Qatar Residential Construction Projects

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$42bn and the capital expenditure on construction projects was approximately $6.52bn or 15 % of GDP. By. 2007 GDP was $68.8bn and construction and real ...
Qatar Residential Construction Projects Nasser Al Jurf 1, Salwa Beheiry 2 1

2

Qatar University ([email protected]) American University of Sharjah ([email protected]) ABSTRACT

Cost and schedule deviation from the estimated baseline are common in construction projects and have a negative effect on construction activity, which is a substantial portion of the GDP in most countries. Previous research studies examined the causes of deviation in several countries including some Gulf Council Countries (GCC) like Kuwait and the UAE, but none were done on the sizeable Qatari market. Qatar is expected to require an additional 93,000 residential units by the end of 2010 [1] to sufficiently address the rising demand, as a result of rapid population increase relative to supply [2]. Therefore, this study identified and ranked, using the Relative Importance Index (RII) method, the significant factors influencing cost and schedule deviation in Qatari residential compound projects. A detailed questionnaire was developed on a likert scale addressing these factors and was used to solicit the viewpoints of Grade A contractors. The collected project sample had a total capital investment of approximately $1.25 Billion and the projects were executed within a five year period (2000 – 2005). The study revealed that most contractors viewed material delays as the most prominent issue influencing construction projects predictability in Qatar. Other top ten factors included design changes, labor shortages, deficient estimates and cash flow planning. Keywords: project performance, cost deviation, schedule deviation, residential compounds, Qatar. 1. INTRODUCTION 2. RESEARCH BACKGROUND Qatar has been considered as one of the fastest growing economies in the world [3]. In 2005, Qatar’s GDP was $42bn and the capital expenditure on construction projects was approximately $6.52bn or 15 % of GDP. By 2007 GDP was $68.8bn and construction and real estate activity had risen by 22% to approximately $8bn or 11.5 % of GDP [4], [5]. Furthermore, the steady economic growth in Qatar in the past decade expanded the job market that relied heavily on expatriates. This raised the demand for residential buildings especially in the form of modern residential compounds. Residential compounds, also called complexes or camps are gated communities that are typically built in a uniform architectural style and offer common recreational facilities (swimming pools, tennis courts, playgrounds, nurseries, club houses, etc). These compounds were sizeable financial investments. Nonetheless, they were often delayed and over budget. Better cost and schedule predictability (reliability of the cost and schedule estimated baselines) is an important planning and control tool for all projects and would reflect favorably on the industry and the overall economy. Therefore, this study was designed to examine the factors influencing cost and schedule deviation in Qatari residential compounds’ projects. The focus was on privately owned compounds built between 2000 and 2005, and the factors were assessed from a contractor’s point of view.

Considerable research was carried out to categorize and classify delay and cost overrun factors in construction projects. Several studies examined specific construction markets including the U.S.A., Turkey, Kuwait and the U.A.E. although, Qatar is expected to require an additional 93,000 residential units by 2010 to sufficiently address the rising demand relative to supply and its economy is expected to be less affected by the recent world market crisis [1], there are no studies identifying the factors affecting deviation in Qatari residential projects. Deviation is common worldwide and in all types of construction project. Several research findings indicated that construction projects tend to deviate in cost and/ or schedule. For instance, it was mentioned by Avots [6] that in complex projects in the United States it was not unusual to have cost overruns of 50 to 100%. Arditi, et al. [7] studied cost overrun in public projects in Turkey. Construction activity constitutes a significant portion of the Gross National Product (GNP) of most world countries. For example, Nigeria’s construction investment accounts for over 60% of the gross fixed capital formation as mentioned by Mansfield and Ugwu [8]. Turkey’s construction investment accounts for about 50% of all investments in the country [7] The scale of capital investment in the construction industry highlights

