Beruflich Dokumente
Kultur Dokumente
CHAPTER 5
5.1 INTRODUCTION
Construction
Management Construction of Project
1. Steel Inflation
2. Cement Exchange Rates
3. Brick Environmental Protection
4. Coarse aggregates Freight and Transportation cost
5. Sand and Demand and Supply
6. Timber Government Policies
Taxes
Interest Rate
Power Tariff
Raw Material Input
Labour Cost
Technolgy Upgradation and
Price Increase by the
Manufacturer
100
C13 and C14 to C15 were related to the causes of cost escalation in Indian
building construction projects.
Survey was carried out among the two major participants of Indian
building construction projects - Government representatives (Clients), and
Contracting organisations (contractors). The survey was administered during
the period June to Dec 2008. Questionnaire survey included only middle and
top level officers who have responsible for execution of projects and powers
for strategic decision making in their respective organisations with respect to
building construction projects are included in the sample. Out of 215
questionnaires sent/delivered directly to the concerned, 119 responses were
received after personal requests and visits to their respective offices. During
such visits, along with questionnaire responses, discussions/ unstructured
interviews were also carried out with the above respondents. The response
rate of 56 percent is considered to be very good for this kind of a mail survey.
Though the total number of questionnaires sent and the responses received
were limited, the survey covered most of the known strategic decision makers
in the Indian building construction projects. The reliability of the survey
results is expected to be high because all the respondents are top-level
experienced management officials in their organizations
102
Table 5.3 Cost escalation - Details of factor name and factor label
Relative
Factor Factor
Factor Name Importance
Label rank
Index
Raw Material Input Cost C10 0.976 1
Power Tariff C09 0.958 2
Demand and Supply C04 0.936 3
Freight and Transportation Cost C05 0.924 4
Taxes C07 0.912 5
Inflation C01 0.903 6
Government Policies C02 0.888 7
Exchange Rates C06 0.873 8
Labour Cost C11 0.852 9
Interest Rate C08 0.839 10
Price Increase by the
Manufacturer considering
market condition C13 0.779 11
Environmental Protection Cost C03 0.761 12
Technolgy Upgradation Cost C12 0.742 13
1.00
0.976 Impact of cost escalation
0.98
0.958
Relative Importance Index
0.96
0.936
0.94
0.924
0.92 0.912
0.903
0.90 0.888
0.88 0.873
0.86
0.84
0.82
Transportation
Taxes
Exchange Rates
Raw Material
Government
Inflation
Demand and
Power Tariff
Input Cost
Freight and
Policies
Supply
Cost
Relative
Factor Factor
Factor Name Importance
Label rank
Index
Demand and Supply C05 0.966 1
Raw Material Cost C10 0.943 2
Transportation Cost C04 0.913 3
Power Tariff C09 0.891 4
Inflation C01 0.868 5
Taxes C07 0.849 6
Exchange Rates C02 0.796 7
Government Policies C06 0.777 8
Labour Cost C11 0.758 9
Interest Rate C08 0.743 10
Price Increase by the Manufacturer C13 0.721 11
Environmental Protection Cost C03 0.702 12
Technolgy Upgradation Cost C12 0.675 13
1.20
0.796 0.777
0.80
0.60
0.40
0.20
0.00
Government Policies
Demand and Supply
Transportation Cost
Raw Material Cost
Inflation
Power Tariff
Taxes
Exchange Rates
Figure 5.3 Contractors response - Most significant factors causing cost
escalation
Relative
Factor
Factor Name Importance Factor rank
Label
Index
Raw Material Input Cost C10 0.986 1
Demand and Supply C05 0.968 2
Power Tariff C09 0.952 3
Transportation Cost C04 0.950 4
Inflation C01 0.911 5
Taxes C07 0.908 6
Exchange Rates C02 0.868 7
Government Polices C06 0.851 8
Labour Cost C11 0.831 9
Interest Rate C08 0.817 10
Price Increase by the Manufacturer C13 0.773 11
Environmental Protection Cost C03 0.754 12
Technolgy Upgradation Cost C12 0.732 13
1.00
0.986
0.968
Impact of cost escalation
0.952 0.95
0.95
Relative Importance Index
0.911 0.908
0.90
0.868
0.851
0.85
0.80
0.75
Government Polices
Raw Material Input Cost
Transportation Cost
Inflation
Power Tariff
Taxes
Exchange Rates
Table 5.7 shows the relative importance indices and ranking of the
13 cost escalation factors based on the responses of client, contractors and
overall (client and contractor) group representatives of building construction
projects in India.
