Cost overruns resulting from payment delays in Ghanaian Public School Projects: exploring the cost benefits to the client
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Date
2021-05-27
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Abstract
The construction industry is plagued with the myriad occurrence of cost-related problems paramount of which is cost overruns. Many factors have been identified as the causes of and solutions to cost overrun. Principal among these factors is delayed payments. This research Sought to explore the cost benefits accrued to the client when payment is delayed. The cost data of 81 Ghanaian school projects were sampled through purposive sampling and analyzed in order to achieve the aim and objectives of the study. The findings are presented as follows: as regards objective 1, it was discovered that 91 % of the projects in the sample experienced cost overruns by an average of 52.90 %. A total of 91.36 % of projects sampled experienced schedule overruns by as much as 286.13%. Objective 2 involved the evaluation of cost trends in relation to schedule trends. It was discovered that a positive correlation exists between the cost trends and schedule trends. A rise in the schedule (time) resulted in a rise in cost. Further studies found that 38.18% of the variation in Cost is explained by the variation in Time, whereas 61.82 % is unexplained. It is recommended that the factors behind the unexplained 61.82% require further investigation to uncover. The following regression module was formulated to illustrate the relationship between cost and time trends: Percentage of Cost Variance = -0.006 + 0.187 (Percentage of Time Variance)
Objective 3 sought to explore cost-benefit accrued to the client when payments are delayed. It was determined that the average period of delay in honoring certificates was 24.54 months approximately two calendar years. The study also revealed that cost benefits average 39.89% of the certified amount are accrued to clients as a result of delayed payment. Also, the mean cost-benefit accrued to the clients resulting from delayed payment of final certificates was 32.05% of the certified final certificates. Overall the cost-benefit due the client resulting from delayed payment leading to cost overruns was revealed to be 1% of the contract sum.
Recommendations made as a result of the study include taking care through prudent management practices to prevent schedule overruns and hence preventing cost overruns.
Policies on payment for construction projects should be structured such that, delayed payments are discouraged. Note should be taken that value accruing to the client indicates value lost by the contractor.
Description
A thesis submitted to the Department of Construction Technology and Management, Kwame Nkrumah University of Science and Technology, Kumasi in partial fulfillment of the requirements for the award degree of Master of Science in Construction Management,
Keywords
Cost Overrun, Schedule Overrun, Delayed Payment, Payment Certificate