the importance of executing construction projects and programs successfully. A study performed by the United States Department of Transportation found the cost of 61% of projects deviated with a range of between -10 to +106%, in road construction 86% of projects deviated with a range of -2 to +182%, in rail projects the average deviation rate was 17%, varying from -14 to +74%. Moreover, the UK Transport and Road Research laboratory studied 21 metro systems in developing countries that showed two metro projects had overruns of +100 and +500%, six projects had cost overruns of more than 50%, , and three had overruns varying from 20 to 50%; the rest deviated from -10 to +20%. Koushki, et al. [9] discussed the problems faced by private construction projects in Kuwait, as well as the scale of delays in time and cost from the client’s point of view. The study found project that spent more time on the preconstruction phase, recorded fewer change orders in the construction phase. Also more experienced contractors, completed more projects on time and budget. Odeh and Battaineh [10] studied construction delay in projects using the traditional design build approach. They surveyed consultants and contractors. The relative importance index was also used to rank factors according to the responses. The results highlighted that labor productivity was the main reason for delays from the contractors’ point of view while consultants viewed inadequate contractors’ experience as the main reason. In spite of disagreement on the top reason, both consultants and contractors agreed that inadequate contractors’ experience and owner interference were among the top five factors. Faridi and El Sayegh [11] conducted a survey on factors influencing project schedules in the United Arab Emirates (UAE). Nearly 50% of their sample of construction projects overran their schedules. The factors influencing predictability were ranked using the Relative Importance Index technique in three different categories, contractor’s and consultants’ perspective, the respondent’s years of experience in the UAE construction industry, and an overall ranking. The top five factors according to the contractor’s perspective were inadequate early planning of the project, preparation and approval of drawings, poor supervision and poor site management, slow decision-making by owner, and shortage of materials on site. Furthermore, project success relies heavily on better cost and schedule predictability. Henry, et al. [12] assessed the subsequent impact of predictability on project success. Consequently, the research framework for this study hinged on the following points; predictability of cost and schedule estimates is essential for construction projects’

success and the success of construction projects contributes the competitiveness of the construction industry and impacts GDP in most countries. Moreover, several past studies explored the causes of deviation but not in Qatar, which is a booming residential construction market. A study of the factors influencing cost and schedule predictability in Qatar’s residential compounds projects is beneficial to both the academic body of applied research, to local and foreign investors and to industry practitioners in the GCC and Qatar. 3. FACTORS INFLUENCING PREDICTABILITY IN RESIDENTIAL COMPOUNDS PROJECTS The factors with a possible influence on project cost and schedule predictability were accumulated from the literature review and consulting with several Qatari construction industry professionals. The factors were set on a likert scale and then presented to 20 industry experts (engineering management and project management executives with more than 10 years experience working for Grade A contractors). The industry experts’ interviews helped tailor the factors obtained from the literature to Qatar’s residential compounds projects and verify their applicability. As shown in Table 1, these factors were then categorized into two main categories: 1- Factors influencing project’s cost and/or schedule at any project phase. 2- Factors influencing deviation in the preconstruction phase and/or the construction phase. 4. DATA COLLECTION AND RESEARCH ALGORITHM Utilizing the factors mentioned in the previous section, a structured questionnaire was created with close-ended questions for ease of data collection and analysis. The factors were categorized in a Likert scale assessing agreement/disagreement of the degree of influence. The questionnaire was sent to Grade A contractors who specialized in building and maintenance work to collect data. The list of contractors was provided by the Qatari Central Tenders Committee [13]. Fifteen of the Grade A contractors contacted filled out the questionnaire on thirty six large projects. However, only twenty nine of the projects were residential compounds projects. The projects have a total capital investment of approximately $1.25 Billion and were executed within a five year period (2000 - 2005). Similar to the tailoring and verification of the deviation factors obtained from the literature review via consulting with an expert panel from the industry, the data received from the Grade A contractor in the questionnaires was also verified by holding face to face interviews with the respondents in Qatar.

Ranking according to effect from/on Schedule and Cost

F1

Deficiencies in general contractor's organization

1.1379

32

-

-

3

18

-

-

F2

Inaccurate estimates

1.0345

36

7

-

-

-

7

-

F3

Unrealistic tender cost estimation

1.1379

33

6

-

-

-

6

-

F4

Unrealistic contract duration estimate Improper pushing from owner on the contractor to reduce contract price Mistakes and / or discrepancies in contract documents Disagreement related to interpretation of contract specifications or other clauses Fraudulent practices and kickbacks

1.6207

18

3

-

-

8

-

-

1.8966

9

1

-

-

-

5

-

1.2759

29

5

-

-

-

-

8

1.1379

34

-

26

-

-

-

10

0.5517

40

-

-

4

-

-

13

1.3448

24

-

21

-

14

-

-

1.6552

15

-

15

-

6

-

-

F11

Delays in refunding accidents damages Site incidents and delays due to lack of safety measures Planning and scheduling changes or deficiencies

1.7241

11

2

-

-

-

-

4

F12

Poor contract administration

0.8621

38

8

-

-

-

-

11

F13

1.3448

25

4

-

-

-

-

6

1.3448

26

-

-

2

15

-

-

F15

Deficiencies in discovery work Slow or improper decision-making from project manager Inadequate cost and schedule control procedures

