THE FACTORS AFFECTING CONSTRUCTION PERFORMANCE IN GHANA:

THE PERSPECTIVE OF SMALL-SCALE BUILDING CONTRACTORS

Amoah, Peter; Ahadzie, Divine K. and Dansoh, Ayirebi
Abstract
The literature identifies numerous potential factors that could be affecting construction performance in Ghana.
Although this significant body of knowledge exists, extant review of the literature suggests that there is lack
of rigorous theoretical and empirical examination to establish the underlying characteristics of the numerous
factors identified, especially with regard to the performance of Small Scale-Building Contractors (SSBCs).
Given the very strategic importance of small-scale firms in Ghana, especially in respect to their contribution
to the development of local government areas of the economy, their evaluation of the knowledge of the
underlying factors influencing performance in the industry could be useful in developing a framework towards
effective performance management and improvement in the sector. Using postal questionnaire survey, data has
been collected and analysed using factor analysis. Judging from the findings, it makes practical sense to
conclude that the variables influencing performance of SSBCs could be linked to two main underlying issues,
namely, 1) fiscal policies, and 2) managerial capacity. The issue of governmental fiscal policy is striking, given
the long-held belief among some industry analysts that the Government of Ghana (GoG) is not doing enough
to create the enabling fiscal environment for the activities of the SSBCs to strive. It is also interesting that
SSBCs are admitting to their own managerial inadequacies as potential source of poor performance in the
sector. Given the threat of global competition, it is vital that the GoG is pragmatic in creating robust policies
that will help strengthen the financial and managerial capacity of SSBCs, towards stimulating accelerated
development of the sector.

Key Words
Construction; performance
small-scale contractors.

factors;

nearly 80% of all short-term employment (including

casual labour), especially for unskilled workers in
many deprived communities in Ghana (drawing
from Ganessan, 1983; GSTDP, 2010). It is contended that, given that these so-called small firms
provide a structural base to the economy and also
determine the productivity of investment and,
accordingly, the rate of development in decentralised and rural areas of the economy, their evaluation
of the factors affecting construction performance
would go a long way in helping to develop a useful
framework for improving construction performance
in the sector. This empirical examination is a contribution towards achieving that.
The paper is structured as follows: First, a commentary is provided on the characteristics of the
so-called small-scale contractors, including their
contribution to overall construction output. This
then is followed by a review of performance measurement literature in Ghana towards placing the
contribution of the paper in perspective. Subsequently, the materials and method used in the study
are described, followed by presentation of the
results. The discussion of the findings then follows

Ghana;

1.0 Introduction
The Ghanaian literature is replete with voluminous
literature on the factors affecting construction
performance and their impact on project success.
However, extant review of the literature reveals that,
many of these studies have often focussed on the
relatively large companies who often undertake the
very large projects in the major cities of the economy (e.g., Ahadzie, 1995; Owusu-Tawiah, 1998;
Fugar and Agyarkwa-Baah, 2010). Small-Scale
Building Contractors (SSBCs), who constitute over
90% of the job market, have often been left out of
the sampling frame. Yet, although these firms are
classified as small, in financial terms, they collectively contribute substantially to overall construction
GDP, especially in the development of decentralised
and local government areas. Indeed, these small
firms could also be accounting for over 50%
(cost-wise) of all building materials production and
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The Ghana Surveyor

with the conclusion, providing a summary of the

issues discussed.
2.0 Characteristics of Small-Scale Contractors in
Ghana
In Ghana, the agency responsible for the registration
of contractors (i.e., building or civil contractors) is
the Ministry of Water Resources, Works and Housing (MWWOH). The MWWOH does this in collaboration with the Registrar Generals Department
under Act 179 (1963) of the companies registration
code. On registration, contractors are classified,
based on a number of guidelines, including the
following: plant equipment holding, financial
standing, previous performance and technical
expertise. The MOWWH has two main classifications for contractors: Category 'D' for general
building works and category 'K' for civil works.
According to MOWWH bulletin, inclusion of a
contractor's name in the Ministry's classification
register is not compulsory, but then it is only those
who are duly registered who can tender for government contracts. The contractors for the categories
mentioned above are sub-divided into four classes,
ranging from class D1, D2, D3, D4 for building
contractors and K1, K2, K3, K4 for civil works.
Class D3/D4 and K3/K4 contractors are commonly
referred to as the small-scale building contractors
(SSBCs) and D1/D2 and K1/K2 are typically referred to as big firms.
A feature of SSBCs in the GCI is that, they are often
believed to be one-man enterprises, having low
financial and capital base and also lacking the
requisite managerial skills to adequately face up to
the numerous and difficult challenges they constantly have to encounter in a typical developing
economy such as Ghanas (cf. Ahadzie, 2007).
Notwithstanding the difficulties however, these
small firms tend to have a very wide geographical
dispersion championing local government development in the many rural and remotest parts of Ghana.
Official statistics indicates that, indeed, these
so-called small firms represent over 95% of contractors operating in the economy. In this respect, their
activities are useful in stimulating growth in many
rural and deprived communities where the government is rigorously championing local development.

