Causes of delay and cost overruns in construction of groundwater projects in a developing countries; Ghana as a case study

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1 International Journal of Project Management 21 (2003) Causes of delay and cost overruns in construction of groundwater projects in a developing countries; Ghana as a case study Yaw Frimpong a, *, Jacob Oluwoye b, Lynn Crawford c a 1/9-11 Oxford Street, Merrylands, NSW 2160, Australia b University of Technology Sydney, PO Box 123, Broadway NSW, 2007 Sydney, Australia c Project Management Program, University of Technology Sydney, PO Box 123, Broadway NSW, 2007 Sydney, Australia Received 28 June 2001; received in revised form 19 September 2001; accepted 27 September 2002 Abstract Delay and cost overruns are common in construction projects and groundwater construction projects in Ghana are not an exception. The paper presents the results of a questionnaire survey conducted to identify and evaluate the relative importance of the significant factors contributing to delay and cost overruns in Ghana groundwater construction projects. Respondents of this survey included personnel from owners, consultants and contractors involved in groundwater projects in Ghana. The results of the study revealed the main causes of delay and cost overruns in construction of groundwater projects included: monthly payment difficulties from agencies; poor contractor management; material procurement; poor technical performances; and escalation of material prices. Hence, effective project planning, controlling and monitoring should be established to enhance project performance in order to minimise or avoid delay and cost problems in groundwater construction projects. # 2003 Elsevier Science Ltd and IPMA. All rights reserved. Keywords: Project management; Groundwater projects; Construction; Overruns; Ghana; Developing countries 1. Introduction Project success can be defined as meeting goals and objectives as prescribed in the project plan. A successful project means that the project has accomplished its technical performance, maintained its schedule, and remained within budgetary costs. Project management tools and techniques play an important role in the effective management of a project. Therefore, a good project management lies in the management tools and techniques used to manage the project. Project management involves managing the resources workers, machines, money, materials and methods used [1]. Some projects are effectively and efficiently managed while others are mismanaged, incurring much delay and cost overruns. A construction project such as groundwater comprises two distinct phases: the preconstruction phase, * Corresponding author. address: yawfrimpong@hotmail.com (Y. Frimpong). (the period between the initial conception of the project and signing of the contract; and the construction phase which is the period after award of the contract when the actual construction is going on) [1]. Delay and cost overruns occur in both phases however, major causes of project overruns usually take place in the construction phase. Therefore, this paper is limited to this phase. Previous studies show extensive information on project schedule delays and cost overruns [2 7]. This paper identifies and examines the causes of delay and cost overruns in the construction of groundwater projects. The study is based on data relating to groundwater construction projects in Ghana. There are many factors that can cause delay and cost overruns in groundwater drilling projects. These range from factors inherent in the technology and its management, to those resulting from the physical, social and financial environment. In a preliminary survey conducted in water drilling projects in Ghana, for the purpose of this research, it was found that 33 out of a total of 47 projects completed between 1970 and 1999 were delayed /03/$30.00 # 2003 Elsevier Science Ltd and IPMA. All rights reserved. doi: /s (02)

2 322 Y. Frimpong et al. / International Journal of Project Management 21 (2003) while 38 projects were overruns [8]. The data indicated that 75% of the projects exceeded the original project schedule and cost whereas only 25% were completed within the budget and on time. The survey revealed that delay and cost overruns occur frequently in construction of groundwater projects in Ghana and developing countries in general, especially in long-duration projects. It is therefore important that thorough analysis be carried out to help in efficient project management, to reduce delay, and cost overruns. 2. Nature of groundwater work Groundwater-drilling projects involve the following activities: Groundwater exploration (siting of boreholes) which involves geophysical surveys conducted at the ground surface using highly sophisticated equipment, borehole sampling, and geophysical logging of the borehole with highly sophisticated well-logging equipment. Borehole drilling and construction; which involves drilling, installing the casing, placing a well screen and filter pack, if required, grouting to provide sanitary protection, and developing the well to ensure sand-free operation at maximum yield. Pumping test and water quality analysis: which involves pumping a well at a certain rate, recording the drawdown in the pumping well, monitoring and recording the recovery of the water, and conducting water quality tests. Civil works and exploration: which involves construction of well base pads and installation of appropriate pump. The nature of work in groundwater projects and the environment within which they are built make such projects susceptible to delay and cost overruns. Some of the influential factors can be summarised as followings: Poor technical performance due to improper planning result number of wells abandoned and thereby causes project delay and cost overruns. Work in these projects depends mainly on equipment, plants and materials, project may be delayed without effective and efficient procurement procedures. Numerous series of activities are involved in the water drilling project and reluctant to use of scheduling techniques and update schedules on regular basis are needed. A great deal of coordination among these activities is required to avoid delay especially in public projects. Due to lack of skilful management less attention is paid to resources allocation i.e. human, financial and material resources. In an attempt to identify the reasons for such delays and overruns, an extensive survey was conducted in Ghana. 