Fatemeh Akbari* Master of Industrial Engineering Islamic Azad University, Zahedan Brench, Iran

Transcription

1 To Design and to Present a Tool to Prevent Extra Expense Incurring in School Reconstruction Projects (A case study: Reconstruction Department affiliated to School Equipment and Development Unit in Sistan and Baluchestan Province, IRAN) Fatemeh Akbari* Master of Industrial Engineering Islamic Azad University, Zahedan Brench, Iran Dr. Bagher Kord Associate Professor of Sistan & BaluchestanUniversity Department of Administration Management, Po Box Dr. Alireza Shahraki Assistant Professor of Sistan & BaluchestanUniversity Department of Industrial Engineering, Po Box Abstract Project expense management is a significant issue for management of reconstruction projects. Today, the issue of comprehensive and proper management of expense in a project with planning of resources, expense estimate, budgeting and expense control as its components is the main concern of project authorities and practitioners. The present study was conducted in School Reconstruction Organization in Sistan and Baluchestan Province and its purpose is to identify and prioritize the factors impacting on expenses incurring more than the estimated one. It is attempted to develop a model to prevent similar extra expenses. The model incorporates two tools so called Critical Factors Checklist and Secondary Factors Checklist. Keywords: School reconstruction projects, School Reconstruction Organization in Sistan and Baluchestan Province, real expenses, estimated expenses, Critical Factors Checklist, Secondary Factors Checklist COPY RIGHT 2013 Institute of Interdisciplinary Business Research 295

2 1. Introduction The management of national reconstruction projects is regarded significant in terms of 20- year Scope of National Development Plan as well as the short term 5-year plans because meeting the goals of the plans depends on successful implementation of every project. This success requires that current capabilities in national and reconstructive projects along with theoretical and academic studies are evaluated as a real basis for elimination of pitfalls and executive constraints. (Rezazadeh Azar, 2000) Organizations often attempt to find methods to elevate productivity, to minimize expenses based on their organizational strategy and to raise their profit. In project-oriented organizations, specific circumstances are dominant for leadership and management due to diversity of projects. Management concerns for on time operations with predetermined expenses and quality, in one hand and achieving higher economic incomes, on the other hand. Therefore, it seems inevitable to make use of appropriate managerial methods. (Odeh & Battaineh, 2002) (Kwak & Anbari, 2009) School reconstruction organization in Sistan and Baluchestan Province concerns about the same issues. An interview with the senior manager of that organization showed that most of reconstruction projects have already been implemented by this organization or they are being implemented currently with the real expenses being higher than the estimated expenses and the organization and the contractors have experienced loss. Therefore, currently the managers of the organization mainly concern about finding a solution for the problem in terms of estimating the accurate expenses (in the step of project definition). Thus, the main purpose of this study is to develop a tool to give a solution to the problem. Certainly, if current study achieves its goal, it would help senior management in the organization and the contractors to prevent and avoid a set of non-estimated extra expenses and related loss. We seek to respond following questions as it is explained above in brief: In reconstruction projects for School reconstruction organization in Sistan and Baluchestan Province what factors lead to real extended expenses higher than the estimated expenses? How are the above factors ranked in terms of their significance and impact on the expense? What is appropriate model for estimating accurately these defined and rated factors for reconstruction projects in school reconstruction organization in Sistan and Baluchestan Province? 2. Study Background In this section, we present the results of the studies conducted to explore the reasons why the projects are delayed and the factors impacting on incurring extra expenses for the projects in other countries and in Iran as well: Jordan: Economical problems for the contractor Contractor interfere and change in project by the contractor COPY RIGHT 2013 Institute of Interdisciplinary Business Research 296

3 Weak management of the project by the contractor Loss of skillful workforce Loss of appropriate experts in contractor organization The studies in Jordan show that firstly the employer and secondly the contractor can be accountable for above mentioned drawbacks. (Marnewick & Labuschagne, 2011) Malaysia: Inaccurate planning by contractor Inappropriate management of workshop Contractor inadequate experience Inadequate and non- on time financing of the project Minor contractors Loss of construction materials The study showed that contractor was noted as main factor of delay but it is notable that the employer was the main cause. (Sambasivan & Soon, 2007) Egypt: Contractor problem of cash Employer interfere and change of project span Not appropriate financing the project by employer (Rezazadeh Azar, 2000) Ghana: Delayed finance Weak contract Construction material weak procurement High inflation Contractor financial problems The study shows that employer is mainly responsible for the delay. Inflation is noted as an independent factor. (Abdolaziz, 1998) COPY RIGHT 2013 Institute of Interdisciplinary Business Research 297