1.2069

30

-

23

-

-

-

9

F16

Construction delays

1.3448

27

-

20

-

16

-

-

F17

Rework during construction

0.7931

39

-

28

-

-

-

12

F18

Design changes

1.9310

8

-

8

-

-

-

3

F19

Work orders

2.1379

6

-

6

-

-

-

2

F20

Inflation

2.2069

5

-

5

-

-

3

-

F21

Cash flow inconsistency during construction

1.7586

10

-

9

-

2

-

-

F22

Contractor’s financial difficulties

1.7241

12

-

10

-

3

-

-

F23

1.7241

13

-

11

-

4

-

-

1.1379

35

-

25

-

19

-

-

1.5172

20

-

16

-

10

-

-

2.2759

3

-

3

-

-

-

1

1.4828

22

-

18

-

12

-

-

F28

Delay in monthly payments from owner Delays in conducting inspections and testing of work Delays in approving permits Delays from subcontractors and nominated suppliers Delays in preparation and approval of drawings, and information flow Construction methods

1.6552

16

-

13

-

-

-

5

F29

Design related issues

1.5862

19

-

1

9

-

-

F30

Lack of team alignment and conflicts management Escalation of basic construction material prices in local market Change of other materials prices in the local market

1.1724

31

-

24

-

17

-

-

2.3448

1

-

1

-

-

1

-

2.3103

2

-

2

-

-

2

-

No.

F5 F6 F7 F8 F9 F10

F14

F24 F25 F26 F27

F31 F32

Factor

RII

Schedule

Cost

Preconstructi on Phase Construction Phase Preconstructi on and Construction Phase

Overall Ranking

Table 1 Summary of Relative Importance Index and Rank For The Causes and Effect Of Overrun.

2.2414

4

-

4

-

1

-

-

F34

Shortage of materials and equipments in the local market Material procurement cost from outer country

2.1034

7

-

7

-

-

4

-

F35

Imported materials issues and limitations

1.5172

21

-

17

-

11

-

-

F36

Late delivery of materials and equipment

1.6897

14

-

12

-

5

-

-

F37

Frequent breakdowns of construction equipments

1.0000

37

-

27

-

20

-

-

F38

General labour shortages

1.6552

17

-

14

-

7

-

-

F39

Shortage of skilled workers

1.4483

23

-

19

-

13

-

-

F40

Low labour productivity

1.3103

28

-

22

-

-

-

7

F41

Weather Conditions

0.4483

41

-

29

-

21

-

-

F42

Use of client Authority

0.2069

42

-

30

-

-

-

14

F33

6. RELATIVE IMPORTANCE INDEX 6.1 Relative Importance Index (RII) The 42 factors were ranked using the Relative Important Index (RII). Factors that were ranked by respondents as having high influence over the cost and/or schedule deviation indicate high importance on the index scale, while low influence indicates low importance. The Relative Importance Index (RII) is 5

RII =

∑W .X i

i =1

i

(3)

5

∑X

i

i =1

Where; Wi: response weight to the ith respond equals 1, 2, 3, 4, 5 respectively. i: response index equal 1, 2, 3, 4, 5, which are for: very low influence, low influence, medium influence, high influence, and very high influence respectively. Xi: frequency of the ith response for a factor. According to the RII equation the factors were ranked in several ways, their overall importance index, their importance in terms of cost, schedule and both, their importance in the pre-construction phase and the construction phase, and most significantly their importance level in terms of project size (indicated by actual cost) and duration. Tables 3 and 4 illustrate the RII rankings. The Relative Importance Index was also discussed by Odeh and Battaineh [10], and Faridi and El Sayegh [11]. 6.2 Overall Ranking As shown in Table 1, the top 5 factors influencing cost deviation were escalation of basic material prices in the local market, change of other material prices in the local

market, inflation, material procurement cost from outside the country, and improper pressure from owner on the contractor to reduce contract price. The top five factors influencing schedule deviation were shortage of material and equipment in the local market, cash flow inconsistency during construction, contractor’s financial difficulties, delay in monthly payments from owner, and late delivery of materials and equipment. Moreover, the top five factors influencing both cost and schedule deviation were delays from subcontractors and nominated suppliers, work orders, design changes, planning and scheduling changes or deficiencies, and ineffective construction methods. The top five factors influencing the preconstruction phase where improper pressure from the owner on the contractor to reduce the contract price, planning and scheduling changes or deficiencies, unrealistic contract duration, Deficiencies in discovery work, and Mistakes and / or dissonances in contract documents, as shown in Table 1. On the other hand, for the construction phase the top five factors in sequence were escalation of material prices in the local market, change of other material prices in the local market, delays from subcontractors and nominated suppliers, shortage of material and equipment in the local market, and inflation. Moreover, the top five factors influencing both phases were design related issues, slow or improper decision-making, deficiencies in general contractor’s organization, and fraudulent practices and kickbacks. 6.3 Project Size Based Ranking As shown in Table 4, the RII ranking was calculated for projects above/under 45.0 Million Qatari riyals. The top 5 factors influencing projects over QR 45.0M were delays from subcontractors and nominated suppliers, site incidents and delays due to lack of safety measures, work orders, material procurement cost from outside the