Within the foregoing context, it is also to be noted

that, the dominant role of small firms by classification in the Ghanaian construction sector is not by
accident (drawing from Ganesan, 1983; Hillebrandt,
1990; Wells, 2007). Typically, construction is
essentially a large industry of small firms in all
construction economies (Fellows, et al., 1983;
Wells, 2007). Among others, this dominance of
small-scale contractors is dictated by particular
characteristics of the industry, such as the wide
dispersion of the demand, flexibility in the scale of
production, lack of standardization of materials, the
effect of climatic controls on the use of materials,
some of which can be very bulky; the low capital
requirement for entry, especially for craft-based jobs
(see, for instance, Ganesan, 1983: Hillebrandt, 1990;
Wells, 2007).
3.0 Literature Review
The literature in Ghana identifies numerous potential factors that could affect the performance of
contractors on construction projects. For instance,
qualitative evidence provided by Edmonds and
Miles (1984) and Ofori (1984) about three decades
ago revealed chronic delay in the payments of
contractors for work done, lack of credit facilities
for firms, poor communication structures and an
unreliable material supply base. Using quantitative
analysis, Ahadzie (1995) also reported evidence of
lack of finance and credit facilities for contractors,
delay in the payment of contractors for work done,
design changes and/or variations, low morale and
motivation of craftsmen, poor planning, supervision
and low mechanization, as some of the important
factors that could be affecting construction performance (see also Owusu-Tawiah, 1998). In their
procurement of audit of Ghana, the World Bank
(1996, 2003), Westring (1997) and Crown Agents
(1998) have continuously reported documentary
evidence of contracts taking very lengthy periods to
reach financial closure and also, often subjected to
unnecessary delays, poor coordination and communication structures, fiscal constraints and extensive
systems of controls and land ownership disputes. In
a recent study, Fugar and Agyarkwa-Baah (2010)
synthesized a number of these factors towards
highlighting their relevance in contemporary Ghanaian construction practice. They concluded that the
factors affecting construction performance could be

Factors Affecting Construction Performance in Ghana: Perspective of Small-scale Building Contractors

classified under the following themes: materials,

manpower, equipment, financing, environment,
changes, government action, contractual relationships and scheduling and controlling techniques.
Indeed, there is a lot of popular literature on factors
affecting construction performance in Ghana.
Although these significant bodies of knowledge
exist in the Ghanaian context, extant review of the
literature suggests that there is a lack of rigorous
theoretical and empirical examination to establish
the underlying characteristics of the numerous
factors identified in the literature, especially with
regard to the performance of SSBCs. It is contended
that, given that SSBCs account for over 95% of
building firms operating in the Ghanaian Construction Industry (GCI), and also in financial terms
contributing substantially to construction GDP at
decentralised and Local Government areas in
Ghana, their evaluation of the knowledge of the
factors influencing performance in the industry
could be useful in developing a framework towards
effective performance management and improvement in a very crucial sector of the GCI.
4.0 Materials and Methods
This section presents the method for data collection,
demographic background of respondents and also
the tools for analysing the data.
4.1 Data Collection
It is a well-known fact that the Ghanaian construction industry lacks a comprehensive database of the
up-to-date classification of Ghanaian Contractors
(GSTDP, 2010). Furthermore, many of the contractors in the job market, especially the SSBCs, are not
easily visible and identifiable as some are not
professional builders and tend to engage in construction as a secondary business. Therefore, in order to
get a representative sample with the requisite experience of Ghanaian construction practices, preliminary
consultations were first held with potential respondents before being included in the survey. This
necessitated the use of purposive sampling through
which questionnaires were sent to 300 respondents
representing the sampling frame. The respondents
were to rate the effect of the variables identified
from the literature (Table 1) using the Likert scale of
1 = Not very important; 2 = Not important; 3 = Not
sure; 4 = Important and 5 = Very important. In all,
a total of 28 variables were deduced after examina-

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tion and redefining of the numerous factors identified in the literature reviewed (Table 1). The questions were simplified and written in simple language
for the SSBCs to easily comprehend and respond to.
184 of the questionnaires administered were retrieved fully completed, representing 61% response
rate.
Table 1: Factors affecting construction performance in
Ghana
Author(s)

Performance Factors Identified

Edmonds and
Miles (1984)

Delay in payments, lack of credit

facilities, poor communication structures, unreliable materials supply
base.

