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20 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
The Role of Construction Cost Management Practices on
Construction Organisations’ Strategic Performance
Reuben A. Okereke1, Mohammed Zakariyau*2, Emmanuel C. Eze2
1Department of Quantity Surveying, Imo State University, Owerri, Nigeria
2Quantity Surveying Department, Federal University of Technology, Owerri, Imo state, Nigeria
mohammedzakariyau88@gmail.com
Published: June 2022
Cost management practices have remained a vital aspect of project management functions. Despite the
efforts of project management, construction projects are still being delivered above budget, with schedule
overrun, poor quality and amongst other problems. Poor cost management approaches have been blamed
for these problems. Effective cost management improves project performance and the strategic
performance of construction organisations. This study aims to assess the role of cost management
practice on construction firms' strategic performance in Nigeria. The objectives of the study are to
determine the benefits of cost management of the project on the competitive position of construction
firms, and the factors influencing cost management strategies of construction firms. This study adopted
a well-structured questionnaire administered to construction professionals via electronic means and using
snowball sampling technique in the six states of the south-south geopolitical zone of Nigeria. With a
response rate of 65.48% and a reliability of index of over 0.70, the gathered data were analysed using
frequency, percentage, and relative importance index (RII). It was found that major factors influencing
construction cost management are; experience and competence of the project managers, weak
management support and control, poor project communications, external economic environment, and
lack of use of project management tools (technology). Also, effective cost management was found to
play a critical role in the strategic performance of construction organisations; with most benefits being
in the areas of waste and expenses reduction, improves operational efficiency need, helps to predict future
expenses, ensures procurement effectiveness, and improve profit maximization. Project managers should
continuously upgrade their skills for effective cost management to boost the strategic competitive
position of their firms.
Keywords: Cost management, construction firms, construction projects, strategic performance,
construction industry, Nigeria
21 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
1.0 INTRODUCTION
Globally, the construction sector has proven to
be a critical sector that should not be ignored in
the life of the economy of any nation (Abiodun
and Nwaogu, 2021). This is because the
construction industry is the economic backbone
of nations, as the industry provides jobs and
propels growth in other sectors of the economy.
(Onyejeakor et al., 2020; Onyeagam et al.,
2019). In spite, of the impact of the sector on the
life of nations, construction projects suffer from
delayed completion, cost overruns, poor
quality, materials shortages, among others.
These problems occur due to an incorrect
management approach to project resources
(Ronald & Agung, 2018). In addition,
construction projects' risk levels and
complexity increase with poor cost
management strategies. Developmental projects
have failed to meet client needs and project
requirements, as a result of poor cost
management strategies by construction
organisations. Poor cost management leads to
poor cost performance. This is a situation in
which the project exceeds its initial planned
schedule and cost budgets. This has remained a
recurring issue affecting a lot of construction
projects both in developed and developing
economies (Obi et al., 2017; Odediran and
Windapo, 2014).
Construction firms are the major actors whose
management experiences impact the project and
customer satisfaction. According to Teja
(2020), construction companies executes
construction projects of public or private nature
that requires proper management and
coordination, with the aim of resources
maximization, continuous work progress,
revenue generation and profitability, growth
and survival of their businesses. A problem that
is common in the construction sector is that of
effective cost management of construction
projects. It is one of the areas the contractor
should focus on as it attempts to manage its
project portfolio (Teja, 2020). Cost
management practices involve all efforts in
ensuring that construction projects are delivered
within budget (Kim, 2002). Cost is a basic and
critical project resource, and when there is the
failure of construction organisations to
adequately manage this project resource from
start to finish via monitoring and controlling, is
what leads to projects overshooting their
budgets. This is supported by the submission of
Phanse et al. (2021) who posits that cost
overruns occur where project management is
incompetent to sufficiently monitor projects
activities and processes from the beginning of
the project to the end. Cost management
Strategies gives a detailed and sophisticated
look to an organisation seeking to obtain a
competitive relevance. Barroso and Armando
(2020) posit that cost management contribute to
the development of strategies for attaining a
competitive advantage.
