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PERFORMANCE EVALUATION OF BILL OF QUANTITIES FOR PROCUREMENT OF ENGINEERING SERVICES
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JESULOWO IYANUOLUWA QTS/2007/030
MARCH 2013
PERFORMANCE EVALUATION OF BILL OF QUANTITIES FOR PROCUREMENT OF ENGINEERING SERVICES
JESULOWO IYANUOLUWA QTS/2007/030 IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF B.Sc. DEGREE IN QUANTITY SURVEYING
A DISSERTATION SUBMITTED TO THE DEPARTMENT OF QUANTITY SURVEYING FACULTY OF ENVIRONMENTAL DESIGN AND MANAGEMENT OBAFEMI AWOLOWO UNIVERSITY ILE-IFE, OSUN STATE
MARCH 2013
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CERTIFICATION This is to certify that this study was carried out by Jesulowo Iyanuoluwa (QTS/2007/030).
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Mr O. Opawole
Dr (Mrs).M.O. Babalola
Supervisor
Head of Department
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DEDICATION I dedicate this work to the Almighty God, the Alpha and the Omega, to my beloved Parents, Pastor and Pastor (Mrs) Jesulowo
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ACKNOWLEDGEMENT As a man plods his way through life and journeys on, he encounters and mixes with a lot of people whose footprints and influences on him invariably accounts for much of his success. My profound gratitude to the Almighty God for his steadfast love, goodness and his guidance that has made everything possible, if not for him the story could have been different. I sincerely appreciate my supervisor, Mr Opawole for the effort invested in mentoring and guiding me through this work, your expertise has played a significant role in this study. I would like to thank firms and individuals that participated in the data gathering process of this study, in the form of completing the questionnaire.
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Abstract This study investigated the level of usage of bill of quantities for engineering services for building projects in the industry, examined the degree of variation between cost of measured quantities of engineering service and the actual cost of construction in the study area, assessed the effectiveness of the bill of quantities for procurement of engineering services for building works and identified the factors affecting the use of bill of quantities for engineering services for building projects. Questionnaire were administered to 70 architectural, quantity surveying and engineering services consulting and contracting firms in Lagos State, out of which 47 questionnaires were retrieved. Descriptive stastistical tools, Relative Importance Index (RII) and Pearson’s correlation techniques were used to analyze the data collected. The results showed that the level of usage of bill of quantities for procurement of engineering services to be high with 95.7% of the respondent prepared a detailed bill of quantities for engineering services. On its level of accuracy, the mean percentage of accuracy was 68.64%. The study further revealed the degree of variation of measured quantities and the final construction cost to be 7.45%. The study also identified some factors affecting the use of bill of quantities for engineering services for building projects. The study concluded that the degree of variation between cost of measured quantities of engineering services and the actual cost of construction to be low as against high degree of variation in the use of P.C sum and its level of usage and awareness is high. Its effectiveness in different construction process was asserted
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TABLE OF CONTENTS Title page
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Certification
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Dedication
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Acknowledgement
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Abstract
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Table of contents
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Chapter One: Introduction 1.1 Background to the study
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1.2 Statement of the problem
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1.3 Research questions
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1.4 Aim and Objectives
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1.5 Justification for the study
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1.6 Scope of the study
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Chapter Two: Literature Review 2.1 Introduction
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2.2 Reviews of Basic Terms
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2.2.1 The Bill of Quantities
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2.2.2 Engineering Services
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2.3 Cost estimation of engineering services for building projects 2.3.1 Purpose of cost estimating
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2.4 Purpose of Bill of Quantities
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2.5 Functions of Bill of Quantities
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2.6 The use and relevance of bill of quantities
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2.6.1 Contractor’s perspective
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2.6.2 Client’s perspective
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2.6.3 Consultant’s perspective
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2.7 Usage
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2.7.1 Factors affecting the use of bill of quantities for procurement of engineering Services
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2.7.2 Steps to ensure the use of bill of quantities for procurement of engineering services
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2.8 Accuracy of bill of quantities for engineering services
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2.9 Factors affecting the accuracy of cost estimating
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2.10 Improving the accuracy of the cost estimating
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Chapter Three: Research Methodology 3.1 Introduction
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3.2 Method of data collection
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3.2.1 Questionnaire administration
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3.2.2 Historical data survey
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3.3 Study population
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3.4 Sampling design
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3.5 Sample response
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3.5 Method of data analysis
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Chapter Four: Data Analysis and Results 4.1 Introduction
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4.2 Analysis of demographic data
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4.3 Examining the degree of variation between cost of measured quantities and the actual cost of construction of engineering services for building projects
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4.4 Determining the level of usage of bill of quantities for procurement of engineering services for building projects
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4.5 Assessing the effectiveness of bill of quantities for procurement of engineering services for building works
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4.6 Identifying the factors affecting the use of bill of quantities for procurement of engineering services for building projects
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Chapter Five: Conclusion and Recommendation 5.1 Conclusion
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5.2 Recommendation
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References
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Appendix: Questionnaire
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CHAPTER ONE INTRODUCTION 1.1 Background to the Study The term “Engineering services” in building projects mainly involves mechanical and electrical services. According to the (CEBC 2009), basic categories of mechanical work, including plumbing, heating, ventilation and sheet metal, refrigeration, HVAC controls, fire protection, insulation, medical gas, compressed air and all standard items associated with these categories while the electrical work, including normal and emergency power distribution, lighting, communication distribution and interfacing, security systems, life safety systems, audio and video systems, electric heating, specialized grounding systems and all standard items associated with these categories. With the cost of engineering services (mechanical and electrical engineering) installations contributing a significant share of the total construction cost of building projects (Mok et al, 1997) and mechanical and electrical services accounting for about ten to sixty per cent (10-60 %) of the cost of building (Sidwell, 1978). Limited drawing information available on the engineering services during the design stage had subjected many quantity surveyors to the use of historical cost data to produce cost plan estimates and at the pre tender stage, quotations are obtain from different engineering services sub-contractor and the lowest estimate is therefore included as the prime cost (P.C) sum in the bill of quantities (Babalola and Adesanya, 2007). This method of using P.C sums for engineering services has been found to be inappropriate and cost ineffective (Swaffield and Pasquire, 1996). Its accuracy has continuously been questionable, in most projects, the difference between the initial and final values of P.C sum are usually significant and this will definitely have effect on
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the total cost of the project. The effects of non-availability of design drawings, lack of expertise on the part of many quantity surveyors and production of inaccurate estimates for mechanical and electrical services are becoming increasingly significant as engineering services assume a greater proportion of building costs and often involve the largest subcontract, with the use of P.C sum (Darke, 2002). Research from Nigeria had revealed an average cost over-run on prime cost sums of 41 %; but where the main contractor was encouraged to execute prime cost work himself, the cost variance was significantly lower (Construction Report, 2010 and Ikpo, 2008). In view of the recent unacceptability of inclusion of cost of engineering services as P.C sum, the need for the preparation of detailed bill of quantities for engineering services had been widely advocated. Bill of quantities (BOQ) is a document used in tendering in the construction industry in which materials, parts, and labour (and their costs) are itemized. It details the terms and conditions of the construction or repair contract and itemizes all work to enable a contractor to price the work for which he or she is bidding (Wikipedia 2012). The use of bills of quantities can help improve cost control. It also promotes risk management in construction contract as it enables fair sharing and allocation of risks between the employer of the contract and the contractor. With the increasing demand for sustainability and energy conservation in the design of modern buildings, the need for good cost control on building services work therefore becomes necessary and this makes the use of bill of quantities for engineering services as alternative to the use of prime cost sum. However, this study is to evaluate the performance of the use of bill of quantities for engineering services procurement in building projects.