Ahadzie (1995)

Lack of credit facilities, delay in

payments, design changes and variations, low morale and motivation of
craftsmen, poor planning and supervision, low mechanisation.

World Bank
(1996), Westering
(1997), Crow n
Agents (1998),
World Bank (2003)

Payment difficulties and delays, poor

coordination and communication
structures, fiscal constraints and
extensive controls, landownership
disputes.

Fugar and
Agyarkwa-Baah
(2010)

Materials related, equipment related,

finance related, environmental related, changes, government action,
contractual relationship, scheduling
and controlling techniques.

Variables used in
the questionnaire

Availability of qualified staff, availability of training proprietors and

technicians. Ability to delegate responsibility, availability of materials
and equipment, availability of technology, existence of labour and labour unions, site organisations, execution of other projects, weather
conditions, government policies,
location of project, competition from
other contractors, level of economic
development, nature of project, professionals engaged, traders skill,
commitment, communication, interpersonal relations, Health and safety
consciousness, ability to work as a
team and coordinate, client satisfaction, access to finance, interest rate,
cash flow of firm, availability of
collateral to secure payments, interim
payments, honouring of payment
certificates.

4.2 Demographic Background of Respondents

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Table 2 presents a summary of the demographic

background of the respondents. 116 (63%) of the
firms that responded indicated that they have been
in practice 5-10 years, while another 55 (30%)
indicated that they have been in business over 10
years. 13 of the respondents (representing 7%)
indicated that they have been in operation less than
five years. Generally, Table 2 indicates that majority
of the contractors (representing about 60%) might
have been involved in some recent projects. Hopefully, this should provide some reasonable conviction that the participants who responded have
credible basis for the data elicited.
Table 2: Information on business record of contractors
Years

Respondents

Percentage (%)

40912

13

41069

116

63

>10

55

30

Total

184

100

4.3 Factor Analysis

Factor analysis was used to establish the underlying
interrelations existing among the very many variables identified above. This makes it possible to
reduce the variables to a more meaningful framework to support effective management and policy
decisions. The rotated component matrix is presented in Table 3. In the preliminary analysis, the
Kaiser-Meyer-Olkin (KMO) test of sampling adequacy achieved a high of 0.938. The communalities
achieved were also 0.80 or higher, indicating that
the sampling size was reasonable enough for the
factor analysis to proceed.
In Table 3, the rotated component matrix indicates
that, the 19 out of the original 28 variables could be
the underlying themes of two main factors (using a
cut-off point of 0.50). It is to be noted that, in an
earlier rotation, eight out of the 28 variables,
namely, availability of qualified staff, site organisation, location of project, nature of project, commitment, interpersonal relations, cashflow of firm and

availability of collateral loaded onto two factors

made the interpretation of the findings rather messy.
Subsequently, these variables were deleted and
factor analysis re-run. Following the re-run, one
variable, namely, level of economic development,
still loaded onto two factors. This variable was also,
subsequently, deleted and the factor analysis re-run
for the third time. Thus, the findings presented in
Table 3 on which the discussion is based emerged
after the third round of running the factor analysis.
With respect to factor 1, access to finance emerged
highest with a factor loading of 0.963, followed by
client satisfaction (0.924), availability of materials
(0.923), honouring of payment certificates (0.903),
interim payments (0.896) and interest rates (0.884),
Government policies (0.853), and in that order (see
Table 3). For factor 2, ability to delegate responsibility emerged highest with a loading of 0.952,
followed by availability of training proprietors and
technicians (0.947), professionals engaged (0.897),
execution of other projects (0.849), competition
from other contractors (0.854) and communication
(0.848). The initial eigenvalues (see also Table 3)
indicates that, if all the factors are ranked, factor 1
accounts for 73.594% of the variance, while factor
2 accounts for 15.092% of the variance. Together,
the two identified factors account for 88% of the
variance.
Given that most of the variables in factor 1 are
directly or indirectly linked to the financial issues,
the authors decided to name this factor as finance-related. However, on reflection, it also makes
practical sense that most of the issues could also be
linked to government financial policies. Factor 1
was, therefore, finally termed government fiscal
policy-related. Similarly, given that most of the
variables in factor 2 are linked to managerial issues,
this has been identified as managerial-related. To
this effect, the authors conviction is that, the numerous factors affecting construction performance
in Ghana in the context of SSBCs unlock separately
unto issues relating to government fiscal policy and
management-related factors.

