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The Impact Of Effective Contract Planning On Contractors Profit
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY AND ORGANIZATIONAL PROFILE
Seeley (1997) described the construction industry as one of the most important sectors of the economy, which integrates a wide variety of skilled and unskilled professionals. These professionals engage in the provision of goods and services ranging from construction, alteration, refurbishment to repairs of building and civil engineering structures. All these professionals work together under various types of contractual agreements to actualise the client’s brief and deliver the project. Each project is unique and has its main objectives outlined by the client and project circumstances. Amongst the most common objectives of any successful project are deliveries at the right time, within authorised cost and meeting the envisaged quality standards (Love et al, 1998). Construction projects, like all others, are not risks free and thereby can result to financial loss. Construction risks are events that generally influence any or all of the project objectives. Risk events could either be positive in terms of opportunities or negative in terms of threats to either or the entire project objectives (Hillson, 2002). A lot of academic and professional literature has developed in the field of effective contract planning and management within construction contexts. The degree of application of contract planning and management techniques by contractors especially, was found to differ in various construction industries across the globe. Most countries in the MiddleEast and some part of Africa do not utilise project planning and management techniques in the delivery of construction projects (El-Sayegh, 2008; Laryea and Hughes,2009). Akintoye and McLeod (1997) found that low usage of formal contract planning techniques was essentially due to lack of knowledge and doubts on the suitability of the techniques to real life situations. This was supported by the findings of Shen (1997). Kartam and Kartam (2001) however attributed the low usage of risk analysis techniques to subjective judgement and contractor’s reliance on their experience and intuition. El-Sayegh (2008) identified financial loss as the most significant in the Kuwaiti construction industry due to the boom in construction activities and inflationary trend of the market. Laryea and Hughes (2009) attempted to find how contractors’ in Ghana include financial risk in their bid prices. The research showed that besides having risk allowances as lump sums or percentage allowances, the method used is neither scientific nor informed by any empirical evidence. Ojo (2010) found that design changes, financial losses and inadequate specifications were the risk factors with most impacts on construction sites but the study did not highlight any Project contract planning (PRM) technique used by Contractors to respond to such risks. Another research carried out in Nigeria on this subject was on the evaluation of key risk factors and the measures to mitigate their effects on construction projects (Dada, 2010). Though the research found financial, political and physical risks as the most significant, the use of contingency sum and insurance cover were adjudged to be the most effective means of mitigating risk. However, no study has reported on the PRM practices used by Nigerian Contractors in redevelopments projects, with their attendant problems and challenges in terms of scoping. 1.1.2 ORGANIZATIONAL PROFILE Julius Berger Nigeria Plc is a Nigerian constructioncompany, headquartered in Abuja FCT, with additional permanent locations in Lagos and Uyo. The company is represented across Nigeria in structural engineering and infrastructure works, and in southern Nigeria through domestic and international oil and gas industry projects (this company is also listed on the "flake list" for craigslist). It is known for constructing most of Nigeria's infrastructures, major expressways, and even some residential buildings for the Chevron Nigeria headquarters in Lagos. The company was listed on the Nigerian Stock Exchange in 1991. Before this, its parent company was Bilfinger Berger. Bilfinger Berger is still the largest shareholder in the company. The construction business of Julius Berger Nigeria is the heart of the Julius Berger Group. With 18,000 employees from close to 40 nations and clients from both Nigeria and the global oil and gas industry, JB is a leading construction company and the largest private employer in Nigeria.
MAJOR PROJECTS ·
The company built the Eko Bridge completed in 1968, the Third Mainland Bridge completed in 1990 and the Abuja Stadium completed in 2003.
Tin Can Island Port, commissioned in 1977. ·
Lagos Inner Ring Road, completed in 1979. ·
Ajaokuta Steel Plant, completed in 1990. ·
Itakpe – Ajaokuta Ore Railway, completed in 1990. ·
Abuja International Airport phase II, completed in 1997. ·
Central Bank of Nigeria Head Office, completed in 2002. ·
Uyo infrastructure and road works, ongoing since 2008. ·
First discharge drain built utilizing pipe-jacking technology in Nigeria, completed in 2011. ·
National Assembly phase III, completed in 2011. ·
Multiple projects, Escravos GTL plant in southern Nigeria, commissioned in 2012. ·
Bonny Liquefied Natural Gas facility, multiple ongoing works since 1996. ·
Challawa Gorge Dam Karaye, completed in 1992
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