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1.2 Statement of the problem The accuracy of estimates of engineering services in building projects has great significance to the cost of the project. In the work of Babalola and Adesanya (2007), the impact of inaccurate cost estimating in contracting business has been of noticeable significance to project delivery for many years. Their work examined the method used for engineering services cost estimating in Nigeria with the view of determining the level of accuracy. The work concluded that the method of estimating used for the production of cost estimates for engineering services was inappropriate and that the estimate produced were inaccurate. As a result of usual cost over-run in the use of prime cost sum for engineering services in building project, the use of detailed bill of quantities for the engineering services was advocated. Ikpo (2008) investigated the variability levels of prime cost sums in building projects in order to establish the reliability of such estimates in bills of quantities and his study reveals that the mean prime cost sum overrun was found to be 41% of the estimated sums. He however concluded that a negative relationship exists between the prime cost sums and the final contract sum of engineering services for building projects. Swaffield and Pasquire (1996) carried out a critique of engineering services cost planning by examining the traditional methods and published information. The study examined the significance of building from parameters in determining engineering services cost. The study concluded that the format and detail of the cost data published by Building Cost Information Service (BCIS) is inadequate for engineering services for building projects and that the method of collecting more appropriate information is required. Kabir and Yakubu (2007) work presented a review of the effects on the initial contract sums of variations caused specialist consultants and adjustment of prime cost sums and they
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concluded that inadequate design could result into differences between initial and final contract sums of construction projects. The study explained that inadequate design could stem from deficiencies in detailing, specification, legislation and buildability of contract drawings and/or inaccuracies in the build-up prime cost sums inserted in the bill of quantities prepared at the precontract stage As a result this; quantity surveyors are now insisting on the services engineers to produce all required detail drawings(electrical and mechanical drawings) during the pre-contract stage of the project, so as to enable the quantity surveyors to carry out a detailed measurement of engineering services as it is being done for other segments of construction works and include same in the bill of quantities. Clients satisfaction on the cost estimate prepared for engineering services has also been identified to be of low degree. The work of Babalola (2012) examined the level of satisfaction construction clients have on cost estimates produced for engineering services installation. The study concluded that clients are not satisfied with the cost estimates produced for engineering services. Now that cost of engineering services are prepared in bill of quantities, Odeyinka, et al. (2009) however, evaluated the reliability of the bill of quantities in building services procurement and the potential of bill of quantities for engineering services as a budgetary tool and also as a useful tool for risk management to avoid cost overrun. It is therefore of necessity to evaluate whether or not the bill of quantities is performing better as a method to guarantee cost certainty than the traditional method of using the prime cost sum for engineering services in building projects.
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1.3 Research Question i.
What is the degree of variation between cost of measured quantities of engineering service and actual construction cost of engineering services?
ii.
What is the level of usage of bill of quantities for procurement of engineering services.
iii.
What are the factors affecting the bill of quantities for engineering services use?
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Is bill of quantities effective in the procurement of engineering services for building works?
1.4 Aim and Objectives Aim: This study aims at evaluating the potentials of bill of quantities to reduce variation between initial and final cost of engineering services with a view to enhancing project delivery. Objectives: The objectives of the study are as follows: i.
To examine degree of variation between cost of measured quantities of engineering service and the actual cost of construction in the study area.
ii.
To determine the level of usage of bill of quantities for procurement of engineering services.
iii.
To assess the effectiveness of the bill of quantities for procurement of engineering services for building works.
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To identify factors affecting the use of bill of quantities for engineering services for building project in Lagos State.
1.5 Justification for the Study Cost of engineering services often ranges between 10-60% of the building cost. This therefore makes controlling its execution cost necessary and important. As traditional method of inclusion of cost of engineering services as P.C sum had been criticized for its inaccurate cost estimate estimating for engineering services being criticize for its inaccurate production of engineering services cost estimate. Many researches had shown that the estimate usually produced for engineering services are inaccurate and fall short of the acceptable standard (Babalola and Adesanya, 2007). This has made the use of detailed bill of quantities a preferred cost control tool for engineering services in building projects. It will be therefore be of good point to assess the performance of bill of quantities approach as against the traditional method of P.C sum to the expectation of the industry. 1.6 Scope of the study This research work will be limited to Lagos State, Nigeria. This is because of high level of construction activities and high concentration of construction professionals and firms in the state.
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CHAPTER TWO LITERATURE REVIEW 2.1 Introduction This chapter provides a literature review of performance evaluation of bill of quantities for procurement of engineering services. It begins with some basic terms and definitions, followed by a discussion on the nature of measurement of engineering services for building project. The review then looks at the use, functions and relevance of bill of quantities for the procurement of engineering services of building projects. It then investigates the factors affecting its use and looks at the various factors that can influence estimate cost accuracy of engineering services for building projects. 2.2 Review of Basics Terms It will be pertinent to review some basic terms and give a clear view of different researchers of cogent terms as relevant to the study. These terms include as follows; 2.2.1 The Bill of Quantities Before going further into the question of performance of bill of quantities of engineering services in the context of building project, it will be appropriate to understand what is bill of quantities. Based on Hackett and Robinson (2003), it can be said that a bill of quantities is a document detailing the qualitative and quantitative aspects of every constituent parts of a proposed construction project. It is a document or a “book” containing a long list of all the items of works for construction. Each of these items is complete with the description of material, labour and workmanship for the work and its quantity (Davis and Baccarini, 2004). 16
Basically, it is a document with detail information about the type, nature and quantities of the finished work in a construction (Willis, et al., 2002). Normally, it is compiled together with the form of tender, specification, preliminary bill and list of drawings to form a tender document. Bill of quantities (BOQ) in traditional contracting according to Seeley (1997) is a document itemizing all potential works in a construction project and their estimated quantities. According to Davis et al., (2009), the bill of quantities is usually produced by the quantity surveyor based on drawings and specifications prepared by the Architect. 2.2.2 Engineering Services Engineering services are the dynamics in a static structure, providing movement, communications, facilities and comfort. They are usually an unavoidable element of the building. The services include cold and hot water supplies, heating, ventilation, air conditioning, drainage, sanitation, refuse and sewage disposal, gas, electrical installation, fire services, energy recovery and alternative energy in building projects. In domestic buildings, according to Sidwell (1978), engineering services account for between 10-60% of the total cost of the building.
2.3 Cost estimation of engineering services for building projects Traditionally, professional quantity surveyors usually allow for prime cost sum for engineering services for building projects. At the cost planning stage, the estimators usually make use of historical cost data to produce cost plan estimates while at the pre-tender stage, they obtain quotation from various engineering services sub-contractor or by approximate estimating, which may involve estimating all plant, material and labour requirements of the work item and build up an estimate using the current rates and unit prices of materials and include any selected
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estimate as prime cost sum in the bill of quantities. The prime cost sum, however can be described as defined in clause A(8) of the Standard Method of Measurement, sixth edition (SMM6) are sums provided in the contract bills for work to be executed by nominated subcontractors, a statutory authority or public undertaking. At the design stage, the drawings for engineering services are usually insufficient to prepare a comprehensive bill of quantities; a prime sum cost is therefore usually put in lieu. In the study of Babalola (2012), it is said that the cost estimate usually produced for engineering services are less satisfactory to clients in the construction industry. The inclusion of prime cost sum in the bill of quantities also does not allow for adequate cost control and quick referencing. It is as a result of this, professional service engineers are now engaged early enough to provide a detailed engineering services drawing for building projects thereby creating an avenue for quantity surveyors to prepare a comprehensive bill of quantities of engineering services. 2.3.1 Purpose of cost estimating The estimate becomes one of the most important pieces of information for decision making at the early stage of construction (Serpell, 2005). Cost estimators develop cost information for owner or managers to use in determining resource and material quantities, making bids for contracts, determining if a new product will be profitable, or determining which product are making a profit for a firm (Dysert, 2006, and Schottlander, 2006). As for the client, cost estimate will act as an indicator against the probable cost at the early stage of construction. With the indicator, client can be well aware regarding the project cost and monitoring the project budget. Besides, the cost estimate will ensure the cost estimated within the clients‟ budget. Other than serve as cost guidance, cost estimate actually will help client in tender evaluation process.
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The cost estimate that built up earlier with the assist from the quantity surveyor will then guide the client to evaluation the most competitive bid (Trost and Oberlender, 2003). The primary function of cost estimation is to produce an accurate and reliable cost forecast of a construction project. However, what cost should be forecasted depends on the requirements of a client and also upon the information and data available (Elhag et al, 2005). The purpose of an estimate is to postulate the costs required to complete a project in accordance with the contract plans and specification (Antohie, 2009). Furthermore, it is important that management has as much information as possible when deciding on funding projects. Sutherland (1999) explains the purposed as to provide the client and design team with as precise an estimate of final cost as possible so that the project can be accomplished within the client’s budget. Likewise, Weatney (cited in Marjuki, 2006) outlines the purpose of a cost estimate through the following:
Provides an assessment of capital cost for a specified piece of work.
Forms the basis for planning and control by defining the scope of work and its associated estimated cost.
Provide much of the basic information (hours, resources, tasks, and durations) which is needed for preparing a schedule. It also states general resource requirements such as labour, material, and construction equipment.
Provides the financial input required to prepare a cash flow curve.
Is a catalyst for discussion, idea generation, teaming participation, clarity and buy-in, it ties together much of the relevant project information within a simple document.
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The main purpose of cost estimation is to produce an accurate and reliable cost estimate of a construction project. To reach this purpose the estimator have to look in deep to all factors that affect the project cost and make sure from the information source.