110
Clients Contractor
Overall
response response
(n=119)
Factor Name (n=66) (n=53)
Facto Factor Factor
RII RII RII
r rank rank rank
Raw Material Input Cost 0.976 1 0.943 2 0.986 1
Non-availability of power supply 0.958 2 0.891 4 0.952 3
Demand and Supply 0.936 3 0.966 1 0.968 2
Transportation Cost 0.924 4 0.913 3 0.950 4
Taxes 0.912 5 0.849 6 0.908 6
Inflation 0.903 6 0.868 5 0.911 5
Government Policies 0.888 7 0.777 8 0.851 8
Exchange Rates 0.873 8 0.796 7 0.868 7
Labour Cost 0.852 9 0.758 9 0.831 9
Interest Rate 0.839 10 0.743 10 0.817 10
Price Increase by the
Manufacturer 0.779 11 0.721 11 0.773 11
Environmental Protection Cost 0.761 12 0.702 12 0.754 12
Technolgy Upgradation Cost 0.742 13 0.675 13 0.732 13
1.20
Clients group Contractors group Overall group
0.80
0.60
0.40
0.20
0.00
Power Tariff
Exchange Rates
Inflation
Raw Material Input
Transportation Cost
Demand and Supply
Taxes
Government Policies
Freight and
Cost
received were evaluated using expert choice software. A detailed case study
analysis of six building construction projects were carried out to validate the
survey findings on most significant factor category contributing to cost
escalation.
The relative weight age of the six significant cost escalation factor
categories as perceived by the client’s representatives is presented in Table
and Figure 5.6.
0.45
0.387
0.40 Cost escalation impact
0.35
0.311
0.30
AHP - Weightage
0.25
0.20
0.15
0.1 0.092
0.10
0.064
0.046
0.05
0.00
Cement Steel Brick Sand Stone Aggregate Timber
0.45
0.35
0.30
AHP - Weightage
0.25
0.20 T
0.15
0.10
0.05
0.00
Cement Steel Brick Sand Aggregates Timber
0.40
0.366
Cost escalation impact
0.35 0.332
0.30
AHP - Weightage
0.25
0.20
0.15
0.102
0.10 0.083
0.073
0.04
0.05
0.00
Cement Steel Brick Sand Stone Aggregate Timber
0.45
CPWD MES TNPWD
0.40
0.35
0.30
AHP - Weightage
0.25
0.20
0.15
0.10
0.05
0.00
Cement Steel Brick Sand Aggregates Timber
0.40
0.35
0.30
AHP Value
0.25
0.20
0.15
0.10
0.05
0.00
Cement Steel Brick Sand Stone Aggregate Timber
Figure 5.10 Clients, contractors and overall’s response to the weight age
of significant factor categories causing cost escalation
95%
Confidence
Organization Standard Mean
Factor N Mean Interval for T-Value P-Value
Status Deviation Difference
Mean
Difference
4.515
Owner 66 0.5036
2
C1 0.21 0.04 0.39 2.38 0.02**
4.301
Contractor 53 0.46347
9
4.439
Owner 66 0.50012
4
C2 0.25 0.08 0.42 2.98 0.00***
4.188
Contractor 53 0.395
7
Owner 66 3.803 0.43746
C3 0.09 -0.08 0.26 1.01 0.32
Contractor 53 3.717 0.49526
4.681
Owner 66 0.46934
8
C4 0.02 -0.15 0.19 0.25 0.81
4.660
Contractor 53 0.47811
4
4.621
Owner 66 0.4888
2
C5 -0.13 -0.30 0.04 -1.56 0.12
4.754
Contractor 53 0.43437
7
4.363
Owner 66 0.48473
6
C6 -0.01 -0.19 0.16 -0.15 0.88
4.377
Contractor 53 0.48936
4
4.560
Owner 66 0.50012
6
C7 0.01 -0.17 0.20 0.15 0.88
4.547
Contractor 53 0.50253
2
Owner 66 4.197 0.40076
C8 3.943 0.25 0.13 0.38 4.08 0.00***
Contractor 53 0.2333
4
4.787
Owner 66 0.41194
9
C9 -0.02 -0.17 0.12 -0.31 0.75
4.811
Contractor 53 0.395
3
4.878
C10 Owner 66 0.32887 -0.05 -0.16 0.06 -0.82 0.41
8
118
4.924
Contractor 53 0.26668
5
4.257
Owner 66 0.44065
6
C11 0.14 -0.02 0.31 1.73 0.09**
4.113
Contractor 53 0.46659
2
3.712
Owner 66 0.51932
1
C12 -0.10 -0.28 0.08 -1.11 0.27
3.811
Contractor 53 0.441
3
3.893
Owner 66 0.43426
9
C13 -0.14 -0.28 -0.01 -2.10 0.04**