Extant literature revealed that project cost
management and control is important, yet
construction organizations are yet to develop
effective cost management practices in their
operations, especially in the construction
industry of a developing country like Nigeria.
While the majority of the studies on cost
management were carried outside Nigeria
(Petare & Thakkar, 2012; Tejas, 2020; Albtoush
et al., 2020; Iyer and Jha, 2005; Divakar and
Jebin, 2018; Meeampol & Ogunlan, 2006;
Olawale & Sun, 2010; Zhao et al., 2017; Smith,
2014; Ronald & Agung, 2018; Miri &
Khaksefidi, 2015; Barroso and Armando, 2020;
Kissi et al., 2016; Annor-Asubonteng et al.,
2018; Chigara et al. 2013), only a very few of
them were carried out in Nigeria (Obi et al.
2017; Fagbenle et al., 2018; Odediran and
Windapo, 2014). This is despite that
construction stakeholders know how important
project cost is, and the impact it has when
properly managed. Fagbenle et al. (2018)
suggested that a cost management study be
carried out in other regions of Nigeria. There are
few studies on cost management of construction
projects in a developing country like Nigeria
than in developed nations of the world. In
addition, Existing studies have failed to
emphasise the benefits of cost management
practices on the strategic performance of
construction projects. It is based on the
foregoing that study assesses the role of cost
management practice on construction firms'
strategic performance in the construction
industry. To achieve this, the specific objectives
are; (i) to determine the benefits of cost
management of the project on the competitive
22 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
position of construction firms, and (ii) to
determine the factors influencing cost
management strategies of construction firms.
It is understood that the outcome of this study
will showcase how critical project managers
and the management of construction
organizations should take cost management
function especially in meeting project baseline
revenue drive and profit maximization and
organizational goal of remaining completive
and surviving in the industry. Effective cost
management helps to save cost and reduce
unnecessary wastages and expenses that could
impact value addition, future investments and
job creation. Thus, cost management supports
the economic and social dimensions of
sustainability. This study will also add to the
few existing bodies of knowledge on effective
cost management impact on construction
organizations' strategic performance in
developing countries.
2.0 LITERATURE REVIEW
2.1 Cost management in construction
projects
A key practice for staying competitive is
effective cost management. Cost management
involves all the processes for ensuring projects
are delivered within the planned budget. The
processes involved are planning, estimating,
coordination, control and reporting of all cost-
matters (Ashworth, 2010; Kern and Formoso,
2006). Cost management involves getting a
clear grasp of how and why costs are incurred
on a project and taking critical measures to
ensure that the planned project budget is not
exceeded. The benefits of effective project cost
management that have captured the attention of
clients (public and private) are its ability to
guarantee improved value for money and
satisfaction of the clients (Gopalan and
Venkataraman, 2015; Obi et al. 2017; Smith,
2014).
In developed countries like the UK, concerted
efforts have been made by the government to
develop a detailed cost management guideline
to help organisations involved in the delivery of
public-funded projects to achieve effective
project cost management (United Kingdom
Office of Government Commerce, 2007).
Similarly, efforts are being made in various
countries to develop similar cost management
guidelines to improve value for monies and
ensure the satisfaction of parties to public
projects (Obi et a., 2017). Effective cost
management can be achieved through a
functional system that allows for accurate
estimation of cost, planning, monitoring and
controlling to keep the cost within budget (Kern
and Formoso, 2004). Tejas (2020) advocated
for holistic management of materials, plant and
equipment; to ensure the cost of projects are
kept within budget. Cost management is not an
easy task, as project managers would have to be
confronted with a lot of issues that required
proactive balancing to ensure that their impact
on project success is minimised.
2.2 Factors Influencing Cost Management
The ultimate goal of cost management is to
ensure that construction projects are delivered
within the planned budget. For Horngren et al
(1990), cost management is the planning,
estimating coordinating, controlling and
reporting of the entire cost associated details of
a project from the conceptualisation stage
through to maintenance and disposal.