2.4 Purpose of Bill of Quantities A bill of quantities (BOQ) is a document used in tendering in the construction industry in which materials, parts, and labour (and their costs) are itemized. It also details the terms and conditions of the construction or repair contract and itemises all work to enable a contractor to price the work for which he or she is bidding. Bills of quantities are prepared by a “taking off” process in which the cost of a building or other structure is estimated from measurements in the architect’s or engineer's drawings. These are used to create a cost estimate such as in regard to the square area in meters of walls and roofs, the numbers of doors and windows, and systems as heating, plumbing and electrical. Similar types of work are then brought together under one item, a process known as "abstracting". Estimating books provide the relevant costs of the materials and labour costs of the operations or trades used in construction. As the rates for materials and labour change due to inflation, these books are frequently republished. There are different styles of bills of quantities, mainly the Elemental BOQ and Trade Bills. Bill of quantities as one of tool of project cost estimation serves certain purposes in the procurement of a project. These purposes are also of relevance to the procurement of engineering
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services for building project. The primary purposes of a bill of quantities, which becomes a contract document, are:
To provide a co-ordinated list of items, together with their identifying descriptions and quantities, that comprise the works to enable contractors to prepare tenders efficiently and accurately;
And when a contract has been entered into, to: o Provide a basis for the valuation of work executed for the purpose of making interim payments to the contractor; o And provide a basis for the valuation of varied work. All these are efficient mode of controlling the cost of a project, inclusive the engineering
services involved in the project. 2.5 Functions of bill of quantities The function of bill of quantities has not changed very much ever since it was introduced about hundred years ago. In the traditional procurement system, bill of quantities is used mainly for project costing and as part of tender document for soliciting tenders from contractors. It is a uniform document for contractors to estimate or price the work on precisely the same basis, thus allowing for the fairest bidding (Willis et al., 2002). Later, it was found that bill of quantities can be used for other further purposes, at any stage of the project development i.e. during the precontract and post-contract phases of a construction (Willis et al., 2002). According to Brook (2008) the bill of quantities has two primary uses. One is at the precontact stage where it assists the contractors in the formulation of their tenders. The other is at the post-contract stage where the bill of quantities assists contractors and quantity surveyors in the valuing of progress payment and variations among others. To the quantity surveyors, bill of
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quantities are also used for project costing or estimating, for assessing tenders, price negotiation; valuation of interim payment and variation orders and for the settlement of final account. Irrespective of what contract strategy is used, at some stage in the procurement process one party will need to quantify the extent of works to be executed; whether it be the employer’s quantity surveyor/cost manager, the main contractor or the work package contractors for the purpose of obtaining a price for completing building works, valuing the extent of work complete for purposes of payment, valuing variations in the content or extent of building works, or to support applications for tax or other financial incentives. It is considered as a multi-purpose document. Consequently, detailed measurement for the purpose of bill of quantities production is beneficial to the procurement process for a number of reasons: it saves the cost and time of several contractors measuring the same design in order to calculate their bids for competition; it provides a consistent basis for obtaining competitive bids; It reduces the risk inherent in the tendering process by providing to all competitors a quantified and comprehensive description of the work required. it provides an extensive and clear statement of the work to be executed; it provides a very strong basis for budgetary control and accurate cost reporting of the contract (i.e. post contract cost control), including:
the preparation of cash flow forecasts,
a basis for valuing variations, and
a basis for the preparation of progress payments (i.e. interim payments);
It allows, when bill of quantities items are codified, reconciliation and any necessary transfers and adjustments to be made to the cost plan;
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When priced, it provides data to support claims for tax benefits (e.g. capital allowances and value added tax (VAT)); It provides one of the best sources of real-time cost data, which can be used for estimating the cost of future building projects (i.e. historic cost information as it provides a cost model in a single document. They form good basis for material scheduling and ordering, for contract planning and control. The discipline invoked by having to prepare bills of quantities also often ensures that design decisions are made well in advance of the commencement of construction works on site and thereby hasten the pre-planning activities and ensures better post-contract control. Davis et al. (2009) also concluded that the bill of quantities is a very useful tool for post-contract cost control. 2.6 The Use and Relevance of Bills of Quantities The question of whether detailed bill of quantities is needed, useful or relevant to engineering services for building projects should be considered holistically from various angles. It is an issue very much associated with project cost management which is an important part of Project Management Processes (PMBOK, 2003). Project cost management processes include cost estimating, cost planning, cost monitoring, cost control and cost information system. Since construction project development involves the client or the owner, the designers, the managers and contractors, it is fair to consider the issue of the use and relevance of bill of quantities from the perspectives of these different groups.
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2.6.1 Contractor’s Perspective For contractors, any construction project will involves the process of tendering or bidding, resources planning (money, materials, labour, plant), work planning and execution, procuring of sub-contractors, supervision, monitoring and controlling. The availability of bill of quantities, prepared either by the owner’s quantity surveyor or by they themselves, provide the contractors with the necessary information to carry out the various project management processes more effectively and efficiently. The descriptions and quantities of the works presented in the bill of quantities provide the contractor with useful information to arrive at an accurate tender price. This information are also essential for preparing project budget and cash flow, to compute the quantities of material required for the project, to prepare labour requirements and schedules, to claims for payments and to procure sub-contractors. The list of the work items and their quantities contain in the bill of quantities is in fact a detail Work Breakdown Structure (WBS) of the project concerned. They are useful information for the contractor’s project planner to prepare the work plan or programme for the project which include organizing of activities into logical sequence and estimating activity duration. At the same time, the quantities, unit rate and the cost of the many work items are useful for the monitoring and controlling of the project finance. These information can be readily processed or translate into cost of the various work section or cost of various trade contractor’s work and projected monthly income and expenditure. 2.6.2 Client’s Perspective For the building owners, their main concern is to see that their projects are completed on time, within the estimated cost and within specified quality. But in today’s environment more owners want to be better informed of their projects and be provided with accurate and reliable 24
information pertaining to the progress and financial aspects of the projects. Although it has been said that it is no more useful after the tendering process, the cost or financial information presented in the priced bill of quantities can be translated into other cost information such as cash flows, periodic project account and cost variation. This information can then be communicated to the owners to continuously keep them informed of the progress and the financial status of the project. 2.6.3 Consultant’s perspective As the representative of the owner, the consultants are expected to manage the project properly and effectively to ensure that the owner get value for money for their projects. They must ensure that the project is of high quality, completed on time and more importantly within the estimated cost or budget. The owner also should be provided with accurate and reliable cost information at the early stage of the project and always kept informed of the project’s financial situation in term of monthly expenditure, any deviation from the estimated budget and how their fund are being used in the project. A priced bill of quantities, either prepared by the contractor or by the consultant quantity surveyor, contains invaluable descriptive, quantitative and financial information for use by the consultants in the project cost management during pre-construction and construction phases. First of all, the priced submitted by contractor provides useful information on the total cost of the project and the market condition. The qualitative and quantitative (including financial) information presented in the priced bill of quantities are very useful for tender evaluation and selection of contractor for the project. The quantities, unit rates and costs of the various items of work presented in a priced bill of quantities are also useful for the valuation of interim payment
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and valuation of variation orders. The information, which as mentioned earlier, is a form of Work Breakdown Structure (WBS) of the project but complete with quantities and costs. They can be computed or translated into realistic work programme, cost plan, projected cash flow or budget and periodic financial reports that can be used for more effective project supervision and cost monitoring and controlling. Bill of quantities can also be considered as a complete shopping list of the various item of works necessary for the construction and completion of a project as such it can also be used for the preparation of project final account. 2.7 Usage The complexity of engineering services has push for shift from the traditional process of allowance for prime cost sum for engineering services in the bill of quantities. But, the usage of bill of quantities for execution of engineering services for building projects has been of limited use. According to Babalola and Adesanya (2007), it is said that in most engineering services for building projects in Nigeria do not have a comprehensive engineering services drawing at the design stage of the project, thereby making impossible the preparation of detailed bill of quantities of engineering services for building project. In the analysis of Onyechi and Alufohai (1989), various factors are identified to be affecting the use of bill of quantities for engineering services in building projects. 2.7.1 Factors Affecting the Use of Bill of Quantities for procurement of Engineering Services a. Insufficient Information This is usually one of the major factors affecting the preparation of detailed bill of quantities of engineering services for building project. In Nigeria, there are only few 26
projects where full/detailed engineering services drawing information will be available at the design stage. This has usually result most quantity surveyors to allowance of prime cost sum in the bill of quantities. Ellis and Turner (1986) found that the design and integration of engineering services is too often developed to less detail than the structure and fabric required at the Royal Institute of British Architects (RIBA) stages D & E, and with result that proven coordinated design of the engineering services is often not available when the building structure is being designed and tendered for. b. Lack of Knowledge or Inexperience of many Quantity Surveyors in Engineering Services The involvement of quantity surveyors in engineering services measurement and cost control has to a large extent also been restricted by lack of adequate technical knowledge, and interest in these services by a considerable number of quantity surveyors. These practitioners render services that should otherwise have been done by them. This has resulted in only very few quantity surveyors compiling engineering services bills of quantities regularly. Swaffield and Pasquire (1996) reported on the outcome of a survey carried out in 1990 that the clients were least satisfied with cost advice on engineering services for building project cost. They reported that this service was used by (62%) of the respondent clients, out of which only 39.5% rated estimators performance as excellent/good in the advice on engineering services costs. They noted that traditionally, quantity surveyors have been too concerned with fragmenting the design to quantities and elements which amounted to allocation of numbers, rather than understanding the relationships between elements that comprise the whole design. This lack of knowledge arises from the following areas.
