Overrun causations under advance payment regimes

Abstract

Purpose Evidence suggests project owners could use advance payments to prevent cost escalations. The purpose of this paper is to elicit the relationships between causations of overruns when advance payments are issued to contractors. Design/methodology/approach In total, 97 responses from a questionnaire survey were analysed. Additional data on 51 projects, completed between 2000 and 2014 under different advance payments regimes, were also obtained and analysed. Findings Project owners issue advance payments to contractors so as to avoid delays. However, statistical correlation between advance payments and overrun causations are not significant. Although cost overruns were higher in large projects than in small projects, schedule overruns were more in small projects than in large projects. Schedule overruns were caused most significantly by contractors’ site management approaches. Design and documentation issues were identified as the most prevalent cause of cost overruns. Regression models are proposed to elicit overruns when advance payments are issued. Practical implications Extant debates on project overruns in construction and project management literature are robust. Nonetheless, the study elicits considerable knowledge gaps regarding the roles of advance payments in fostering project performance. Originality/value This pioneering work indexes the relationship between advance payment and project overruns in Nigeria. It is also the first attempt to document the probability distribution of overruns in Nigeria, particularly under specific advance payment regimes.

Causes of Delay in Power Transmission Projects: An Empirical Study

“…and A.A. Abdel-Hakam [46] Weather conditions, shortage (availability) in construction materials, slowness of the owner decision making process, poor site management and supervision by contractor, shortage of labor, accidents/mistakes during construction, slow delivery of materials, construction methods, shortage in equipment/insufficient numbers, financing by contractor during construction 4 Bruland, A., N. Dmaidi, and I. Mahamid [48] Political situation, segmentation of the west bank and limited movement between areas, award project to the lowest bid price, progress payment delay by owner, shortage of equipment 5 Kaliba, C., M. Muya, and K. Mumba [49] Delayed payments, financial processes and difficulties on the part of contractors and clients, contract modification, economic problems, materials procurement, changes in drawings, staffing problems, equipment unavailability, poor supervision, construction mistakes, poor coordination on site, changes in specifications, labor disputes and strikes Delay in progress payments, defective planning, delay in delivery of materials, unforeseen site condition, poor site management by contractors, consultant's late approval of tests and inspection, lack of communication between the project parties, delays in drawings approval 2 Mpofu, B., et al [96] Unrealistic contract duration imposed by client, incomplete design at the time of tender, too many scope changes and change orders, inadequate planning and scheduling, poor project planning and control Labors rework, rework by consultant workforce, operation suspension, delay in progress payments, ineffective planning and scheduling of project, low productivity level of labors, change orders in documents, error in execution 5 Georgy, M., M. Kadry, and H. Osman [99] Delays in site possession, change orders, unexpected adverse weather conditions, unavailable or limited mobilization area, poor planning, lack of adequate project coordination, issues clearing customs, delay in material fabrication, obstruction to owner-controlled site access, theft 6 Famiyeh, S., et al [100] Financial problems, unrealistic contract durations imposed by clients, poorly defined project scope, client-initiated variations, underestimation of project cost by consultants, poor inspection/supervision of projects by consultants, underestimation of project complexity by contractors, poor site management, inappropriate construction methods used by contractors, delays in the issuance of permits by government agencies 7 Oluwole, A. [101] Design and documentation issues, effectiveness of financial management approaches, project management and contract administration approaches, efficiency in human resource, efficiency of materials and plant resources, contractor's site management style, information and communication technology tools, external factors 8 Agyekum-Mensah, G. and A.D. Knight [102] Inadequate planning, finance and payment, slow in approving, variation, ground condition, labor supply and subcontractors, design changes, material shortage, manufactured and imported items, site management, weather, fluctuation, construction mistake, contractors experience, contingency or unforeseen 9 Adam, A., et al…”

Attributes and impact of advance payment system on cash flow, project and organisational performance

“…Advance payment system and project success Various studies have linked APS to project success (Aje et al, 2017;Oke et al, 2013;Motawa and Kaka, 2009;Li et al, 2005) describing it as a strategic approach to ensuring a project is completed to prescribed standards of conformance (frequently delineated in terms of time, cost quality parameters as stated in the contract documents). Given this context, Jagboro (1998) described APS as offering strategic value in the business environment.…”

Causal relationship between material price fluctuation and project’s outturn costs

“…Causatives can occur without hurting project budget. Aje et al (2017) presented some project samples where delays in completion and scope variation did not influence pre-contract estimates.…”

“…Causatives can occur without hurting project budget. Aje et al (2017) presented some project samples where delays in completion and scope variation did not influence pre-contract estimates. Ali and Kamaruzzaman (2010) conclude most estimates vary from outturn costs because of wrongful application of estimation methods that often lead to poor outcomes.…”