3. Research aim and objectives This paper identifies and examines the causes of delay and cost overruns in the construction of groundwater projects in Ghana. The objectives are: To study and evaluate the factors that contribute to delay and cost overruns in groundwater construction, To identify the main factors that influence the causes of delay and cost overruns in construction of groundwater projects and to examine their relative importance. 4. Methodology In order to evaluate and analyse the causes of delay and cost overrun in groundwater projects, a wide range of personnel involved in groundwater construction in project Ghana were targeted. Personnel were randomly selected from Ghanaian project managers, consultants, contractors, client s representatives and construction managers. A questionnaire of 26 factors was carefully designed from previous preliminary investigations conducted in groundwater drilling projects between 1970 and 1999 in Ghana. It was organised in the form of a priority scaling (1=very low, 2=low, 3=medium, 4=high, and 5=very high). The questionnaire was directed towards three groups in both public and private organisations: owners of the groundwater projects, consulting offices, and contractors working in the groundwater works. The questionnaire was distributed to a random sample of 55 owners, 40 contractors and 30 consultants. The sample selected for each of the three groups is described below as: Owners comprising the government agency (key decision-makers) responsible for the projects, private organisations (industries), and individual owners. Consultants working in the groundwater construction projects. Contractors who are involved in the groundwater drilling project.

3 Y. Frimpong et al. / International Journal of Project Management 21 (2003) Respondents were from public and private agencies that sponsor groundwater construction projects, and the contracting and consulting organisations that work for them. There were 125 in the group targeted, 72 (57%) questionnaires were returned completed of these: 28 were from owners; 19 from consultants; and 25 from contractors (see Table 1). 5. Data analysis The procedure used in analysing the results was aimed at establishing the relative importance of the various factors responsible for project delay and cost overruns. The score for each factor is calculated by summing up scores assigned to it by respondents. Therefore, the level of importance as indicated by the owners, contractors and consultants were used to measure the relative weight of each factor. The relative weight was computed using the following equation: Relative Importance Weight (RIW)= P 5 i¼1 P N a i n i 100 xj j¼1 where: x j =the sum of the jth factor; j=the factors 1, 2, 3, 4,...N; N=total number of factors (26); a i =constant expressing the weight given to the ith response: i=1, 2, 3, 4, 5 for a response of very high a 1= 5 for a response of high a 2 =4 for a response of medium a 3 =3 for a response of low a 4 =2 for a response of very low a 5 =1 n i =the variable expressing the frequency of the ith response n 1 =frequency of very high responsen 2 =frequency of high response n 3 =frequency of medium response Table 1 Per cent of questionnaire distribution and their response Description Questionnaire distributed Number of respondents Owners Contractors Consultants Total ð1þ Percentage of responses n 4= frequency of low response n 5 =frequency of very low response Eq. (1) was used to calculate the Relative Importance Weight for all delay and cost overruns factors. The Weights were ranked for Contractors, Owners and Consultants. To determine whether there is degree of agreement among the three groups with respect to their rankings of the factors, Kendall s Coefficient of Concordance was used. The Kendall s Coefficient of Concordance says that the degree of agreement on a zero to one scale is: W ¼ 12U 3m2 nn ð 1Þ 2 m 2 ð2þ nn ð 1Þ where: U ¼ Xn j¼1 ðsrþ 2 n=number of factors; m=number of the groups; j=the factors 1, 2, 3, 4,...N. The calculated Kendall s Coefficient of concordance W = In order to know whether there is disagreement or agreement between the three groups on ranking the factors, a test of hypothesis is needed. Null hypothesis: H 0 : Disagreement in rankings among the three groups. Alternative hypothesis: H 1 : Agreement in rankings among the three groups. Since n=26 is too large for the table of critical values of Kendall s, chi-square approximation of the sampling distribution of W is computed with Eq. (3). 2 ¼ kn ð 1ÞW ð3þ Therefore, w 2 =69.06 and using a w 2 critical table for n=26 and a=0.05, the w 2(n 1) a = 225 ð Þ :05 =7.65. Since computed value w 2 is greater than critical table 225 ð Þ :05 null hypothesis H 0 is rejected and alternative hypothesis H 1 is accepted. Therefore, concluded that there is a significant degree of agreement between the three groups with respect to how they rank the factors. 6. Surveyresults and analysis The questionnaire was analysed from contractors, owners and consultants perspective. In order to identify the most important factors that influence time and cost