Factors Affecting Construction Performance in Ghana: Perspective of Small-scale Building Contractors

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Table 3: Rotated Component matrix and Total variance explained

Component
1

Component

Availability of training proprietors

and technicians

0.947

12

Ability to delegate responsibility

0.952

Availability of materials and equipment

0.923

Availability of technology

0.837

Existence of labour and labour unions

0.779

Execution of other projects

13.983
2.868

% Variance
73.594
15.097

Cumulative %
73.594
88.691

0.849

Weather conditions

0.847

Government policies

0.853

Competition from other contractors

0.854

Other Professionals

0.897

Traders skills

0.75

Health and safety consciousness

0.801

Ability to work as a team and coordinate

0.824

Client satisfaction

0.924

Access to finance

0.963

Interest rate

0.884

Interim payments

0.896

Honouring of payment certificates

0.903

Communication

Total

0.848

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 3 iterations.

5.0 Discussion
It is clear from the factor analysis that the underlying construct of the numerous variables affecting
construction performance, especially with respect to
SSBCs might, apart from being managerial, also
linked to the governments fiscal policies. No doubt,
factors, such as completion of time of projects,
client satisfaction, government policies, interest rate,
interim payments and honouring of certificates, are

a reflection of the fiscal obstacles associated with

most government projects implemented in this
country. To wit, the World Bank (2003) observed
that fiscal constraints largely accounts for insecurity
of funding for construction projects which creates a
constant spectre of delayed payments. There is also,
no doubt that these factors, especially those linked
to finance and interest rates, are within the purview
of the governments fiscal policy (see, for instance,

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The Ghana Surveyor

ISSER, 2008). That is why, it makes practical sense

to name factor 1 as fiscal policy-related. It also
makes practical sense why factors, such as availability of materials and availability of technology,
should be classified under fiscal policy. This is
because, presumably, if access to finance and the
enabling environment is addressed, there is a high
possibility that these factors would, invariably, also
be taken care of, especially if sound management
principles are also adopted (see, for instance,
Carrillo, 1994; GSTDP, 2010). However, it is not
clear why the factor, weather conditions, also
loaded onto the factor now termed fiscal policy.
Perhaps, this is a manifestation of the fact that, there
are certain logistics that could help small-scale
contractors work in adverse weather conditions and
these are funding-related.
The issue bordering on the managerial capacity for
the SSBCs is also quite revealing. Thus, it is striking
that the SSBCs are admitting to their own inadequacies, although this is also a long-held belief among
many industry analysts. The reality is that, many
SSBCs operate a personalised style of management
without due regard to effective modern management
practices and recruitment methods (Edmonds and
Miles, 1984; GSTDP, 2010). Here, the variables
classified under managerial-related factor are all
practically relevant even in modern-day Ghanaian
construction practice. From the authors experience,
factors, such as health and safety, site organisation,
communication, interpersonal skills, availability of
training proprietors and technicians, are all
management-related and could be addressed by
providing a holistic, but rigorous continuing professional development management programme for
small-scale contractors. By their own admission, it
should be possible for the GoG and other stakeholders to collaborate with SSBCs towards devising
a robust strategy to improve their managerial capacity regularly in the sector.
As noted by Ganesan (1983), small-scale firms
account for over 90% of all construction firms in
practically all countries. Indeed, in many developing
countries, practically all construction firms are small
and the Ghanaian situation is no exception (cf.
Ayisi, 2000). Notwithstanding that these companies
are described as small firms, their dominant role in
building materials production and construction in

many construction economies is well established (cf.

Wells, 2007). Indeed, in Ghana, the contribution of
SSBCs in terms of employment in the informal
sector is quite significant. Above all, they are
responsible for engendering the accelerate development of many rural and local government areas
where approximately 60% of Ghanaians make their
living. However, against the background of fluctuating and declining demand for projects, taxed with a
deteriorating national economic environment, the
challenges faced by these firms can be overwhelming. Indeed, when account is taken of the difficult
environment in which they operate, their performance could be described as satisfactory. However,
the reality is that, these firms must be competitive,
if they are to survive and grow in an increasingly
difficult business environment such as those pertaining in many developing countries south of the
Sahara. As noted by numerous writers in the past
(cf. Ganesan, 1983; Ofori, 1991; Zawdie and
Lanford, 2000), the most pressing problems facing
small-scale contractors in many developing countries are the same, namely, lack of finance, low
labour productivity, shrinking demand arising from
fluctuations in national construction output, capacity
under-utilisation and inadequate technical assistance
required for rationalisation. Interestingly, despite
some modest improvement made in the economy of
many developing countries, such as Ghana, in recent
times (GSTDP, 2010), the above problems still exist
and are undermining the capacity of most businesses, including construction companies to grow
and be competitive (cf. ISSER, 2008).
As a developing country, the role of the Ghanaian
Construction Industry (GCI) in terms of its linkage
to the agricultural sector and rural development is
very much unquestionable. Subsequently, many of
the local construction firms, particularly small ones,
operate in rural areas to help stimulate local government development. As noted earlier, these firms,
albeit small, could also be accounting for over 50%
(cost-wise) of all building material production and
nearly 80% of all short-term employment in many
deprived communities in Ghana. With the discovery
of oil in commercial quantities, a massive flow of
capital, both domestic and foreign, is expected to be
attracted to undertake the necessary infrastructure in
Ghana. Within this context, the construction industry is projected to grow at an unprecedented a rate of