Furthermore, cost management should not be
isolated; it should impact other managerial
duties and drive the company's strategies. The
construction cost management practices of
construction firms are influenced by certain
factors that should not be ignored because of the
critical importance of cost management.
From the southwestern part of Nigeria,
Fagbenle et al. (2018) found that the dominant
factors influencing cost, management practices
of construction firms are Poor and inappropriate
leadership and management, poor resources
deployment, too much materials wastages on-
site, the mechanism for payment being
complex, variations during construction, and
materials theft on sites. Iyer and Jha (2005)
found that the cost management influencing
factors of construction organisations are; the
experience and competence of project
managers, leadership skills, coordinating skills,
top management support; economic situations,
23 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
economic and climatic conditions.
Impracticable estimates by the estimators,
poorly developed brief, insufficient client brief,
poor design coordination, poor leadership, poor
risks allocation, poor management control,
excessive construction materials wastes,
underutilization of plant and equipment,
materials theft, poor pricing during tendering;
were the identified to be the factors affecting
cost management practice (Enshassi et al. 2006;
Akinsola et al., 1997). Poor resource and
budgetary management, poor construction
methods and poor communication are factors
affecting the cost management of construction
firms (Meeampol and Ogunlan, 2006).
Unstable construction materials prices, poor
planning, poor contract administration,
incorrect estimation methods, lack of
experience in managing project costs; are
factors that critically impact construction cost
management (Al-Juwairah, 1997). The cost
failure factors identified by (Ikediashi et al.,
2014) are poor management of risks, ineffective
communication, poor estimation of project
schedule and cost.
Divakar and Jebin (2018) assessed the factors
influencing effective cost management process
implementation in construction and found that
the top 14 factors are; Unrealistic schedule
imposed in the contract, poor scope definition,
accuracy in the estimation of direct and indirect
cost, inaccurate activity cost estimate,
allocation of direct, indirect and joint cost,
ineffective frequency of project budget updates,
poor WBS definition, change in schedule, weak
regulation and control, often changing
subcontractors, lack of proper training and
experience of project manager, low productivity
of labour, poor updating of cost management
information systems, and not implementing
project management tools for monitoring and
control. Olawale & Sun (2010) found that in
the UK, the top factors influencing time and
cost control are design changes, poor evaluation
of project time and cost, uncertainties, the
complexity of works, and poor contractors'
performance.
In Ghana, the top factors influencing the cost
management practices of indigenous
construction firms are Conflict between project
parties/stakeholders, Unexpected ground
conditions, Poor communication between
project team, Poor project management, Lack of
expenditure, and control Project
variations/Design changes (Annor-Asubonteng
et al., 2018). One of the vital factors causing
poor cost management practices is insufficient
project information for accurately estimating
the project cost (Peeters and Madauss, 2008). In
Zimbabwe, Chigara et al. (2013) found that
shortage of skilled personnel, building materials
unavailability in local market, variations and
weak cost control systems, are the factors
influencing cost management of projects.
Zhao et al. (2017) in New Zealand, states that
the factors requiring adequate monitoring and
control in cost management situations are
market conditions, key stakeholder’s
influences, regulations regarding building and
construction, and external economic
environment. Obi et al. (2017) found that the
quality of the project team, information
availability, management actions and external
environment are factors that influence project
cost management effectiveness. Kissi et al.
(2016) identified weak planning, knowledge
issues, poor cost databases, poor designs, poor
planning and external conditions; are the
barriers to effective cost planning of
construction projects. EduPristine (2015)
identified three major factors affecting cost
management, and they are; advancement in
information technology, local and international
competition, and changes in services and
manufacturing sectors.
24 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
Table 1: Factors influencing cost management
S/N
Factors affecting cost management
Source(s)
1
Poor leadership and coordinating skills
Fagbenle et al. (2018);Iyer and Jha (2005);
Enshassi et al. (2006); Akinsola et al.