4 324 Y. Frimpong et al. / International Journal of Project Management 21 (2003) overruns in groundwater projects, the items were ranked in the various groups. On the basis of ranking of the factors by the various groups it was possible to identify the most important factors that influenced project time and cost overruns. A summary of all the factors causing delays and cost overruns in groundwater projects in relative importance weights, ranking by the groups, and overall ranking as identified by all groups is shown in the Table 2. The results show that, there are several important factors underlying causes of delay and cost overruns in groundwater construction projects in developing countries such as Ghana. The five most important factors agreed by the owners, contractors and consultants, as the main causes were (see Table 2) monthly payment difficulties from agencies, poor contractor management, material procurement, poor technical performances, and escalation of material prices. Contractors and consultants ranked the monthly payment difficulties from agencies for completed works first whereas the owners ranked it tenth. This problem may be due to the existing culture in the construction industry. In Ghana, the biggest customer of the groundwater industry is the government and there is very little participation from private investors [8]. Like most developing countries, groundwater projects in Ghana are financed either through domestic savings or foreign funding. Groundwater construction projects funds may be from capital allocation from Ministry of Work and/or foreign assistance which have been budgeted. However, there is delay in payment for the completed work due to bureaucracy in governments departments. Regular monthly payment to contractors for work done removed constraints which otherwise may have impeded project progress to cause delay and cost overruns. Failure to provide adequate funding resources to contractors for the job done will make it difficult for the contractors to meet project objectives [14]. The second most important factor attributing to the cause of delay and cost overruns in groundwater projects is poor contract management. Poor contract management was ranked first by owners, second by consultants, while contractors ranked it sixth (see Table 2). This can be attributed to the way contracts are been awarded. Most cases, projects are awarded to the lowest bidder. Some of the lowest bidders may lack management skills and less attention is paid to contractor s plan, cost control, overall site management, and resource allocation, ie, human, financial and material resources. Evidence from Ogunlana and Olomolaiye [9] and Wahab [11] postulated that many contractors in developing countries are entrepreneurs who are in the business of making money Table 2 Rank of all the factors responsible for project delays and cost overruns according to contractors, consultants and owners Factors Owners Contractors Consultants Overall RIW% RANK RIW% RANK RIW% RANK RANK Planning and scheduling deficiencies Deficiencies in cost estimates prepared Inadequate control procedures Delays in work approval Waiting for information Mistakes during construction Delays in inspection and testing of work Cash flow during construction Frequent breakdowns of construction plant and equipment Shortages of technical personnel Labour shortages Monthly payment difficulties Poor contract management Shortage of materials, Plant/equipment parts Contractor s financial difficulties Low bid Material procurement Imported materials Late delivery of materials and equipment Escalation of material prices Slow decision-making Inflation Difficulties in obtaining construction materials at official current prices Ground problems Bad weather Unexpected geological conditions

5 Y. Frimpong et al. / International Journal of Project Management 21 (2003) at the expense of good management. They pay low wages, submit very low bids and have very little, if any, ability to plan and coordinate contracts. The third significant factor identified was material procurement (see Table 2). It demonstrates a complete absence of effective material procurement management on the part of the contractors. The established bureaucratic structures in material procurement processes in developing countries like Ghana seem to hinder the easy flow of construction materials. In Ghana, the processing of an order can take from a week to several months especially in public sector. Project procurement involves the development of contract strategy, the management of contracting activities from initiation such as project and contract definition, market study through tendering process, contract documentation to contract performance, management and administration after contract award. The project team of client, consultants and contractors should join to establish proper material procurement strategy and methods in order to remove all the obstacles in the material procurement. The fourth item in Table 2 which was given by respondents as a cause of delay and cost overruns in groundwater construction projects is poor technical performances. Well completion problems are emerging from problems faced during actual drilling activities and from technical failures, which are accounted for improper planning and management experience limitation. The escalation of material prices was ranked fifth, resulting principally from the high and unstable inflationary trend in Ghana and developing countries in general. The average rate of inflation in Ghana was 12.7% between 1970 and 1979; 48.6% between 1980 and 1989; 30.8% between 1990 and 1999 [11]. The trend of inflation is probably due to demand exceeding supply, which creates scarcity of goods and hence the prices of materials increase. These unpredictable inflationary trends are readily observed in many developing countries and may have aided inaccurate projection of construction costs in such areas [7]. Other factors that emerged clearly as not very important, but of interest, are bad weather and geological conditions. These are the natural factors. Bad weather is ranked eight by owners and consultants and 10 by contractors while all the three groups ranked it 10. The respondents ranked the geological condition factor low. The bad weather and geological condition are the most difficult