
nal Method
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Integrated as well as rmed by a Sometimes,
architect, er to form a curement is ts of which r time is of
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Figure 6.
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Cost PerformanCost Performan
ct success. Undwide are expcted in the cociated with almma is
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out worldwrials is a cotruction cost coficant amount ens mostly
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oushki [14] tim
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Sequences of Oper
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plmost every perious and is fs. It requires
his problem of ctries. Overrun ihighlighted by
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cause of lack oagement system
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ngle point ofroject. Design ly used in USAion is also or turnkey
and still wid. The typicaeration is show
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e private compation projects h as engineemay choose to
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damental normmany of constror cost performroblem whichproject
[11]. faced in both dcareful attenticost overrun isin cost is
occury numerous r
these, use or which resuestimated cost
terials during cof availability oms. Further, a he project manst
overruns. Th
many Thai conshighlighted byreases were sig
ournal of Civil
f contact andand build or
A. Similarly inwidely usedsystem was
dely adopted inal contractuawn in Figure 5
ated Procurement
ed Procurement
se procuremenclients such asanies that havehave directly
ers, architectso subcontract a
consultants andbut it retains
forts in projec
m of measuringruction projectsmance. This ish now days isCost
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32
d r n
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nt s e y s, a d s t
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III. DAData
phase focvarious pidentify csurvey waffecting consultanfactors.
Athe degrestrongly agree aparticipatStatisticaused to anto
rankindata colleis considethan 0.3. more than
Distriin figure i.e. 21 ouin the cexperienchad 2-5
yexperienc
and Built Envir
te residential for these incluts and owners
he issues to reconditions wethese, desig
table weather cng materials arerruns [15, 16]. ed that
monthlyconstruction p
ently project fatives highli
ment is the mostin groundwatwere found pdifficulties, m
nces, and escal
ATA COLLECTcollection was
cused on field sprocurement strcommon causewas conducted
construction nts and contracA five point likeee of agreeme
disagree, 2 and 5 stronglted in interviel Package for nalyze the
datag the factors. Rected measuredered low and uReliability is
c
n 0.7 [18].
ibution of respo11. Figure 11
ut of 36 (58.33%construction ince between 6-1years experiencce
less than 2 y
Figure 7. R
ronment V
projects in Kuded frequent s lack of expelated contractoere
major contgn changes, conditions; ande frequently ocIn Ghana,
co
y payments difprojects that leafaces overrun ighted that t
critical factorter projects opoor contractomaterial proculation of
mater
TION AND ANAs carried out instudy and interrategies adoptees of
cost overrd for identifycost performa
ctors for assesert-scale of 1 to
ent of each caudisagree, 3
ly agree. A ews and questSocial Science
a. Data was chReliability desd using Cronbaunacceptable
ifconsidered sati
ondents in term indicates that
%) were experindustry, 7 ou10 years, whilece and only 4
(years.
Respondents worki
Vol. 1 No. 1, 20
Kuwait. The mchange orders
perience in coor, material antributors to cos
inadequate d fluctuations ccurring factorsntractors and
cfficulties is a mad to delay in in cost. Wh
the poor rs in causing coof Ghana, major managemenurement,
poorial prices [17].
ALYSIS n two phases rviews. It aimeed in MARA prun. In the
sec
fying significaance among cssing significao 5 was adopteuse
where 1 r
3 moderately total of 36 r
tionnaire survee (SPSS) versi
hecked for reliacribes the stabach coefficief Cronbach
visfactory if Cro
ms of experienct majority of renced more tha
ut of 36 (19.e 4 respondent(11.11%) respo
ing experience
014
major time s, financial onstruction. nd owners st increase.
planning, in the cost s leading to consultants major issue works
and
hile, client contractor
ost overrun. jor factors
nt, monthly r technical
where first ed to assess projects and cond phase, ant factors
contractors, ance of the ed to assess represented
agree, 4 respondents ey process. ion 17 was ability prior bility
of the ent value. It value is less onbach is
ce is shown respondents an 10 years .44%) had s (11.11%)
ondents had
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IV. A. C
Mlarge traditadoptprojealso classideliveprojenormnorman
aconstcontaworthThis speciMARprojesuper
B. MSt
procuMARwholemanagrantshowmanashow
Fig
Fi
Figu
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RESULTS AN
Classification ofMARA construc
projects. Motional procuremting managemcts which are adopting
ma
ification of theery methods act worth less t
mally consideremally MARA is architect is aptruction at the act
with MARh more than R
large project al knowledge a
RA is adoptingct and as a mrvise and admin
MARA Constructudies revealeurement; tradiRA is organizine the
project.