4.037
Contractor 53 0.27472
7
$ Please refer to Question No. C1 to C13 of the questionnaire (Appendix A) for causes of
cost escalation
# T test of Ho : Significant mean difference between clients and contractors
Ha : No Significant mean difference between clients and contractors
*** Significance at 99% level ** Significant at 95% level * Significance at 90% level
In order to evaluate the differences in perceptions of clients and
contractors among CPWD, MES and TNPWD representatives ANOVA was
performed and is also shown in Tables 5.9 and 5.10.
$ Please refer to Question No. B1 to B29 of the questionnaire (Appendix 1) for causes of
cost escalation
Please refer to Question No. B1 to B29 of the questionnaire (Appendix 1) for causes of cost
escalation.
Project
Building construction projects
details
Construction
Construction Construction
of Construction Construction Construction
Project of of residential
international of educational of Hostel of office
name educational hostel
terminal building-II building-II Building
building-I building-I
building
Type of
Item–rate Item-rate Item-rate Item-rate Lumsum Item-rate
contract
Form of
CPWD CPWD CPWD CPWD CPWD TNPWD
contract
ECPT 152.47 88.83 -- 10.44 436.30 55.00
Agreement
value in 153.19
70.99 80.40 10.59 457.30 43.47
(Rs.
Million)
Final value 85.44 84.80 18.70 494.0 32.20
0.47% above 12.25%
Tendered 1.36% below
the estimate below the -- -- --
percentage the ECPT
cost ECPT
Period of
10 months 12 months 8 months 12 months 15 months 17 months
completion
Date of
31.10-2005 16.8.2004 25.6.2007 30.1.2004 01.07.2004 20.11.2006
starting
Date of
completion
31.08.2006 15.8.2005 24.2.2008 29.1.2005 30.09.2005 19.04.2008
as per
agreement
Actual
date of 06.07.2007 28.12.2006 24.2.2009 15.4.2005 29.9.2006 09.07.2008
completion
Time delay 10 months 4 months 2 months 2 months
12 months
in 12 Months
5 days 13 days delay 15 days 20 days
completion
TNPWD: Tamailnadu Public Works Department CPWD: Central Public Works Department
ECPT: Estimate Cost Put to Tender
125
Most
significant
Cost
Building construction projects
escalation
factor
categories
Construction
Construction Construction Construction
of Construction Construction
Project of of of residential
international of Hostel of office
name educational educational hostel
terminal building-II Building
building-I building-II building-I
building
Type of
Item–rate Item-rate Item-rate Item-rate Lump sum Item-rate
contract
Form of
CPWD CPWD CPWD CPWD CPWD TNPWD
contract
Overall impact of most significant cost escalation factor categories
Cement 11.50 % loss 14.0% 10.5% 5 to 10% 11.0 % 10.0%
13.5%
Steel 14.0 % loss 16.50% 13.5% 10% 15.5 %
5.9 SUMMARY
the data collected from the questionnaire survey, within various groups as
classified according to the role of the participants involved in the Indian
building construction industry. The five point scale was transferred to relative
importance index for each factor. The factors were ranked in order of
importance based on the relative importance indices values. These ranking
made it possible to cross-compare the relative importance of factors as
perceived by the two group of respondents i.e. owner and contractor. All the
numerical scores of each of the identified factors were transformed to relative
importance indices to determine the relative ranking of the factors.