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i.
Ignorance of the technology of building engineering services.
ii.
They seem unable to control cost effectively due, in part, to the customary organization of the design and installation of engineering services.
iii.
Lack of knowledge of relevant of measurement rules and methods
c. Resistance of engineering services consultants According to Onyechi and Alufohai (1989) most mechanical and electrical consultants have criticized the approach of bills of quantities by the quantity surveyor. They had contended that in most simple contracts, and even on complex ones, claiming bills of quantities are inappropriate and unnecessary because; 1. Adequate drawings and a properly prepared specification are all that a contractor (sub-contractor) needs to submit a lump sum tender. 2. The production of bill of quantities will require a change in design practice to give much greater details than on single line drawing s and would result in a rise in design fees, pre-contract period and additional cost for buildings. 3. Cost control is lost, not through the absence of bill of quantities, but rather that variations are executed without agreed valuation being attached to them at the time. Now however, there is a fair agreement amongst engineering services consultants as to the need for preparing bills of quantities for most of these works. There is how-ever, still considerable resistance amongst them to the quantity surveyor preparing these bills of quantity and carrying out the cost monitoring and control during construction. They have argued that only they are technically qualified to interpret their drawings and information. This resistance has led to the uncooperative attitude of most services consultants in not providing adequate design
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information whenever the quantity surveyors is assigned the duty of preparing services bills, thereby frustrating their efforts.
2.7.2 Steps to Ensure the Use of Bill of Quantities for Procurement of Engineering Services To improve on the use of bill of quantities of engineering services for building projects, following recommendations has to be i.
The technique and skill of the staff responsible for preparation of bill of quantities of engineering services should be enhanced in parallel with the development of new technology applied in engineering services installations. Placement of more emphasis on the study of engineering services construction and measurement both in the training institutions curricula and for the professional examinations. And keeping abreast of technical development in these areas through periodic short courses, seminars, workshops, etc. for practicing members. Quantity surveyors skills at analysis, measurement and valuation should not be confined to any particular section or part of the total construction process. It should be extended to all aspect of construction process.
ii.
Provision of adequate engineering services drawing: According to Worthington (1994), spending time at the early stages of a project design identifying needs and assessing options, is time well-spent. This is a small expenditure compared with the budget at risk. The services engineer is a designer and ideally, his appointment should be at the same time with that of architect as there is the need for him to size all equipment with due cognizance to space requirements. His early appointment will also give him the opportunity to prepare all required drawings for preparation of detailed bill of quantities of engineering services. His designs should fully accommodate all the standard method of 29
measurement (S.M.M.) measurable items well detailed enough for quantity surveyor to measure. iii.
Liaison with the engineering profession should be encouraged, so as to acquaint them with the need for the quantity surveyors participation in these areas and reduce their opposition and obstacles to this participation.
iv.
Time to time revision of the method of measurement to suit the increasingly complex and involving advanced technology/specialist type applications.
2.8 Accuracy of bill of quantities of engineering services Accuracy is the degree to which a measurement or calculation varies to its actual value; thus bill of quantities accuracy is an indication of the degree to which the final cost outcome of a project may vary from the single point value used as the estimated cost for the project (Dysert, 2006). Mok et al. (1997) conducted a survey to find out the current building services cost estimation practices and obtain an insight into the understanding, use and application of risk management process in preparing building services cost estimates. They stated that the accuracy of building services cost estimates plays an important role in the total building construction project cost estimate. The degree of accuracy is influenced by the experience of the person preparing the bill of quantities, the type of construction, the type of contract, and time. It is essential compare the construction with other projects that are as similar as possible in size and type (Al-Bani, 1994) Skitmore (cited in Aibinu and Pasco, 2008) described the accuracy of early stage estimation as comprising two aspects, namely, bias and consistency of the estimate when compared with the contract or accepted tender price. Bias is concerned with “the average of differences between actual tender price and forecast” while consistency of estimates is concerned
30
with “the degree of variation around the average”. Accurate early cost estimates for engineering and construction projects are extremely important to both the client and the project team. For the client, Oberlender and Trost (2001) stressed that early cost estimates are vital for business unit decisions that include strategies for asset development, potential project screening and resource commitment for further project development. For the project team, the performance and overall project success are often measured by how well the actual cost compares to the early cost estimate. Inaccurate early estimates can lead to lost opportunities, wasted development effort, and lower than expected returns. The accuracy level of the cost estimates is one of the critical indicators of effective estimation, because in case of under-estimation, the client may getting an unpleasant shock when tenders are opened and drastically modifying or abandoning the work at that stage. On the other hand, in case of overestimation, the engineer or quantity surveyor may lose his client or his job, or in any case his confidence (Ibrahim, 2003). Accurate estimation of construction costs is heavily dependent upon the availability of quality historical cost data and the level of professional expertise among other things. The limited information available at an early stage of a construction project may mean that the quantity surveyor must make assumptions about the design details of a project, which may not eventuate as the design, planning, and construction evolve (Liu and Zhu, 2007). The accuracy of an estimate depends on four determinants:
Who was involved in preparing the estimate
How the estimate was prepared
What was known about the project
Other factors considered while preparing the estimate (Oberlender, and Trost, 2001).
31
2.9 Factors Affecting the Accuracy of Cost Estimating There are two types of factors that influence and contribute to the cost of a project, control factors and idiosyncratic factors. Control factors are the factors that can be controlled by estimators to improve the performance of estimation. Idiosyncratic factors are factors that influence cost estimation but outside the control of the estimators including market condition, project complexity, weather, size of contract, site constraints, resource availability, type of procurement system, contract work type, etc. (Liu and Zhu, 2007). Elhag et al, (2005) stated that most of the significant factors affecting project costs are qualitative such as client priority on construction time, procurement methods, and market conditions including the level of construction activity. Ashworth (1994) summarized factors that have some influence on the accuracy of estimating the costs of construction work. These factors are availability of design information, type and quality of cost data, type of project, project size, and stability of market conditions, personal factors, proficiency in estimating and sheer quantitative experience. In a study of 67 process industry construction projects around the world, Trost and Oberlender (2003) identified 45 factors contributing to the accuracy of estimates. They summarized the factors into 11 orthogonal elements. Of the 11 factors, the five most important include: process design, team experience and cost information, time allowed to prepare estimates, site requirements, and bidding and labour climate. Al-Shanti (2003) summarized the factors that affect cost estimating as follows: project type, special construction (complexity), project accessibility, time of year, labour rates, and material costs. Elhag et al, (2005) stated that technological and project design, contractor’s expertise and management ability, and the client’s desired level of construction sophistication play an important role in determining the cost of the project.
32
Dysert (2006) mentioned in his study that there are many factors which affect the estimate accuracy such as level of project definition, the quality of reference cost estimating data (material pricing, labour hours, plant rates, etc.), the quality of the assumptions used in preparing the estimate, the experience and skill level of the estimator, the desired use of the estimate, the level of effort budgeted to prepare the estimate, as well as extraneous market conditions (such as periods of rapid price escalation and climate factors). In addition, other factors that affect bill of quantities accuracy are the project team capability to control the project, and the capability to adjust the estimate for changes in scope as the project develops. Akintoye (2000) worked on factors influencing project cost estimating practice identified complexity of design and construction as the most important factor; this is followed by scale and scope of construction. Odusami and Onukwube (2008) studied the factors that influence the accuracy of consultant pretender cost estimate. They indicated that the main factors are: expertise of consultants, quality of information and flow requirements, project team’s experience of the construction type and market condition, extent of completion of pre-contract design, complexity of design and construction. Swaffield and Pasquire (2000) identified the problem of communication between clients and building professionals which has been leading to misinterpretation of engineering services requirement and inaccurate cost estimates. They observed that a sufficiently accurate cost estimate depend on an accurate understanding of the quality of engineering services required by the client. Ibrahim (2006) identify variation as another major factor affecting the accuracy of bill of quantities. He described variation as one of the most significant sources of increase in the cost of a project.