Factors Affecting Construction Performance in Ghana: Perspective of Small-scale Building Contractors

13.0% (ISSER, 2008). Thus, contextually, key

sector indications suggest that the GCI is strategically well positioned to help engender the
much-needed accelerated development of wider
economy. However, many performance-related
deficiencies exist that need to be addressed before
the industry can become a major driver of economic
growth and job-creation. Thus, the degree to which
the GCI industry can maintain competitiveness and
growth is to train highly skilled and adaptable
workforce and also learn from effective modern
management techniques from best practices. The
findings of this research should help generate
renewed interest in a rigorous policy programme
towards strengthening the financial position and
managerial capacity of SSBCs. All in all, government, as the largest employer and regulator, has a lot
to do in terms of streamlining fiscal policy direction
towards making the operations of SSBCs competitive.
6.0 Conclusion
The structure of the construction industry in every
country is pyramidal in shape, and that of Ghana is
no exception. That is, in many construction economies like Ghana, there are very few large firms
which are able to work in many geographical locations and on a wide range of projects. The overwhelming majority of construction firms are small
and have limited scope of operation. In the case of
Ghana, these companies are geographically dispersed in championing local government development in many rural and deprived communities.
Despite the significant contribution they are making,
not very much has been done to understand the
performance dimension of their operations. Here,
factor analysis has been used to isolate the underlying factors that could be responsible for their poor
performance. The findings suggest that the factors
affecting the performance of SSBCs could be
classified into two main stands, namely, fiscal
policy and managerial capacity-related. It is contended that, the activities of the SSBCs are very
strategic to the decentralization concept and, therefore, needs to be fully understood so that its products and activities could be used in stimulating
accelerated development within local government
areas. A striking point about this study is that, it has
provided empirical evidence to support the

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long-held anecdotal notion that the GoG is not doing

enough in terms of fiscal policy to help address the
needs of SSBCs towards engendering accelerated
development in the sector. SSBCs admission of
inadequacies in their managerial capacity is also
credit-worthy. It is suggested that, if the GoG is that
committed towards using the construction industry
to engender accelerated development of local government areas and the country at large, it is vital for
the issues of pragmatic fiscal policy direction to be
vigorously pursued.
7.0 Acknowledgement
The authors wish to thank an anonymous reviewer
who made very useful suggestions towards improving on the quality of the paper.
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Divine K. Ahadzie (Ph.D.) is a researcher at the Centre for Settlements Studies at the College
of Architecture and Planning, KNUST. He has over 10 journal articles in both local and
international journals and over 15 conference papers. He is a reviewer for the International
Journal of Project Management, Journal of Construction Management and Economics and
Journal of Engineering Construction and Architectural Management. In 2010, he was a
Consultant to the World Bank on the Ghana Skills and Technology Development Project
(GSTDP) as a Construction Industry Analyst. He was also recently Africas Representative
to GHK Consult (UK) on the stakeholders workshop sponsored by the World Bank for the
preparation of a Global Handbook on Floods, held in Accra, in May 2011.
Peter Amoah (MSc, FGhIS, MFIG, MGIOC) is a lecturer in the Building Technology
Department of Kwame Nkrumah University of Science and Technology. He is also a Fellow
of the Ghana Institution of Surveyors, a member of International Federation of Surveyors and
Ghana Institute of Construction. He is a researcher and a consultant. He has published several
papers in both local and international journals. E-mail: amoahp@yahoo.com
DANSOH AYIREBI is a lecturer in the Department of Building Technology in the Kwame
Nkrumah University of Science and Technology, Kumasi. He is also a consulting architect
with Technobuild Design Consult, Kumasi. His key research interests include Strategic
Management, Project Performance and Innovation in construction.
E-mail: adansoh@consultant.com