(1997);
2
Poor resources deployment
Fagbenle et al. (2018);Meeampol and
Ogunlan (2006);
3
Excessive materials wastages on site
Fagbenle et al. (2018); Enshassi et al.
(2006); Akinsola et al. (1997);
4
Complex payment mechanism
Fagbenle et al. (2018);
5
Variations/design changes during construction
Fagbenle et al. (2018); Olawale & Sun
(2010); Annor-Asubonteng et al. (2018);
Chigara et al. (2013);Kissi et al. (2016)
6
Materials theft on sites
Fagbenle et al. (2018); Enshassi et al.
(2006); Akinsola et al. (1997);
7
Weak management support and control
Iyer and Jha (2005); Enshassi et al. (2006);
Akinsola et al. (1997); Fagbenle et al.
(2018);Meeampol and Ogunlan (2006);Obi
et al. (2017);
8
the experience and competence of project
managers
Iyer and Jha (2005); Al-Juwairah (1997);
Divakar and Jebin (2018);Kissi et al.
(2016)
9
Unstable construction materials prices,
Iyer and Jha (2005); Al-Juwairah (1997);
Zhao et al. (2017);
10
climatic conditions
Iyer and Jha (2005);
11
Impracticable estimates by the estimators
Enshassi et al. (2006); Akinsola et al.
(1997); Al-Juwairah (1997);Ikediashi et al.
(2014); Divakar and Jebin (2018);
12
Poorly developed project brief
Enshassi et al. (2006); Akinsola et al.
(1997); Divakar and Jebin (2018);
13
Poor risks management
Enshassi et al. (2006); Akinsola et al.
(1997);Ikediashi et al. (2014); Olawale &
Sun (2010);
14
underutilization of plant and equipment
Enshassi et al. (2006); Akinsola et al.
(1997);
15
poor pricing during tendering
Enshassi et al. (2006); Akinsola et al.
(1997);
16
poor construction methods
Ikediashi et al. (2014); Meeampol and
Ogunlan (2006);
17
Poor project communications
Annor-Asubonteng et al.
(2018);Meeampol and Ogunlan (2006);Obi
et al. (2017);
18
Poor planning
Al-Juwairah (1997); Kissi et al. (2016);
19
poor contract administration and management
Al-Juwairah (1997);Annor-Asubonteng et
al. (2018);
20
insufficient project information
(Peeters and Madauss (2008); Divakar and
Jebin (2018);Obi et al. (2017);
21
poor evaluation of project time and cost,
Olawale & Sun (2010);
22
complexity of works
Olawale & Sun (2010);
23
poor contractors’ performance
Olawale & Sun (2010);
25 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
24
The conflict between project
parties/stakeholders
Annor-Asubonteng et al. (2018);
25
Unexpected ground conditions
Annor-Asubonteng et al. (2018);
26
shortage of skilled personnel
Chigara et al. (2013);Kissi et al. (2016)
27
building materials unavailability in the local
market
Chigara et al. (2013);Zhao et al. (2017);
28
weak cost control systems
Annor-Asubonteng et al. (2018); Chigara
et al. (2013); Divakar and Jebin (2018);
29
Often changing subcontractors,
Divakar and Jebin (2018);
30
Low productivity of labour,
Divakar and Jebin (2018);
31
poor updating of cost management information
systems
Divakar and Jebin (2018);Kissi et al.
(2016)
32
Lack of use of project management tools
(technology)
Divakar and Jebin (2018); EduPristine
(2015)
33
key stakeholders influences
Zhao et al. (2017); Obi et al. (2017)
34
quality of project team
Obi et al. (2017)
35
Regulations regarding building and construction
Obi et al. (2017)
36
external economic environment
Zhao et al. (2017);Obi et al. (2017); Kissi
et al. (2016)
2.3 Benefits of cost management and
Strategic performance of construction firms.
Cost management according to Andres (2021),
ensures that project cost performance is
monitored, changes are corrected and changes
that will impact cost are announced to project
stakeholders. Effective cost management
ensures that the financial health status of
businesses is known via cost monitoring. This
helps companies to make an informed decision
that will bring sustainable growth and progress.