33
2.9.1 Variation Variation may be defined as the alteration or modification of the design, quality or quantity of the works, as shown upon the contract drawings and described by or referred to in the contract bills, and includes the addition, omission or substitution of any work, the alteration of the kind or standard of any of the materials as goods to be used in the works. Variations are sometimes resulted from inadequate design, improper documentation of specifications, bills, etc. Variations during the project may affect the project progress and quality (Assaf et al, 1995). The most common effect of variations, during the construction phase, is the increase in project cost (CII, 1990). Any major additions or alterations in the design may eventually increase the project cost (Clough and Sears, 1994). In every construction project, a contingency sum is usually allocated to cater for possible variations in the project, while keeping the overall project cost intact. 2.10 Improving the Accuracy of Cost Estimates Improving the accuracy of bill of quantities is important; quantity surveyors need to use appropriate method of measurement and cost information in order to improve the accuracy of estimates. However, Aibinu and Pasco (2008) concluded that the accuracy of cost estimates has not improved over time. There may be four possible explanations for these results:
Estimates of new projects are based on historical cost data from past projects. Thus inaccuracies are transmitted to new estimates over time.
Firms do not monitor the performance of their estimates in terms of accuracy and so are not aware of any inconsistent error trend.
Estimating expertise and skills developed by firms based on experience with past estimates are lost, and so reflect the lack of reduction in estimate bias over time.
34
Other than technical factors such as the skill of the estimating team and their experience, team expertise or inadequate data, human-related factors such as the estimator’s attitude might significantly influence the accuracy of estimates.
Ling and Boo (2001) found that the most effective methods of improving accuracy according to quantity surveyors were, ensuring proper design documentation and information management was found to be the most popular measure to improving estimate accuracy, followed by checking all assumptions during the estimating process and thirdly, providing a realistic timeframe in which to undertake the estimate. Ashworth (1994) outlined three important factors to improve the accuracy of cost estimation, these factors are:
An improvement in the quality of designer's information.
A reappraisal of the methods currently used for estimating.
To identify the qualities in the quantity surveyor which contribute towards accuracy in estimating and to consider how they might be improved?
Improving the accuracy of bill of quantities is vital; estimators need to use appropriate cost information in order to improve the accuracy of estimates. A proper effort should be made to ensure accuracy of bill of quantities of engineering services for building projects by ensuring quality of information and ensuring quality of design documentation.
35
RESEARCH METHODOLOGY 3.1 Introduction This chapter provides an explanation regarding the methodologies and procedures employed for the study. These include data collection, sampling (population used), questionnaire design, and the method of data analysis. 3.2 Method of data collection Primary data would be used for the purpose of this study. The primary data would be collected through questionnaire administration. 3.2.1 Questionnaire Administration Well-structured questionnaire will be used for obtaining data applicable for this study. The questionnaire will be designed based on aim and objectives of this study. The target respondents of the questionnaire would comprise professionals involved with engineering services in building projects. These include architects, quantity surveyors, services engineers and engineering services contractors. The questionnaire would be divided into two sections. The first section would identify the demographic information about the respondents to guarantee reliable and quality information. These include the academic qualification, professional qualification, and years of experience of the respondents among others. The second section will elicit information on specific objectives of this study. 3.2.1 Historical data survey Data survey would be carried out on executed engineering services for building projects covered within the period of year 2000-2012 to obtain data relating to degree of variation
36
between the cost of measured quantities of engineering services and the actual construction cost in the study area. 3.3 The study population The study population consists of architects, quantity surveyors, services engineers and engineering services contractors in Lagos, Nigeria. These include 161 Architectural services firms (ARCON, 2008), 168 Quantity surveying firms (QSRBN, 2008) and 195 engineering service consulting and contracting firms (businesslist.com.ng , 2012) in the study area. 3.4 Sampling Design The target respondents are professionals that are mainly concerned with engineering services in building project from construction firms. Architects, quantity surveyors, services engineers and engineering services contractors as target groups for the effective conduct of this research, seventy respondents representing 13.36% of the total population comprising of sixteen (16) architectural firms, twenty-five (25) quantity surveying firms and twenty-nine(29) engineering services consulting and contracting firms will be randomly selected using stratified random sampling technique as a type of probability sampling in order to give everyone that falls into any of these identified target groups equal and independent chance of being included in the sample. Respondent
Population (no)
Percentage (%)
Selected (no)
Architectural firms
161
10
16
Quantity surveying firms
168
15
25
and 195
15
29
13.36
70
Services
consulting
contracting firms 524
37
3.5 Sample Response Seventy copies of questionnaire were randomly administered. A total of forty-seven usable responses were received, representing 67.14% effective response rate. The maximum responses from each sampling frame are shown in table 4.2.1 Type of firm
No of distributed Percentage questionnaires (%) 16 22.86
No Returned 11
Percentage (%) 68.75
25
35.71
13
52
Engineering services firms
29
41.43
23
79.31
Total Table 4.2.1
70
100
47
67.14
Architectural firms Quantity Surveying firm
Designation of Respondents The demographic profiles of the respondents in table 4.2.2 below show that 25.5% were architects, 34% were quantity surveyors, 31.9% were service engineers, 6.4% were project managers and 2.1% were contractors. Designation
Frequency
Percentage
Cumulative Percentage
Architect
12
25.5
25.5
Quantity surveyor
16
34.0
59.5
Service engineer
15
31.9
91.4
Project manager
3
6.4
97.8
Contractor
1
2.1
100.0
Total
47
100.0
38
3.6 Method of Data Analysis Data collected would be presented in table and graphs. The data analysis will be done using descriptive and inferential statistical tools with the aid of computer software named Statistical Package for Social Sciences (SPSS) and Microsoft Excel. These include mean, relative important index and Pearson’s correlation techniques. Data relating to factors affecting the use of bill of quantities for engineering services and factors affecting the accuracy of bill of quantities for engineering services for building projects will be analysed with relative importance index. The data related to the degree of variation between the cost of measured quantities of engineering services and the actual construction cost will be analysed using Pearson’s correlation techniques.
39
CHAPTER 4 DATA ANALYSIS AND RESULTS 4.1 Introduction The previous chapter focused on the research methodology comprising of the techniques of sample selection and data collection. This chapter deals with the analysis and discussion of the collected data in relation to the research questions, relevant hypothesis and research objectives which include, to examine the degree of variation between cost of measured quantities of engineering service and the actual cost of construction in the study area; to determine the level of usage of bill of quantities for procurement of engineering services; to assess the effectiveness of the bill of quantities for procurement of engineering services for building works and to identify factors affecting the use of bill of quantities for engineering services for building project in Lagos State as well as the stated hypotheses. 4.2
Analysis of demographic data
Years of experience of respondents Table 4.2.1 show that most of the respondents possessed a working experience ranging from six to ten years with 46.8%. However, those in the eleven to fifteen year’s category are also of significant percentage with 29.8%. The mean years of experience of the respondent were 9 years. This period is relatively long enough to provide a reliable data. Mean = ∑fx/∑f = 403/47 = 8.5 years = 9 years
40
Table 4.2.1: Year of Experience of Respondents No of years
Frequency
Per cent
Mid-point (x)
fx
1-5years
9
19.1
3
27
6-10years
22
46.8
8
176
11-15years
14
29.8
13
182
16-20years
1
2.1
18
18
Total
47
100.0
403