4 Iran: Table1. Delay reasons for Iranian constructive projects by order in view of 3 groups (employer, contractor and consultant) (Rezazadeh Azar, 2000) Respondents employers contractors consultants Delay reasons by order Workshop weak management Payment for the inventories, dismissal, etc. Design issues Human resource skill and profession Delay in executive resolutions Contractor inadequate experience Utilized executive procedures Payment for the inventories, dismissal, etc Inadequate acquaintance of the project area Inadequate estimate of project expenses Delay in executive map resolution Inaccurate planning Conventional tender for contractor selection Contractor financial power Workshop weak management Contractor inadequate experience Payment for the inventories, dismissal, etc Human resource skill and profession Inadequate estimate of project expenses Delay in executive map resolution Inappropriate planning 3. Research Methodology The present study is exploratory and applied and the designed analysis unit is individual. The statistical population (n=95) includes managers, contractors and project managers and consultants as the experienced groups in school reconstruction organization in Sistan and Baluchestan Province. The sample group (n=76) was selected randomly based on proportionate stratified method. It is notable that three common tools (library, interview and questionnaire) were used to collect data as follows: COPY RIGHT 2013 Institute of Interdisciplinary Business Research 298

5 Table 2. Methods and tools for collecting data through different steps of study Step of study Tools and methods for collecting data 1 Problem identification Interview with managers of school reconstruction organization in Sistan and Baluchestan Province 2 Problem explanation Library research 3 Literature review Library research 4 5 Identifying the factors for extra expenses in reconstruction projects of school reconstruction organization in Sistan and Baluchestan Province Factors rating and ranking based on their impact on total project expenses Open questionnaire distributed among senior and middle managers and contractors and projet managers in school reconstruction organization in Sistan and Baluchestan Province Closed questionnaire distributed among senior and middle managers and contractors and projet managers in school reconstruction organization in Sistan and Baluchestan Province SPSS software was used to analyze the data in addition to descriptive and inferential statistics (specifically Friedman Test). 4. Data analysis results In the present study, open questionnaire was used to identify the expense incurring factors. The sample group (n=76) was received the questionnaire based on their knowledge and experience to identify the factors impacting on incurred extra expenses in reconstruction projects in Open questionnaire distributed among senior and middle managers and contractors and project managers in school reconstruction organization in Sistan and Baluchestan Province. The respondents proposed factors were grouped into 7 general groups (Table3). 1 2 Table3. The factors impacting on incurred extra expenses in views of the respondents factor Inaccurate estimation of the project expenses Management change in employer organization Reason why it is emerged Contractor inappropriate acquaintance of required resources Contractor fault in terms of current price or future price estimation Contractor lacking experience and knowledge about setting expenses No attention to economical process Sudden non-estimated inflation due to social and political issues Change in senior management in the province Inconsistent administration system in country Prevention based on capability of school reconstruction organization in Sistan and Baluchestan Province Ensuring that contractor has identified the financial resources accurately and comprehensively Ensuring that contractor has measured current and future price accurately Consulting with financial and economic experts for accurate estimation of resources in forthcoming months and years Employer organization system and process empowerment so that management change would not influence in project operations COPY RIGHT 2013 Institute of Interdisciplinary Business Research 299

6 Inefficient managers in contractor organization with less experience No necessary infrastructure in project site No cooperation from local population in project site Workforce shortage in the cite of project 7 Delays of projects No effective and efficient system of employment and training in contractor organization to nurture capable managers No supervising by employer over executive team in contractor organization Weak training system in country for nurturing capable project managers No efficient investigation in project definition step in terms of existing infrastructure such as road, water supply and electricity Local population are not aware of project importance and use Local people are concern about the consequences of the project Complaints by local people that the land is acquired illegally Special circumstances of the site of project (in terms of suitable workforce). Thus, workforce partly is provided from far away sites and extra expenses are incurred such as higher wages, commuting, absenteeism and leave. Delay of employer in terms of paying for expenses Weak management of contractor in workshop Underestimating the expenses of project Delay in maintenance of the equipments Bad weather condition Full resume is required for project manager to be analyzed in employer technical committee to confirm and establish his or her capability for management of the project A checklist addressing the essential infrastructure for implementing construction projects (in project definition step) Explaining for local people about the benefits, the duration, the executive team and their contribution in quick advance of the job Contribution of local people in finance of project Ensuring that contractor is acquainted with social circumstances of the site with exact estimation of potential workforce in the site and the possible expenses Improvement of bureaucracy in employer organization to pay for the expenses as quickly as possible if confirmed To visit workshop periodically to be ensured that the site is managed properly (by help of experienced observers) Alternation in conventional tender system (contract is assigned to a person who offers the lowest price in tender). The tender committees must reject he offers with no real analysis of expenses Explaining the weather and climatic and geographic condition as well as social situation of the site for contractors COPY RIGHT 2013 Institute of Interdisciplinary Business Research 300