Help to optimise the financial planning of the
company. This makes the estimation and
planning of expenditure more effective and
efficient. Effective cost management helps to
improve profit maximization and cost reduction
on a project. Avoidable activities are eliminated
to prevent unnecessary expenses that do not add
value. Where the revenues are improved, profit
maximised, more monies will be available for
other investment opportunities.
Effective project cost management
implementation can help project managers
make clear the business expectation with
stakeholders, scope creep is controlled, ensure
that progresses are tracked and corrective action
taken where the deviation is noticed, ensure that
return on investment is increasing, money
losses are avoided, expected margins
maintained. It also generates cost data for
benchmarking potential future projects and the
tracking of future long-term cost trends
(Hexagon, 2020). According to the submission
of EduPristine (2015), Cost Management is
vital for the following reasons; helps in decision
making that impact the project objectives and
organisational goals, help to reposition
businesses for effectiveness, helps to establish
overspending on an element or component, the
long-term trends of a business can be analysed,
helps to predict future expenses, and project-
specific costs and that of the businesses can be
controlled. Bidkon (2021), Doeren (2020), and
Zoe (2017) identified major benefits of cost
management to include; 1) Reduction of
expenses: project managers utilise the cost
management practices to directly put the flow
of cost of resources into proper checks. The
overall expenses of a company can be reduced
through eh implementation of appropriate cost
management techniques; 2) Improve
operational efficiency: Cost management
ensures that projects activities are managed
based on a predetermined budget, to ensure the
smooth running of organisational and project
activities; 3)Procurement effectiveness: proper
project cost management ensure that various
vendors are identified and the most profitable
one is selected for procuring materials and
services that are economical and standard, and
4) Streamline technological need: cost
management helps to avoid the implementation
26 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
of unnecessary technology that does not add
value to the organisation, but add to the overall
expenditure of the company. These will enable
the project manager to save the cost of other
beneficial activities.
When there are cost savings in every activity,
the cost saved is aggregated and invested in
other businesses portfolios of the organisations.
The implementation of effective cost
management systems by construction
organisations has an impact on their
competitive advantage and survival in the
construction industry. Cost Management plays
a critical role in determining the construction
organisations strategic performance in the
construction industry. Cost management is a
strategic approach by businesses to ensure they
are successful and competitive. It increases the
competitive position of companies beyond the
local areas, encourages the adoption of new
technologies, changes businesses processes and
makes management dynamic and vital in the
industry (Rounaghi et al., 2021). Project
managers and managers of construction firms
should have a competitive attitude. All efforts
of management should be targeted towards
remaining relevant and competitive in the
industry. Parameters that are considered in
determining the success of a construction
project is how well the project has fared in terms
of cost, time, and quality. Cost management is a
strategic competitive tool for meeting and
exceeding the needs of the clients and
objectives of the projects.
Cost management is used to support the
corporate strategy via the provision of
information that the organisation can use to
better compete in the industry. As can be seen
in Figure 1, the implementations of effective
cost management practices have an impact on
both the project and the implementing
organisations. On the construction projects, it
ensures that projects are delivered within cost,
and with required quality specifications and to
achieve clients' satisfaction. Construction firms
would experience improved revenue and
profitability, business growth. The ultimate end
of effective project cost management is the
improvement of the strategies performance of
the organisations. Organisational, survival and
sustenance is what drives cost management for
the attainment of a higher competitive position
in the industry.