Table 4: RII by Cost and Schedule Categories Factor No. F26 F10 F19 F34 F5 F4 F9 F18 F36 F22 F11 F20 F28 F29 F14 F21 F23 F38 F2 F27 F13 F15 F16 F33 F25 F39 F32 F3 F31 F35 F1 F40 F7 F24 F12 F30 F6 F37 F17 F8 F41 F42

Factor Delays from subcontractors and nominated suppliers Site incidents and delays due to lack of safety measures Work orders Material procurement cost from outer country Improper pushing from owner on the contractor to reduce contract price Unrealistic contract duration estimate Delays in refunding accidents damages Design changes Late delivery of materials and equipment Contractor’s financial difficulties Planning and scheduling changes or deficiencies Inflation Construction methods Design related issues Slow or improper decision-making from project manager Cash flow inconsistency during construction Delay in monthly payments from owner General labour shortages Inaccurate estimates Delays in preparation and approval of drawings, and information flow Deficiencies in discovery work Inadequate cost and schedule control procedures Construction delays Shortage of materials and equipments in the local market Delays in approving permits Shortage of skilled workers Change of other materials prices in the local market Unrealistic tender cost estimation Escalation of basic construction material prices in local market Imported materials issues and limitations Deficiencies in general contractor's organization Low labour productivity Disagreement related to interpretation of contract specifications or other clauses Delays in conducting inspections and testing of work Poor contract administration Lack of team alignment and conflicts management Mistakes and / or discrepancies in contract documents Frequent breakdowns of construction equipments Rework during construction Fraudulent practices and kickbacks Weather Conditions Use of client Authority

country, and inappropriate pressure from owner on the contractor to reduce contract price. The top 5 factors influencing projects under 45 Million were change of other materials prices in the local market, escalation of basic construction material prices in local market, shortage of materials and equipments in the local market,

Actual Cost > QR 45 Million

Actual Cost ≤ QR 45 Million

Actual Duration > 20 Months

Actual Duration ≤ 20 Months

RII

Rank

RII

Rank

RII

Rank

RII

Rank

3.875 3.692 3.455 3.450

1 2 3 4

3.083 2.167 3.333 3.000

6 27 4 7

2.813 2.813 3.313 2.813

5 8 1 6

3.846 2.462 2.923 3.462

3 28 13 6

3.368

5

2.500

19

2.500

15

3.385

7

3.333 3.292 3.211 3.091 3.053 3.000 3.000 2.944 2.833 2.789 2.778 2.765 2.765 2.762

6 7 8 9 10 11 12 13 14 15 16 17 18 19

2.167 2.000 2.833 2.917 2.583 2.500 3.333 2.417 2.417 2.083 2.917 2.667 2.500 1.750

28 34 11 9 16 20 5 22 23 31 10 13 21 37

2.375 2.250 3.125 2.500 2.375 2.625 2.500 2.750 2.813 2.000 2.438 2.375 2.250 1.938

20 22 2 14 18 11 13 9 7 30 16 17 21 33

2.923 2.462 2.692 2.923 3.154 2.846 4.077 2.538 2.308 2.769 3.154 3.154 3.154 2.154