7 In next step, it was tried the above mentioned 7 factors are rated using the closed questionnaire in terms of their impact on non-estimated extra expenses using SPSS software and Friedman Test. It is noted that the 7 factors are addressed in the software as follows: Var00001: project expenses inaccurate estimate Var00002: management change in employer organization Var00003: inexperienced and inefficient managers in contractor organization Var00004: lack of essential infrastructure in site of project Var00005: local people do not cooperate in site of project Var00006: inadequate workforce in site of project Var00007: project delay It is also noted that significance rate software analysis output is: sig=0.05 Table4. test statistics for general rating of the factors N 76 Chi-Square Df 6 Asymp. Sig The table4 indicates that respondents believe the seven factors ratings are not the same (sig<0.05). Table 5 shows the ratings of the seven factors in views of the respondents as output of the software analysis: Table5: The factors ratings in terms of their impact on reconstruction projects extra expenses in school reconstruction organization in Sistan and Baluchestan Province. Ranking factor 1 Inaccurate estimation of project expenses 2 Project delay 3 Inexperience project managers in contractor organization 4 Lack of essential infrastructure in the site of project 5 Inadequate workforce in the site of project 6 Local people do not cooperate in the site of project 7 Management alteration in employer organization 5. Conclusion and presenting tools to prevent non-estimated expenses In this section, we try to conclude the study and to show how to prevent extra expenses incurred by the identified factors in reconstruction projects in school reconstruction organization in Sistan and Baluchestan Province. Therefore, table6 and table7 as two checklists are developed. The Table.6 (so- called critical factors) refers to the most significant factors (1-4 ratings in Table.5). The Table.7 (socalled secondary factors) refers to ratings 5-7 in Table.5 or less significant factors. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 301

8 It is suggested that first of all a technical committee evaluates the checklist items in order that school reconstruction organization in Sistan and Baluchestan Province can determine how much the requirements in checklists for any project are realized by a contractor before it is assigned to. For example, if a project fulfills higher percentage of the checklist items than other project, it would be measured as an appropriate one with lower extra expenses. Of course, secondary factors checklist is also important and must not be ignored. Otherwise project would be incurred by heavy extra expenses. On the whole, it seems that proper use of both checklists can prevent non-estimated extra expenses in school reconstruction organization at acceptable rate (more than what expected initially). COPY RIGHT 2013 Institute of Interdisciplinary Business Research 302

9 Table 6. Checklist of critical factors Factors Realized Unrealized accurate estimation of required resources for project by contractor Contractor has consulted with economic and financial experts about the accurate prices (documents mentioned) accurate current prices mentioned by contractor Accurate future prices mentioned by contractor Employer organization has planned to evaluate the contractor reports for payments continuously It is planned to visit contractor workshop periodically ( for ensuring proper management by contractor) In tendering process, all offers are evaluated not the lowest offer only The selected contractor is acquainted with geographical and weather conditions of the site of the project (documentation and interview with the contractor are indicated) Contractor has reported the manager of project to the reconstruction organization (with accurate resume) The suggested project manager resume illustrates experience and qualifications of the manager There are appropriate access road to the site of the project for transportation of staff, equipments and materials Electricity is present in the site Water is supplied in the site Realization rate in percent % COPY RIGHT 2013 Institute of Interdisciplinary Business Research 303

10 Table7. Secondary factors checklist Factors Realized Unrealized Contractor is aware of social conditions in terms of local workforce (documented by expense analysis and interviews with contractor) Contractor has accurate estimation for local workforce Local people are aware of the significance of implementing the reconstruction project Local people are aware of the positive consequences of the reconstruction project Local people are aware of the estimated timing of the reconstruction project Local people themselves contribute in financing all expenses or part of expenses of the project When the project is implemented, there would be no major management change in employer organization Realization rate in percent % COPY RIGHT 2013 Institute of Interdisciplinary Business Research 304

11 References Abdolaziz Morad Darvish (1998)"Project Expense Management" M.S. Final Project, Elmosanat University, Department of Industry. Danayifard, Hasan; Alvani, Seyedmehdi; Azar, Adel (2009)"Methodology of quantitative study in management: comprehensive approach" Tehran, Saffar Pub., 2 nd Edit. Kwak H.Y., Anbari F.T., (2009). "Analyzing project management research: Perspectives from top management journals", Department of Decision Sciences, School of Business, The George Washington University, USA, International Journal of Project Management, Vol. 27, Issue 5, p.p Marnewick C., Labuschagne L, (2011) "An investigation into the governance of information technology projects in South Africa", Department of Business Information Technology, University of Johannesburg, South Africa, International Journal of Project Management, Vol. 29, Issue 6, p.p Odeh, Abdalla M., Battaineh, Hussein T., (2002) Causes of Construction Delay: Traditional Contracts International Journal of Project Management, pp Rezazadeh Azar, Ehsan (2000)"Examining delay reasons in dam construction projects in country and suggestion to lower it" M.S. Final Project in engineering and construction management, Tehran University, Department of Civil Engineering. Sambasivan, Murali and Soon, Yau Wen, Causes and Effects of Delays in Malaysian Construc-tion Industry International Journal of Project Management, pp (2007). COPY RIGHT 2013 Institute of Interdisciplinary Business Research 305