Figure 1: Cost management and Construction Firms strategic performance Source
Construction firm
Construction Project
Budget not exceeded
Cost savings
Waste minimisation
Stakeholder satisfaction
Timely delivery of work
Reduced expenses
Better quality
Value addition
Fewer claims and disputes
Less conflict
Profit maximisation
Better revenue
Shareholders satisfaction
Repeat patronage
Business Growth
Improved operational efficiency
Better procurement
Higher competitive advantage and
Organisational survival
Effective Cost
management practices
Implementation
27 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
3.0 RESEARCH METHODOLOGY
The purpose of this study is to assess the role of
cost management practice on construction
firms’ strategic performance in the construction
industry in Nigeria. With the specific objectives
of determining the benefits of cost management
of the project on the competitive position of
construction firms, and the factors influencing
cost management strategies of construction
firms. A well-structured questionnaire that is
suitable for large sample coverage within a
shorter time was adopted to collect data from
the target participants. The target participants
are built environment experts such as (Quantity
Surveyors, Engineers, Builders, Architects)
working in the South-South geological zone of
Nigeria, and who have attained managerial
positions or are at least responsible for the
management of project/organisational
resources, and are actively involved in the
delivery project or running of an organisation.
A minimum of 5 years of working experience
and experience in construction project cost
management was also set as a criterion for
participation in the study. The essence of these
sampling selection criteria is to gather quality
and unbiased data (Nwaki et al., 2021). The six
states in the study area are Bayelsa state, Akwa
Ibom, Delta, Cross River, Rivers states and
Edo; the population size of these experts within
these states as reported in the study of (Otali et
al., 2020) is 1252. The sample size of 197 was
obtained using the population of 1252 from the
(Krejcie and Morgan, 1970) sample size
determination table is 197.
The literature review led to questionnaire
development, and the questionnaire used was
divided into three parts; the 1st part garnered
information on the demographic characteristic
of the respondents. The 2nd part collected
information on the factors influencing cost
management of construction projects, and the
3rd part collected data on the benefits of cost
management on the strategic performance of
construction organisations. The questionnaire
was based on a 5-point Likert scale in which 1
= lowest score/rating and 5=highest
score/rating. The respondents were required to
rate the variables on the factors influencing cost
management based on the level of influence,
and the variables on benefits of cost
management based on level of
agreement/impact.
The snowball sampling techniques via Google
form was the procedure for the survey and data
collection. The snowball sampling technique is
based on referrals and it can increase sample
response rate (Heckathorn, 2011; Atkinson,
2001). The Google form questionnaire is faster
and can cover a large audience at a relatively
shorter time. The Google form is an electronic
means of a questionnaire survey that helps to
avoid hardcopy questionnaires; it is eco-
friendly (Nwaki and Eze, 2020). The sampling
method adopted in this study was informed by
the survey criteria. Since it was impracticable to
get a separate database of professionals or
companies that meet the study participation
criteria, the snowball sampling method was
found appropriate.
A total of 129 responses were received over the
survey period of 15weeks. The effective
response of 129 is equivalent to a 65.48%
response rate, and this is far above the range of
20-30&% suggested by (Moser & Kalton,
2001). The gathered data were analysed using
frequency, percentage, and relative importance
index (RII). The Cronbach’s alpha test was used
to determine the reliability of the research
instrument and the internal consistency of
responses. As can be seen in Table 2, the
Cronbach’s alpha coefficients obtained are
above 0.70 suggested by (Hair et al., 2010;
Pallant, 2005). This implies high instrument
reliability and quality of data.
Data normality distribution was done using
Shapiro-Wilk test as it is the most widely used
where the sample size if well below 2000
(Ghasemi and Zahediasl, 2012). The data
collected on the factors affecting cost
management and the benefits of cost
management where found to have their p-values
to be less than 5% significant level (see Table 3
and 4). Based on this, the data were found
adjudged non-parametric in nature. The
methodological flow chart is shown in figure 2
below.
28 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
Table 2: Reliability Test
Case Processing Summary
Reliability Statistics
N
%
Cronbach's
Alpha
No. of
items
Cases 1: Factors affecting
cost management
Valid
129
100.0
0.801
36
Excludeda
0
0
Total
129
100.0
Cases 2: Benefits of cost
management
Valid
129
100.0
0.797
22
Excludeda
0
0
Total
129
100.0
a. Listwise deletion based on all variables in the procedure.