agement procued first before
w the contractuagement procu
ws their sequenc
gure 8. Contractu
gure 9. Sequence
ure 10. Contractua
I
ND DISCUSSION
f MARA projecction projects aost of the sm
ment while the ment procurem
complex and anagement pre project is basare based on ithan five
milli
ed as a small adopting the tr
ppointed as tconstruction
RA. Contrast tRM 5 million is
normally higand expertise t
g management matter of factnister the entire
ction Procuremed that MARtional and m
ng its own tech. However, if
urement,approva PMC is app
ual relationshipurement whilece of operation
ual Relationship of
e of Operation of M
al Relationship of M
International Jo
N
cts are classified inmall projects majority of lar
ment. In someneed special
rocurement. Ted on its contrits size and coion ringgit
(RMproject. As mraditional procthe leader to site. The lead
to small projes considered asghly complicatto handle it.
Moprocurement ft, MARA enge project.
ment RA is adoptinmanagement. Fhnical teams tof MARA dec
val from LPMointed. Figure p of MARA
e Figure 10 a.
f MARA Tradition
MARA Traditiona
MARA Managem
ournal of Civil
nto 2; small andare adopting
rge projects aree cases, smalknowledge are
Therefore, theract cost but itsomplexity. TheM 5 million)
ismention earliercurement where
organize theder has direc
ect, the projecs large projectted and needsost of the timefor
this kind ofgages PMC to
ng 2 types ofFor traditional administer the
cides to adopM A must be
8 and Figure 9traditional and
and Figure 11
nal Procurement
al Procurement
ent Procurement
l Engineering a
33
d g e l e e s e s r, e e t t
t. s
e, f o
f l, e t e 9 d 1
Figure 1
C. FactoDurin
affecting identifiedcommon shown inpurpose. reliability0.776
whorder to iperformanpresentedof matericost perdifficultieShortage
were 3rdcontracto
Fluctthe fluctuconstructaccordingwhile con
Cash contractodifficultieContractoinfluencesite workbe
facedconsultanthis issue
Shortperceivedrespondendominantrespondensubcontraof the wworkers
abetween prevails.
Lack communiaffecting contractopoor manbetween t
and Built Envir
11. Sequence of O
ors Affecting Cong interview p
project cost pd. Literature s
factors affecn figure II. The
Data collectey. Cronbach's Ahich means dataidentify the rannce,
data was
d in table III. Bals is the most
rformance folles faced by cof site workersmajor factor a
ors were found
uation in pricuation of materiion cost. Howeg to client
flucntractor ranked
flow and ors: Contractoes as 2nd factors believe thie other
causes kers and ineffecd due to delant and late in may as well
se
tage of site wd by Client. nts. Howevert while contrants claim
thatactor seems lar
works are contare hired by thcontractor and
of communication between
factor. Clienor ranked as 4tnagement, selethe contractor a
ronment V
peration of MARA
Construction Coprocess, a totalerformance in
showed that thcting cost perse factors were
ed through quAlpha of the gaa collected in anks of factors as
analyzed witBased on table
significant faclowed by Cacontractors as s, lack of comm
and incorrect pas 4th ranked fa
ces of materiaial is the most ever, it is very
ctuation in pricd as 1st.
financial ors rankled ctor while clieis issue is versuch as site
m
ctive planning aay approval monthly paymettle other issue
workers: ThisIt is 3rd ran
, client rankeactors ranked t the problem rgely contributtracted
to sub
hese sub-contrad subcontractor
nication betwn parties is alsnts ranked thth. Lack of co
ection of propeand other partie
Vol. 1 No. 1, 20
A Management Pro
ost Performancl of 15 commMRA large pr
he identified rformance wore investigated f
uestionnaire waathered data waacceptable for aaffecting constrth
SPSS 17. RIII, Fluctuatio
ctor affecting coash flow and
second rankemunication am
planning & schactor.
als: Table III dominant facto
y interesting toce was ranked
difficulties cash flow andent ranked samry critical
whemanagement, sand schedulingof work com
ment from clienes simultaneou
s factor is signked factor bed this factor
it as 12th rabetween cont
te to this causecontractors, m
actor. If there ar, automatically
ween parties:so ranked as thhis factor as oordination maer
material andes.