Average number of projects executed Table 4.2.2 show that most of the respondents have executed an average numbers of projects ranging above twenty with 31.9%. They are, however, followed by those who had executed between 11-15 with 25.5%, 16-20 projects with 23.4% and 6-10 projects with 12.8%. The mean number of executed projects by the respondent was 16 projects. This result is relatively good enough to provide a reliable data. Mean = ∑fx/∑fx = 756/47 = 16.09 = 16 projects Table 4.2.2: Average Number of Projects No of project
Frequency
Per cent
Mid-point (x)
fx
0-5
3
6.4
3
9
6-10
6
12.8
8
48
11-15
12
25.5
13
156
16-20
11
23.4
18
198
above 20
15
31.9
23
345
Total
47
100.0
756
41
4.3
Examining the degree of variation between cost of measured quantities of
engineering service and the actual cost of construction in the study area Table 4.3.1 examines the rating of the accuracy of bill of quantities of engineering services for building in the study area. Enquiry into the rating of the accuracy of bill of quantities of engineering service for building shows that most of the respondents represented by 97.7% rate it as accurate and 14.0% out of the 97.7% rate it to be very accurate, leaving 83.7% to rate bill of quantities for building services to accurate while only paltry 2.3% are of the opinion of no difference. Table 4.3.1: Rate of accuracy of bill of quantities of engineering services for building projects How will you rate the accuracy of bill of quantities of Frequency
Percentage (%)
engineering service for building? Very accurate
6
14.0
Accurate
36
83.7
No difference
1
2.3
Total
43
100.0
In order to deduce the relationship between the accuracy of bill of quantities for engineering services for building projects and the no of projects executed so far, and the number of years of working experience, two hypotheses were set and were tested using chi-square as described below. Hypothesis 1: Null hypothesis (H0): there is no significant relationship between the accuracy bill of quantities and average number of project executed 42
Alternate hypothesis (H1): there is a significant relationship between accuracy bill of quantity and average number of project executed Table 4.3.2: Cross-tabulation of Average number of Projects and Accuracy of Bill of Quantities for procurement of engineering services Average number of projects executed
Very accurate Accurate No difference Total
Chi-Square Tests
0-5
6-10
11-15
16-20
above 20
Total
0
1
2
2
1
6
3 0
5 0
9 1
8 0
11 0
36 1
3
6
12
10
12
43
df
Χ2
value
8
3.942
.862
Table 4.3.2 shows the relationship between the accuracy of bill of quantities for engineering services for building projects and the number of project executed. It can deduce from the table, a Pearson chi square of 3.942, degree of freedom (df) of 8, and a significant value of 0.862, which is greater than 0.05 the critical alpha value. It can be therefore be concluded by accepting the null hypothesis that there is no significant relationship between accuracy of bills of quantities and average number of project executed Hypothesis 2: Null hypothesis (H0): there is no significant relationship between the accuracy bill of quantities and the number of years of working experience. Alternate hypothesis (H1): there is a significant relationship between accuracy bill of quantity and the number of years of working experience. 43
Table 4.3.3: Cross-tabulation of Years of experience and Accuracy of Bill of Quantities for procurement of engineering services Years of experience of respondent
Chi-Square Tests
165years 10years
1115years
1620years
Above 20 years
Total
Very accurate Accurate
2
2
2
0
0
6
6
19
10
0
1
36
No difference Total
0
0
0
1
0
1
8
21
12
1
1
43
df
Χ2
value
44.394
8
.215
Table 4.3.3 shows the relationship between the accuracy of bill of quantities for engineering services for building projects and the number of project executed. It can deduce from the table, a Pearson chi square of 44.394, degree of freedom (df) of 8, and a significant value of 0.215, which is greater than 0.05 the critical alpha value. It can be therefore be concluded by accepting the null hypothesis that there is no significant relationship between accuracy bill of quantity and the number of years of working experience of the respondents. Accuracy level of bill of quantities of engineering services of building projects Table 4.3.4 examines the level of accuracy of bill of quantities for engineering services of building projects in the study area. Enquiry into the average percentage of the accuracy of bill of quantities of engineering service for building shows that most of the respondents (62.8%) took the average accuracy level of bill of quantities for engineering services to be between the range of 61-81%, 16.3% of the respondent choose 41-60% and 81-100% each, and only 4.7% of the respondent choose 21-40%. It can also be seen from the table above, the mean of 68.64% for the accuracy of bill of quantities for engineering services for building projects. 44
Mean = ∑fx/∑f = 2951.5/43 = 68.64% Table 4.3.4: Accuracy level of bill of quantities of engineering services of building projects Accuracy quantities
level
of
prepared
bill
of Frequency Percentage for
Mid-point
(%)
(x)
Fx
engineering services of building projects 21-40%
2
4.7
30.5
61
41-60%
7
16.3
50.5
353.5
61-80%
27
62.8
70.5
1903.5
81-100%
7
16.3
90.5
633.5
Total
43
100.0
2951.5
The degree of variation between cost of measured quantities of engineering services and the actual cost of execution Table 4.3.5 presents the initial contract sums in the bill of quantities for engineering services for building projects as well as its final account for 20 building projects studied. An analysis of the percentage difference between the tender sum and the final account figure gives an indication of 7.45% average cost overrun as against 41% average cost overrun of P.C sums (Ikpo, 2008). Within the limitation of the data set, this suggests that where detailed bill of quantities is produced according to the Standard Method of Measurement (SMM) for engineering services for building projects, the BOQ tends to be a reliable budgetary tool with little cost overrun.
45
Table 4.3.5: The degree of variation between cost of measured quantities of engineering services and the actual cost of execution S/N
Project year/duration
Project 1 " 2 " 3 " 4 " 5 " 6 " 7 " 8 " 9 " 10 " 11 " 12 " 13 " 14 " 14 " 15 " 16 " 17 " 18 " 19 " 20
4.4
June ‘07-Oct ‘10
Project Type
Public June ’07Sept’10 Public 2010/6 Months Private 2008/8 Months Public 2010 Private 2008 Private 2007 Private 2010/6 Months Private 2008/16 Months Private 2006/6 Months Public 2009/12 Months Public 2008/12 Months Private 2009/16 Months Private 2007/ 18 Months Private 2010/8 Months Private 2007/ 14 Months Private 2011/15 Months Private 2010/8 Months Public 2009/8 Months Private 2008/10 Months Private 2006/10 Months Private
Initial Final engineering engineering services contract services contract sums (#) sums (#)
2,000,000,000 675,000,000 4,568,490 3,980,825 206,463,676 857,550,000 1,057,004,113 4,568,970 45,346,570 3,740,056 5,287,500 22,865,280 98,780,000 108,675,000 14,670,849 6,301,560 28,000,000 6,013,716 4,013,716 247,356,000 6,500,000
2,200,000,000
Cost Difference % of (#) Difference
200,000,000
10.00
700,000,000 25,000,000 4,994,225 425,735 4,240,695 259,870 209,500,450 3,036,774 975,750,000 118,200,000 1,150,000,000 92,995,887 5,016,842 447,872 46,108,380 761,810 4,025,960 285,904 5,985,300 697,800 24,590,400 1,725,120 100,460,000 1,680,000 110,265,940 1,590,940 14,920,225 249,376 6,857,600 556,040 29,560,290 1,560,290 6,756,853 743,137 4,756,853 743,137 250,047,580 2,691,580 7,260,140 760,140 Average percentage
3.70 9.32 6.53 1.47 13.78 8.80 9.80 1.68 7.64 13.20 7.54 1.70 1.46 1.70 8.82 5.57 12.36 18.51 1.09 11.69 7.45
Determining the level of usage of bill of quantities for procurement of engineering services Table 4.4.1 enquire the respondents of their opinion whether the use of bill of quantities
of engineering service for building projects produces a better estimate. The table reveals that most of the respondents of 97.8% agree that the use of bill of quantities of engineering service for building project will produce a better estimate with none of them thinking otherwise. The remaining percentage of 2.2% goes for those who are sitting on the fence.
46
Table 4.4.1: Opinion of Respondents on the use of Bill of quantities for procurement of Engineering Service. Do you think the use of bill of quantities of engineering service for
Frequency
Percentage (%)
Strongly agree
15
32.6
Agree
30
65.2
Neutral
1
2.2
Total
46
100.0
building project will produce a better estimate?
Table 4.4.2 (a) shows the results of the question whether respondents prepare detailed bill of quantities for procurement of engineering services for building projects. The result shows that 95.7 % of the sample responses prepare detailed bill of quantities for procurement of engineering services for building projects, while only 4.3 % of them do not. While table 4.4.2 (b) shows that 50 % of those who do not prepare detailed bill of quantities for procurement of engineering services for building projects and gave reason for such action as absence of qualified personnel in their firm to prepared the bill of quantities while the other 50 % give no specific reason for not preparing bill of quantities. Table 4.4.2 (a & b): Level of Usage of Bill of Quantities for procurement of Engineering Service Do you prepare detailed bill of quantities (measured quantities) for
Frequency
Percentage (%)
Yes
44
95.7
No
2
4.3
Total
46
100
procurement of engineering services of building projects?
47
(b) If NO, what is/are the reason(s) why your firm does not prepare detailed
Frequency
Percentage (%)
Non response
1
50
No qualified engineer
1
50
Total
2
100
bill of quantities for procurement of engineering services in building projects?