and unknown factors because they cannot be controlled. In Ghana, the effect of these natural factors may not be very significant, but it is worthy of consideration. Ghana is located in a tropical zone with only two climates: wet and dry. Rain would definitely stop groundwater construction activities because of the works nature. In the dry season, the average temperature varies between 30 and 38 C while the humidity ranges from 25 to 80%. Temperature and humidity affect the productivity of workers. If the temperature and humidity are high, workers feel dullness of senses and poor coordination [12] and generate body heat and subsequent discomfort [13]. Therefore, productivity in hot climates is certainly low. In the drilling world, the most apparent representative problem is the nature of the work itself. It is a work that can not see what is happening deep in the subsurface. The number of abandoned well due to the unfavourable geological conditions causes project delay and cost overruns. 7. Summaryand conclusion The main survey of contractors, owners and consultants as discussed in this paper relates to the construction of groundwater projects in Ghana. The survey focused on identifying and ranking in order of importance, the main factors causing project delay and cost overruns. The main conclusions of the survey are as follows: According to the contractors and consultants, monthly payments difficulties from agencies was the most important delay and cost factor, while owners ranked poor contractor management as the most important factor. Despite some difference in viewpoint held by the three groups surveyed, there is a high degree of agreement among them with respect to their ranking of the factors. The overall ranking results indicates that the three groups felt that the major factors that can cause excessive groundwater project overruns in developing countries are poor contractor management, monthly payment difficulties from agencies, material procurement, poor technical performances, escalation of material prices according to their degree of influence. Other factors that emerged clearly as not very important, but of interest, are bad weather and unexpected natural events. These are the natural factors. Bad weather is ranked eight by owners and consultants and 10 by contractors while all the groups on average ranked it 10. The respondents ranked geological conditions low. The bad weather and unfavourable geological conditions are most difficult and unknown factors because they cannot be controlled. The result shows that many of the problems in the groundwater construction projects are originated from poor resources management (human, technical and material). In practice, this phe-

6 326 Y. Frimpong et al. / International Journal of Project Management 21 (2003) nomenon is expected to continue unless actions are taken to control these causes right away from the planning to the implementation and management stages. Therefore, good practice in planning, coordinating, controlling and monitoring procedures needs to be recognised. 8. Recommendations Based on this study, and with developing countries in mind, some recommendations are given as follows: Appropriate funding levels should always be determined at the planning stage of the project so that regular payment should be paid to contractors for work done. In order to improve contractors managerial skills there is need for continuous work-training programs for personnel in the industry to update their knowledge and be familiar with project management techniques and processes. have effective and efficient performances. Effective and efficient material procurement systems should be established within projects. Material procurement has the potential to cause major delays to construction projects. Therefore, material procurement process should be executed properly by improving procurement process in order to avoid supply delays. Developing effective and efficient technical performances in the groundwater industry through different types of training programs. The training should cover project planning, scheduling, time and cost control, and the information systems. There should be adequate contingency allowance in order to cover increase in material cost due to inflation. References [1] Giridhar P, Ramesh K. Effective management of Turnkey projects. Aace Transactions, PM7- PM [2] Dlakwa MM, Culpin MF. Reasons for overrun in public sector construction projects in Nigeria. International Journal of Project Management 1990;8(4): [3] Ogunlana SO, Promkuntong K, Vithool J. Construction delays in a fast-growing growing economy: comparing Thailand with other economies. International Journal of Project Management 1996; 14(1): [4] Khalil ALMI, AL-Ghafly MA. Delay in public Utility projects in Saudi Arabia. International Journal of Project Management 1999;17(2): [5] Mansfield NR, Ugwu OO, Doran T. Causes of delay and cost overruns in Nigeria construction projects. International Journal of Project Management 1994;12(4): [6] Okpala DC, Aniekwu AC. Causes of high costs of construction in Nigeria. Journal of Management in Engineering, ASCE 1988; 114: [7] Arditi D, Akan GT, Gurdamar S. Cost overruns in public projects. Project Management 1985;3(4): [8] Frimpong, Y. (2000, November). Project management in developing countries: causes of delay and cost overruns in construction of groundwater projects. Unpublished Masters Research Project, University of Technology, Sydney, Australia. [9] Ogunlana SO, Olomolaiye PO. A survey of site management practice on some selected sites in Nigeria. Building Environ 1989; 24(2): [11] Wahab KA. Improving efficiency in the building sector. West Africa Tech Rev 1997:81 9. [12] Okpala DC. Causes of delay and cost overrun in the construction industry. CENSER Seminar Series 1986;May. [13] Ministry of Finance. Government Budget Statement. Ghana: Accra; [14] Oglesby C, Parker H, Howell G. Productivity improvement in construction. New York: McGraw-Hill; 1989.