014
ocurement
ce mon factors roject were factors are rldwide as for ranking as
test for as found as analysis. In ruction cost Results are on in
prices onstruction
d financial ed factors.
mong parties heduling by
shows that or affecting
o know that as 6th rank
faced by d financial me as 5th. ere it may shortage of g. This
may mpleted by nt. Settling
usly.
gnificant as by overall r as most ank. Client tractor and e. As
most
most of the are disputes y this issue
Lack of hird highest
3rd while ay result in d problems
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Built Environment Vol. 1 No. 1, 2014
34
TABLE II. RANKING OF FACTORS AFFECTING CONSTRUCTION COST
PERFORMANCE
S.No Causes [10]
[`11
]
[17]
[19]
[20]
[21]
[22]
[23]
[24]
[25]
[26]
[27]
[28]
[29]
[30]
1 Incorrect planning and scheduling by contractors 2 Fluctuation
in prices of materials 3 Frequent design changes 4 Unforeseen
ground conditions 5 Inadequate contractor experience 6 Change in
the scope of the project 7 Low speed of decisions making 8 Cash
flow and financial difficulties faced by
contractors 9 Contractor's poor site management and supervision
10 Practice of assigning contract to lowest bidder 11 Lack of
communication among parties 12 Shortage of site workers 13 Delay in
Material procurement 14 Underestimate project duration resulting
Schedule
Delay 15 Incompetent Project team (designers and
contractors)
TABLE III. RANKING OF FACTORS AFFECTING CONSTRUCTION COST
PERFORMANCE
S.No. Factors Overall Client Respondents Contractor
Respondents
Mean S.D Rank Mean S.D Rank Mean S.D Rank
1 Fluctuation in prices of materials 3.97 0.97 1 3.62 0.87 6
4.47 0.92 1
2 Cash flow and financial difficulties faced by contractors 3.89
1.21 2 3.90 1.18 5 3.87 1.30 2
3 Shortage of site workers 3.78 1.12 3 3.95 1.02 4 3.53 1.25
7
4 Lack of communication among parties 3.78 1.07 3 4.0 0.78 3
3.78 1.07 4
5 Incorrect planning and scheduling by contractors 3.67 1.12 4
4.29 0.78 1 2.8 0.94 12
6 Contractor's poor site management and supervision 3.67 1.06 4
4.24 0.70 2 2.87 0.99 11
7 Delay in Material procurement 3.53 0.94 5 3.33 0.91 9 3.8 0.94
3
8 Underestimate project duration resulting Schedule Delay 3.47
0.91 6 3.47 0.75 7 3.47 1.13 8
9 Unforeseen ground conditions 3.39 0.96 7 3.14 0.96 10 3.73
0.88 5
10 Low speed of decisions making 3.36 0.90 8 3.38 0.80 8 3.33
1.04 9
11 Inadequate contractor experience 3.36 1.10 8 3.95 0.80 4 2.53
0.92 13
12 Change in the scope of the project 3.33 0.76 9 3.14 0.65 10
3.60 0.83 6
13 Practice of assigning contract to lowest bidder 3.28 1.28 10
3.09 1.19 11 3.53 1.34 7
14 Frequent design changes 3.19 0.95 11 2.90 0.94 12 3.6 0.83
6
15 Owner interference 2.89 0.95 12 2.8 0.81 13 3.0 1.13 10
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Built Environment Vol. 1 No. 1, 2014
35
V. CONCLUSION Study was carried out to investigate various
procurement
strategies adopted in MARA large construction projects. Results
showed that MARA projects are classified as small and large project
based on cost of project cost. Project worth contract amount above
5 Million Ringgit were regarded as large construction projects. In
order to manage projects, traditional and management procurement
strategies are adopted. Also, comprehensive study was conducted to
identify the factors affecting construction cost performance.
Through a questionnaire survey amongst contractor and client
personnel, it was perceived that fluctuation of material prices was
the most dominant factor affecting construction cost performance
followed by cash flow and financial difficulties faced by
contractors. Shortage of site workers and lack of communication
between parties were found as third major factors affecting
construction cost performance.
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