Table 4.4.3 show the inquiry into whether or not respondents are satisfied with the preparation of detailed bill of quantities (measured quantities) for building projects as against the inclusion of PC sum shows result for those who are very satisfied, satisfied and for those who are neutral. 10.9 % of the respondents are very satisfied the preparation of detailed bill of quantities for engineering services for building project and 78.3 % of the respondent are satisfied with the preparation of detailed bill of quantities (measured quantities) for building projects as against the inclusion of PC sum while only 10.9% represents the percentage of those who sit on the fence. Table 4.4.3: Respondents Level of Satisfaction Are you satisfied with the preparation of detailed bill of Frequency Percentage quantities (measured quantities) for building projects as (%) against the inclusion of PC sum? 5 10.9 Very satisfied Satisfied
36
78.3
Neutral
5
10.9
Total
46
100.0
48
4.5
Assessing the effectiveness of the bill of quantities for procurement of engineering
services for building works. Table 4.5.1 assesses the effectiveness of the bill of quantities for procurement of engineering services for building works. It focuses on the perspective views of the respondents based on certain processes in relation to the effectiveness of the bill of quantities for procurement of engineering services for building works. The analysis of result shows that bill of quantities for engineering services for building project is most effective in the process of valuation of work in progress, followed by the process of bidding and tender analysis and project coordination which are second and third respectively. The result further shows bill of quantities for engineering services for building projects to be least effective in ascertaining of work quality and management of risks which are ranked 10th and 11th respectively. Table 4.5.1: Relative significance of effectiveness of BOQ for engineering services for building projects S/N 1
Processes Bidding process and tender analysis
TWW 190/47
RII 4.04
Ranking 2
2 3
Price negotiation Cost control and monitoring
182/47 174/47
3.87 3.70
4 8
4 5 6 7
Project coordination Risk management Cost reliability Resources scheduling
187/47 154/47 176/47 178/47
3.98 3.28 3.75 3.79
3 11 7 5
8
Cash flow analysis
176/47
3.75
7
9
Budgetary allocation
177/47
3.77
6
10
Valuation of work in progress
195/47
4.15
1
11 12
Work quality Settlement of final account
156/47 172/47
3.32 3.66
10 9
49
Table 4.5.2 assesses the impact of certain factors in relation to the effectiveness of the bill of quantities for procurement of engineering services for building works. From the table above, the adequacy of design is ranked highest among the factors that determine the effectiveness of bill of quantities for the procurement of engineering services for building projects. The quality of cost information, the project team capability to control the project and the quantity surveyor’s experience and skill level were ranked 2nd, 3rd and 4th respectively. And the market condition and variation were ranked 5th and 6th respectively. Table 4.5.2: Relative significance of impact of the following factors on effectiveness of bill of quantities for engineering services for building projects. S/N
Factors
TWW
RII
Ranking
1
Adequacy of design
205/47
4.36
1
2
Variation
168/47
3.57
6
3 4
Quality of cost information 198/47 Project team capability to control 197/47 the project Quantity surveyor experience and 191/47 skill level
4.21 4.19
2 3
4.06
4
Market condition
3.91
5
5 6
184/47
4.6 Identifying the factors affecting the use of bill of quantities for engineering services for building projects. Table 4.6.1 identifies from the sampled respondents’ perspective, the factors affecting the use of bill of quantities for engineering services for building project in Lagos State. It can be observed from the table that insufficient drawing information ranked highest among the factors affecting the use of bill of quantities for procurement of engineering services for building
50
projects in Lagos State, and the resistance of engineering services consultants in the preparation of bill of quantities for engineering services ranked second while the limited knowledge of quantity surveyors in the measurement of engineering services ranked fourth and last. Table 4.6.1: Relative significance of factors affecting the use of bill of quantities for procurement of engineering services for building projects. S/N 1
Factors Insufficient drawing information
TWW 200/47
RII 4.26
Ranking 1
2
Little knowledge of quantity surveyors in measurement of engineering services
162/47
3.45
4
3
Resistance of engineering services consultant
177/47
3.77
2
4
Variation to the work
171/47
3.64
3
51
CHAPTER FIVE 5. 1 Conclusion This study has investigated the performance of the bill of quantities for procurement of engineering services for building project using primary and secondary data from professionals and completed building projects respectively. From the analysis of results, majority of the respondents supported the clamour for the preparation of detailed bill of quantities for procurement of engineering services for building project and says its preparation will produce a better and more reliable cost estimates. As a result of this, results showed that most of the respondents prepare a detailed bill of quantities for engineering services and they are mostly satisfied with it. This, however, shows that the level of its usage is high, which reveals that the construction professionals have yielded to most recommendations of previous researchers who have condemned the inclusion of PC sums for engineering and recommended the preparation of detailed bill of quantities for engineering services for building projects {Ikpo (2008) and Odeyinka et al (2009)}. Examining the accuracy level of bill of quantities for engineering services for building projects, it was revealed that most respondent rate the bill of quantities for engineering services for building to be accurate and most of them took the range of its percentage of accuracy to be between 61-80% and the mean percentage of accuracy was 68.64%. The study further revealed the degree of variation of measured quantities and the final construction cost to be 7.45%. This however shows the use of bill of quantities rather than the inclusion of PC sums for procurement of engineering services for building projects to be much more reliable, as it records a significant low percentage of cost overruns of 7.45% as against 41% cost overrun recorded for PC sums according to the work of Ikpo, 2008. 52
Its effectiveness was, however, assessed in relation to certain construction processes. It was revealed that the bill of quantities for engineering services is most effective in the process of valuation of work in progress, followed by the process of bidding and tender analysis, project coordination and other processes include price negotiation, resources scheduling, budgetary allocation, cash flow analysis, cost reliability, cost control and monitoring, settlement of final account, work quality and risk management. The results, however, show the bill of quantities to be least effective in ascertaining the work quality and management of risks. On assessing the impact of certain factors on the effectiveness of bill of quantities for procurement of engineering services for building projects, the adequacy of design was ranked most, followed by the quality of cost information available, the project team capability, the quantity surveyor experience and skill level, market condition and variation of work. On the factors affecting the use of bill of quantities for the procurement of engineering services for building project, insufficient drawing information was revealed as major factor affecting the use of bill of quantities for engineering services and other factors affecting its use are; the resistance of engineering services consultants, variation, and limited knowledge of quantity surveyors in the measurement of engineering services for building projects.
5.2 Recommendation The following recommendations are deduced from this study: 1. The quantity surveyor should regularly refresh their knowledge on the measurement of engineering service for building projects through attending refresher courses, seminars and conferences among others so as to update themselves of the latest trends in this section of work and produces a better estimate.
53
2. The services engineering consultants must be mandated or encourage to prepare a detail drawing information early enough during the design stage so as to enable the quantity surveyors to prepare a detail bill of quantities for engineering services 3. A well-organised and up-to-date cost data bank for engineering services should be created so as to make enough cost information available to the estimator in order to produce a better estimate 4. There should be a regular update of the standard method of measurement of engineering services for building projects so as to incorporate the latest technological advancement in order to ensure proper measurement of work. 5.
There should be thorough cross-checking of estimates based on updated price information in order to avoid any wrong estimation.
6. The assessment of the degree of variation of measured quantities and the actual cost of construction was based on data from just twenty projects. It is recommended that more extensive studies involving very large samples be undertaken so as to derive more reliable measurement of cost overrun in the use of bill of quantities for procurement of engineering services for building projects.
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REFERENCES
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services cost estimates in Nigeria In: Boyd, D (Ed) Procs 23rd Annual ARCOM Conference, 3-5 September 2007, Belfast, UK, Association of Researchers in Construction Management, 75-83.
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Brook, M. (2008). Estimating and Tendering for Construction Work, Butterworth Heinemann, Oxford. CII (1990), The Impact of Changes on Construction Cost and Schedule, Construction Industry Institute, University of Texas at Austin, Austin, TX, . Clough, R.H., Sears, G.A. (1994), Construction Contracting, 6th ed., John Wiley & Sons Inc., New York Construction report (2010). Report of the Commission of Enquiry into the Construction Sector in Trinidad and Tobago, March 2010. Consulting Engineers of British Columbia (CEBC) and the Association of Professional Engineers and Geoscientists of British Columbia (APEGBC) {2009}. “Budget guidelines for consulting engineering services”. Retrieved at www.apeg.bc.ca on 16/05/2012. Darke, S. (2002). The True Cost of Building Services. The Building Economist, March, 2002, Davis, P.R. and Baccarini, D. (2004).The Use of Bills of Quantities in Construction Projects An Australian Survey. http://www.rics-foundation.org/publish Davis, P.R., Love, P.E.D and Baccarini, D. (2009) Bills of Quantities: nemesis or nirvana? Structural Survey, 27 (2), 99-108. Dysert, L. R. (2006). Is "estimate accuracy" an oxymoron? AACE International Transactions EST.01: EST01.1 - 01.5. Elhag T.M.S., Boussabaine, A. H., and Ballal, T.M.A. (2005). Critical determinants of construction tendering costs: quantity surveyors_ standpoint, International Journal of Project Management, 23(7), 538–545.
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Ellis, C. and Turner, A. (1986). Engineering services procurement problems. Chartered Quantity Surveyor, 8(9), 11-15 Hackett, M. and Robinson, I. (Eds) (2003).