15 30 21 14 10 18 2 24 32 19 8 9 11 36

2.750

20

2.667

14

2.125

26

2.923

17

2.714 2.700 2.684 2.643 2.632 2.579 2.571 2.556

21 22 23 24 25 26 27 28

2.583 2.083 2.250 3.500 2.750 2.667 3.750 1.750

17 32 26 3 12 15 1 38

2.188 2.063 2.375 3.063 2.188 1.938 3.063 2.188

24 28 19 4 23 31 3 25

2.538 2.385 2.308 3.462 2.923 3.077 3.615 2.077

25 31 33 5 16 12 4 38

2.538

29

3.667

2

2.688

10

4.154

1

2.474 2.444 2.444

30 31 32

3.000 1.917 2.333

8 35 25

2.563 1.750 1.938

12 38 32

2.462 2.615 2.769

29 23 20

2.421

33

2.167

29

1.813

35

2.538

26

2.278 2.167 2.167 2.059 1.941 1.765 1.412 1.250 1.125

34 35 36 37 38 39 40 41 42

2.167 1.667 2.417 2.583 2.083 1.833 1.750 1.417 1.000

30 40 24 18 33 36 39 41 42

1.813 1.563 2.125 2.000 1.875 1.813 1.313 1.375 1.375

36 39 27 29 34 37 42 40 41

2.538 2.231 2.231 2.615 2.154 1.769 1.846 1.538 1.000

27 35 34 22 37 40 39 41 42

work orders, and inflation. Smaller projects suffered more from material shortages than larger projects. 6.4 Duration Based Ranking

The RII ranking was also calculated for projects with less than 20 months duration and projects longer than 20 months. The top 5 factors for project with actual durations longer than 20 months were work orders, design changes, change of other materials prices in the local market, shortage of materials and equipments in the local market, and delays from subcontractors and nominated suppliers. The top 5 factors for projects with actual duration shorter than 20 months were Escalation of basic construction material prices in local market, inflation, Delays from subcontractors and nominated suppliers, change of other materials prices in the local market, and shortage of materials and equipments in the local market. 7. CONCLUSIONS The main objective of this study was to identify and rank the significant factors influencing cost and schedule deviation in Qatari residential compound projects. The viewpoints of Grade A Qatari contractors were weighed on a Relative Importance Index (RII). The projects in the data sample totaled $1.25 Billion in capital investment and were executed between 2000 and 2005. Contractors viewed material delays and price escalations as the most prominent negative influence on construction projects’ predictability in Qatar. Other project management concerns such as subcontractor delays, inaccurate baseline estimates and late design changes were also among the top ten factors in perceived influence. Further research in this topic may explore the owners’ perspective and compare it to the contractors’, examine predictability factors in other types of construction projects in Qatar, or identify the underlying causes of the escalation in material prices and material delays in market. Detailed statistical models can then be developed with more quantitative and predictive capabilities. REFERENCES [1] AME Info website, “Company News: LifeStyle Homes & Properties – Qatar” [Online] Available at http://www.ameinfo.com [Accessed 15 November 2008], 16 July 2008. [2] Samachaar.in website, “Business & Economy: Qatar to be less affected by financial crisis” [Online] Available at http://samachaar.in [Accessed 15 November 2008], 4 Nov. 2008. [3] US Department of State website, “Background Notes: Qatar” [Online]. Available at http://www.state.gov [Accessed 15 May 2007], n.d.

[4] Qatar Central Bank Database website, “Capital Expenditure Report” [Online]. Available at http://db.qcb.gov.qa/ [Accessed 15 May 2007], n.d. [5] Planning Council website, “Gross Domestic Product – 2005” [Online].Available at http://www.planning.gov.qa [Accessed 5 March 2008], n.d. [6] Avots, I. “Cost-relevance analysis for overrun control”, International Journal of Project Management, Vol. 1, No. 3, pp. 142-148, 1983. [7] Arditi, D., Akan, G. T. & Gurdamar, S. “Cost overruns in public projects”, International Journal of Project Management, Vol. 3, No. 4, pp. 218224, 1985. [8] Mansfield, N. R., Ugwu, O. O. & Doran, T. “Causes of delay and cost overruns in Nigerian construction projects”, International Journal of Project Management, Vol. 12, No. 4, pp. 254-260, 1994. [9] Koushki, P. A., Al Rashid, K. & Kartam, N. “Delays and cost increase in the construction of private residential projects in Kuwait”, Construction Management and Economics, Vol. 23, pp. 285 – 294, 2005. [10] Odeh, A. M. & Battaineh, H. T. “Causes of Construction Delay: Traditional Contracts”, International Journal of Project Management, Vol. 20, pp. .67-73, 2002. [11] Faridi, A. & El Sayegh, S. “Significance factors causing delay in the UAE construction industry”, Construction Management and Economics, Vol. 24, pp.1167-1176, 2006. [12] Henry R. et al, “Exploiting organizational knowledge in developing IS project cost and schedule estimates: An empirical study”, Journal of Information & management, Vol. 44, No. 6, pp. 598-612, 2007. [13] Qatari Central Tenders Committee website. n.d. “Contractors Classifications” [Online].Available at http://www.ctc.gov.qa [Accessed 15 May 2005].