The Effects of Project Planning Techniques on Contractors Profit

The Effects of Project Planning Techniques on Contractors Profit

Chapter One of The Effects of Project Planning Techniques on Contractors Profit

BACKGROUND OF THE STUDY

Projects are used in all economic and non-economic fields as mean of organizing the activity, aiming the achievement of desired objectives. There is a direct relationship between projects, projects portfolio, programs and the organizational strategy. Projects, as the main way of creating and dealing with change (Cleland, Gareis, 2006), are used to implement strategies. Meskendahl (2010) refers to projects as the central building block used in implementing strategies, therefore business success is determined by the success of the projects. A project is an individual or collaborative enterprise, possibly involving research or design that is carefully planned, usually by a project team, to achieve a particular aim New York Time (2009). A project is also temporary because it has a defined beginning, end time, and defined scope and resources (Cathy, 2009). A project is unique because it is not a routine operation, but a specific set of operations designed to accomplish a singular goal. Based on these characteristics, carefully it is imperative to plan to achieve targeted outcome. Thus; Project planning can be defined as a part or branch of project management, which relates to the use of schedules to plan and subsequently report progress within the project environment.

Dubois and Gadde (2002) described the construction industry as decoupled and McKinsey (2017) confirmed that it is still true. The lack of coupling is present both between the construction project and its subcontractors as well as between the project and the parent company and other projects. This hampers the possibility to have a successful coordination of resources on a portfolio level within the contractor, as resources are in many cases utilised from a common resource pool (Engwall and Jerbrant 2003).The construction industry therefore embraces a wide range of loosely integrated organizations that collectively construct, alter and repair a wide range of different building and civil engineering projects. Individuals, organizations and government need to carry out some form of project planning for building and civil engineering project before embarking on whatever activity they are engaged to do. According to Lock (2002), the principal identifying characteristics of a project is its novelty, it’s a step unknown fraught with risk and uncertainty. No two projects are ever exactly alike and even a repeated project will differ from its predecessor in one or more commercial, administrative and physical aspect.

Construction is also characterized by time and cost intensive production processes which make it prone to project risks and failure, mainly in terms of time and cost. In practice, this means, that the performance of construction projects is usually low. In particular, construction projects are very often delayed and over budget. This is not just due to problems faced during project scheduling, but also during related processes.

Laryea and Hughes (2009) attempted to find how contractors’ in Ghana include financial risk in their bid prices. The research showed that besides having risk allowances as lump sums or percentage allowances, the method used is neither scientific nor informed by any empirical evidence. Ojo (2010) found that design changes, financial losses and inadequate specifications were the risk factors with most impacts on construction sites but the study did not highlight any Project project planning (PRM) technique used by Contractors to respond to such risks.

Another research carried out in Nigeria on this subject was on the evaluation of key risk factors and the measures to mitigate their effects on construction projects (Dada, 2010). Though the research found financial, political and physical risks as the most significant, the use of contingency sum and insurance cover were adjudged to be the most effective means of mitigating risk.

However, no study has reported on the PRM practices used by Nigerian Contractors in redevelopments projects, with their attendant problems and challenges in terms of scoping.