Pre-Contract Practice and Contract
Administration. Oxford: The Aqua Group & Blackwell Science Ibrahim, A. D. (2003). Cost implications of architectural design variables. Unpublished master thesis in construction engineering and management, King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia. Ikpo, I. J (2008). Variability Analysis of Prime Cost Sums published in the “Civil Engineering Dimension” Vol. 10(1), 40–44. Kabir, Bala and Yakubu, Ibrahim (2007). Inadequate design by specialist consultants in construction projects. Journal of engineering and applied sciences, 2(9), 1414- 1420. Ling, Y. Y. and Boo, J. H. S. (2001). Improving the accuracy of approximate estimates of building estimates. Building Research and Information, 29(4), 312 - 318. Liu, L., Zhu, K. (2007). Improving cost estimates of construction projects using phased cost factors, Journal of Construction Engineering and Management, 133(1), 91-95. Marjuki, M. (2006). Computerized building cost estimating system, Unpublished MSc Thesis. University Teknologi Malaysia. Malaysia. Mok, C.K., Tummala, V.M.R. and Leung, H.M. (1997). Practices, Barriers and Benefits of Risks Management Process in Building Services Cost Estimating. Construction management and Economics, 15(1), 161-175 Oberlender, G. D., and Trost, S. M. (2001). Predicting accuracy of early cost estimates based on estimate quality, Journal of Construction Engineering and Management, 127(3), 173182.
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Odeyinka, H., Kelly, S. and Pereira, S. (2009). An evaluation of the budgetary reliability of bill of quantities in building procurement. RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009, 435-446 Odusami, K. T., and Onukwube, H. N. (2008). Factors affecting accuracy of pre-tender cost estimate in Nigeria, The construction and building research conference of the Royal Institution of Chartered Surveyors, COBRA. Onyechi, A.I. and Alufohai, A.J. (1989). The Importance of Quantity Surveyors involvement in Mechanical and Electrical Engineering Services. The Nigerian Quantity Surveyor, December 1989, 35-37 Schottlander, D. E. (2006). How accurate are your estimates? AACE International Transactions EST.17: EST.17.1 - 17.6. Seeley, I.H. (1997) Quantity Surveying Practice, Macmillan Education Limited, London Serpell, A. F. (2005). Improving conceptual cost estimating performance. AACE International Transactions EST.13: EST.13.1 - 13.6. Sidwell A.C. (1978) “The measurement of mechanical and engineering services in Buildings” The Quantity Surveyor. Dec. Edition. London: Institute of Quantity Surveyors. Sutherland, J. (1999). Project cost estimating for major renovation projects. AACE International Transactions, 43rd Annual Meeting, EST 05.1-EST.05.7. Swaffield, L.M and Pasquire, C.L. (1996) A Critique of Mechanical and Electrical Services Cost Planning, Existing Methods and Published Information. Journal of Financial Management of Property and Construction, 1(3), 23-41.
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Swaffield, L.M and Pasquire, C.L. (2000) Improving Early Cost Advice for Mechanical and Electrical Services Considering Functions and Client/Design Team Communication. Journal of Financial Management of Property and Construction, 5(1), 3-13. Trost, S. M., and Oberlender, G. D. (2003). Predicting accuracy of early cost estimates using factor analysis and multivariate regression, Journal of Construction Engineering and Management, 129(2), 198-204. Wikipedia (2012). Bill of quantities. Last modified on 06/05/2012. Retrieved at www.wikipedia.org on 16/05/2012. Willis, C.J., Ashworth, A. and Willis, J.A.(2002) Willis’s Practice and Procedure for the th
Quantity Surveyor. 11 Edition London: Blackwell Science. Worthington, J., 1994. Design in practice-Planning and Managing space. In: Spedding, (Ed), CIOB Handbook of Facilities management. Harlow: Longman Group.
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APPENDIX I
OBAFEMI AWOLOWO UNIVERSITY FACULTY OF ENVIRONMENTAL DESIGN AND MANAGEMENT DEPARTMANT OF QUANTITY SURVEYING Research Title: Performance Evaluation of Bill of Quantities for Procurement of Engineering Services Dear Respondent, I am an undergraduate of Obafemi Awolowo University carrying out a survey on a research title as above mentioned. The purpose of the survey is to collect information on the level of usage of bill of quantities for procurement of engineering services in building projects, factors affecting its usage, its effectiveness on the work and examination of degree of variation between cost of measured quantities of engineering and its actual construction cost [Final cost]. Your assistance in completing this questionnaire to the best of your knowledge and ability is of great importance so that the objectives of this research can be achieved. I assure you that your responses shall be strictly used for research purposes and shall be treated with absolute confidentiality.
Thank you. Yours faithfully, …………………………… JESULOWO Iyanuoluwa 500L Quantity Surveying QUESTIONNAIRE SECTION A Please tick in the appropriate section 1. Name of firm (optional)_____________________________________________ 2. Address of organization_____________________________________________ 3. Type of firm a. Contracting firm ( ) b. Architectural firm ( ) c. Quantity surveying firm ( ) d. Consulting engineering firm ( ) e. others (specify) ____________________________________ 4. Year of establishment________________________________________________ 5. Designation of respondent a. Architect ( ) b. Quantity surveyor ( ) c. Service engineer ( ) d. Project manager ( ) e. Contractor ( ) 6. Year of experience of respondent a. 1-5 years ( ) b. 6-10 years ( ) c. 11-15years ( ) d. 16-20 years ( ) e. over 20 years (specify) ____________ 60
7. Professional qualification of respondent a. MNIA ( ) b. FNIA ( ) c. MNIQS ( ) d. FNIQS ( ) e. MNSE ( ) f. FNSE ( ) g. COREN ( ) f. others (specify)_____________ 8. Average number of projects executed 0-5 ( ) 6-10 ( ) 11-15 ( ) 16-20 ( ) above 20 ( ) SECTION B Please tick in the appropriate bracket. 9. Do you think the use of bill of quantities of engineering service for building project will produce a better estimate? Strongly agree ( ) agree ( ) neutral ( ) disagree ( ) strongly disagree ( ) 10. a. Do you prepare detailed bill of quantities (measured quantities) for procurement of engineering services of building projects? Yes ( ) No ( ) b. If (NO) , what is /are the reason(s) why your firm does not prepare detailed bill of quantities for procurement of engineering services in building projects? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 11. Are you satisfied with the preparation of detailed bill of quantities (measured quantities) for building projects as against the inclusion of P.C sum Very satisfied ( ) satisfied ( ) Neutral ( ) not satisfied ( ) Very not satisfied ( ) 12. How will you rate the effectiveness of bill of quantities of engineering services for building projects on the following processes , based on your perspective level of effectiveness on a scale of 1 - 5, where 1 – not effective; 2 – less effective; 3 – effective; 4 – more effective; 5 – most effective.
S/N Factors 1 Bidding process and tender analysis 2 Price negotiation 3 Cost control and monitoring 4 Project coordination 5 Risk management 6 Cost reliability 7 Resources scheduling 8 Cashflow analysis 9 Budgetary control 10 Valuation of work in progress 11 Work quality 12 Settlementof final account
5
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4
3
2
1
13. Please kindly rate how do the following factors affect the use of bill of quantities of engineering for building based on your perspective level of impact on a scale of 1- 5, where 1 – very low; 2 – low; 3 – moderate; 4 – high; 5 – very high
S/N Factors 1 Insufficient drawing information Little knowledge of quantity surveyors in 2 measurement of engineering services 3 Resistance of engineering services consultant 4 Variation to the work
5
4
3
2
1
14. How will you rate the accuracy of bill of quantities of engineering services for building? Very accurate ( ) accurate ( ) no difference ( ) Inaccurate ( ) Very inaccurate ( ) 15. Based on your experience, what is the accuracy level of bill of quantities prepared for engineering services of building projects? 0-20% ( ) 21-40% ( ) 41-60% ( ) 61-80% ( ) 81-100% ( ) 16. Please kindly rate the effect of the following factors as pertain to the effectiveness of bill of quantities of engineering services in building based on your perspective level of impact on a scale of 1- 5, where 1 – very low; 2 – low; 3 – moderate; 4 – high; 5 – very high
S/N Factors 1 Adequacy of design 2 Variation 3 Quality of cost information 4 Project team capability to control the project 5 Quantity surveyor experience and skill level 6 Market condition
5
4
3
2
1
17. Do you have any comment as to ways of improving the effectiveness of bill of quantities for the procurement of engineering services in building projects? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _________________________________________________________________
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Section C Please fill the table below with appropriate information of engineering services for building projects your firm executed in Lagos State within the period of year 2000-2012 using detailed bill of quantities. S/N
Project name
Project year/project duration
Project type Public
1
2
3
4
5
6 7
8
9
10
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Private
Initial engineering services contract sum
Final engineering services contract sum
