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FACTORS AFFECTING CONSTRUCTION COSTS IN SAUDI ARABIA

FACTORS AFFECTING CONSTRUCTION COSTS IN SAUDI ARABIA. By Yaser Abdulla Al-Juwairah Presented by Shaikh Imran Abdul Qayyum Gani. TABLE OF CONTENTS. INTRODUCTION OBJECTIVES SCOPE AND LIMITATIONS RESEARCH METHODOLOGY DATA COLLECTION DATA ANALYSIS CONCLUSIONS RECOMMENDATIONS.

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FACTORS AFFECTING CONSTRUCTION COSTS IN SAUDI ARABIA

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  1. FACTORS AFFECTING CONSTRUCTION COSTS IN SAUDI ARABIA By Yaser Abdulla Al-Juwairah Presented by Shaikh Imran Abdul Qayyum Gani

  2. TABLE OF CONTENTS • INTRODUCTION • OBJECTIVES • SCOPE AND LIMITATIONS • RESEARCH METHODOLOGY • DATA COLLECTION • DATA ANALYSIS • CONCLUSIONS • RECOMMENDATIONS

  3. INTRODUCTION • The Demand for more construction of all types, coupled with a tight monetary supply, provide the construction industry with a bigger challenge to cut costs. • However, little has been done to minimize the problem. • Consequently, substantial increases are observed in project costs. • Therefore, it is important to identify the main dominating factors leading to high construction cost so that efforts can be concentrated on those factors in order to reduce construction cost in Saudi Arabia.

  4. OBJECTIVES The main objectives of this study are as follows :- • To identify the factors affecting construction costs of large projects in the Eastern Province of Saudi Arabia. The research will answer the following questions, • What are the cost factors ranking according to contractors? • What are the cost factors ranking according to consultants? • What are the cost factors ranking according to owners?

  5. CONTD…. • To find the agreement ranking factors between contractors/owners and consultants/owners. • To test the hypothesis that contractors, owners and consultants, generally agree on the severity rank of the factors.

  6. SCOPE AND LIMITATIONS • This study is limited to large projects in the Eastern Province of Saudi Arabia. • In the Selection process, there are two restrictions, namely: • Restricted to large projects ( SR 5 million and above). • Restricted to the Eastern Province of Saudi Arabia.

  7. RESEARCH METHODOLOGY The Research Methodology is as follows: • Literature review and Personal interviews with some contractors, owners, and professionals in the construction and consulting industries. • A Questionnaire, which is the output of the literature review and personal interviews.

  8. QUESTIONNAIRE DESIGN There are three main parts in the Questionnaire. • The First part is an introduction to explain the idea and purpose of the survey as well as the definition of the interested area of study. • The Second part contains general information questions including annual volume, specialization, experience and nationality of the company. • The Third part concerns the cost factors in building construction projects. For each question, the respondents have five options. These are “extremely severe”, “very severe”, “severe”, “some what severe” and “not severe”.

  9. DATA COLLECTION A total of 280 Questionnaires were distributed(200 mailed, 50 hand carried and 30 faxed). A total of 84 Questionnaires were received and analyzed. The percentage of respondent was about 30%.

  10. DATA COLLECTION Table for Questionnaire Responses

  11. DATA ANALYSIS • STATISTICAL METHODS: The following Statistical Methods were used for the analysis of the data collected through Questionnaire. • Ranking • Statistical Techniques • Correlation • Tabulation and Cross Tabulation

  12. BY SEVERITY 1) SPEARMEN 1) MEAN 1) EXPERIENCE INDEX CORRELATION 1) COMBINED 2) RANK AGREEMENT 2) STANDARD 2) COST FACTOR RANKING FACTOR DEVIATION CATEGORIES 2) CONTRACTOR’S 3) KENDALL’S 3) STANDARD ERROR V/S RANKING COEFFICIENT OF MEAN PERCENTAGE 3) CONSULTANT’S 4) CONFIDENCE AGREEMENT RANKING INTERVAL 4) OWNER’S 5) COEFFICIENT OF RANKING VARIATION STATISTICAL METHODS RANKING CORRELATION STATISTICAL TECHNIQUES CROSS TABULATION

  13. CONTD…. • Hypothesis testing : Hypothesis testing was used in order to check whether consultants, contractors, and owners generally agree on the rank of severity of construction cost factors. In this case t test was more suitable. The null hypothesis says that parties do not agree on the severity rank of the factors and they differ in their responses. As tobs > tcritical the null hypothesis is rejected and hence it is concluded that the parties agree on the severity rank of the factors and these parties are reliable in their responses.

  14. RESULTS AND CONCLUSIONS • The five most severe factors affecting the construction cost as agreed by three set of professionals (consultants, contractors, and owners) are: • Cost of materials • Incorrect planning • Previous experience of the contract • Contract Management • Poor financial control in site

  15. CONTD…. • Contractors have ranked the following factors to be most severe: • Cost of Materials • Incorrect Planning • Contract Management • Wrong Estimation Methods • Previous Experience of the Contract

  16. CONTD…. • Consultants have ranked the following factors to be the most severe factors affecting construction cost: • Cost of Materials • Wrong Estimation methods • Incorrect Planning • Project Financing • Previous Experience of the Contract

  17. CONTD…. • Owners have ranked the following factors to be the most severe factors affecting construction cost: • Cost of Materials • Incorrect Planning • Poor Financial Control in Site • Previous Experience of the Contract • Economic Stability

  18. CONTD…. • The five least important factors as agreed by the three professionals are: • domination of construction industry by foreign firms • currency exchange • insurance cost • social and cultural impacts • waste on site

  19. CONTD…. • Incorrect Planning is the second major problem affecting construction cost. • Material cost is given the highest rank of all the 42 factors. • Project financing is the major factor in the financing factors category.

  20. RECOMMENDATIONS The following recommendations are the most important ones that can be deduced by this study: • Effort should be concentrated in major factors affecting construction cost. • Since the least agreement factor is between owners and consultants, it is suggested that this group should sit together and resolve all possible misunderstanding and reduce gaps between them.

  21. CONTD…. • Coordination and communication among various parties working on the project is of a great importance to improve management and control problems and reduce any avoidable delay. • It is the responsibility of contractors to come up with a clear plan and strategy before starting a project. • Estimates based on updated price information should be considered in order to come up with a reasonable offer and avoid any wrong estimation.

  22. CONTD…. • Continuous update on material price list by the Government related agencies is recommended. • The amount of experience of contractors should be given high priority in the pre-qualification procedure.

  23. Thank You

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