Table 3: Tests of Normality of data obtained on Factors affecting cost management
Kolmogorov-Smirnova
Shapiro-Wilk
Statistic
df
Sig.
Statistic
df
Sig.
Poor leadership and coordinating skills
0.337
129
0.000
0.674
129
0.000
Poor resources deployment
0.258
129
0.000
0.767
129
0.000
Excessive materials wastages on site
0.421
129
0.000
0.552
129
0.000
Complex payment mechanism
0.420
129
0.000
0.562
129
0.000
Variations/design changes during construction
0.314
129
0.000
0.726
129
0.000
Materials theft on sites
0.337
129
0.000
0.648
129
0.000
Weak management support and control
0.386
129
0.000
0.652
129
0.000
the experience and competence project
managers
0.436
129
0.000
0.510
129
0.000
Unstable construction materials prices,
0.287
129
0.000
0.781
129
0.000
climatic conditions
0.271
129
0.000
0.740
129
0.000
Impracticable estimates by the estimators
0.332
129
0.000
0.731
129
0.000
Poorly developed project brief
0.370
129
0.000
0.654
129
0.000
Poor risks management
0.292
129
0.000
0.772
129
0.000
underutilization of plant and equipment
0.395
129
0.000
0.595
129
0.000
poor pricing during tendering
0.279
129
0.000
0.767
129
0.000
poor construction methods
0.343
129
0.000
0.728
129
0.000
Poor project communications
0.412
129
0.000
0.607
129
0.000
Poor planning
0.373
129
0.000
0.660
129
0.000
poor contract administration and management
0.236
129
0.000
0.816
129
0.000
insufficient project information
0.248
129
0.000
0.771
129
0.000
poor evaluation of project time and cost,
0.289
129
0.000
0.789
129
0.000
complexity of works
0.303
129
0.000
0.768
129
0.000
poor contractors’ performance
0.287
129
0.000
0.780
129
0.000
Conflict between project parties / stakeholders
0.340
129
0.000
0.710
129
0.000
Unexpected ground conditions
0.248
129
0.000
0.819
129
0.000
shortage of skilled personnel
0.278
129
0.000
0.787
129
0.000
building materials unavailability in local
market
0.338
129
0.000
0.700
129
0.000
weak cost control systems
0.331
129
0.000
0.733
129
0.000
Often changing subcontractors
0.270
129
0.000
0.804
129
0.000
Low productivity of labour
0.329
129
0.000
0.694
129
0.000
poor updating of cost management information
systems
0.292
129
0.000
0.758
129
0.000
29 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
Lack of use of project management tools
(technology)
0.383
129
0.000
0.674
129
0.000
key stakeholders influences
0.331
129
0.000
0.735
129
0.000
quality of project team
0.337
129
0.000
0.718
129
0.000
Regulations regarding building and
construction
0.315
129
0.000
0.730
129
0.000
external economic environment
0.418
129
0.000
0.576
129
0.000
Table 4: Tests of Normality of data obtained on the Benefits of cost management
Kolmogorov-Smirnova
Shapiro-Wilk
Statistic
df
Sig.
Statistic
df
Sig.
Improve value for money for the parties and
this can lead to repeat patronage
0.398
129
0.000
0.582
129
0.000
Leads to Client satisfaction
0.430
129
0.000
0.586
129
0.000
ensures that project cost performance are
monitored
0.470
129
0.000
0.506
129
0.000
enables the correction of changes that will
impact projects outcome
0.466
129
0.000
0.508
129
0.000
financial health status of businesses is known
via cost monitoring
0.360
129
0.000
0.685
129
0.000
helps companies to make an inform decision
that will bring a sustainable growth and
progress.
0.353
129
0.000
0.638
129
0.000
Help to optimise financial planning of the
company
0.356
129
0.000
0.702
129
0.000
improve profit maximization
0.484
129
0.000
0.461
129
0.000
help project managers make clear business
expectation with stakeholders
0.301
129
0.000
0.772
129
0.000
scope creep is controlled
0.312
129
0.000
0.715
129
0.000
ensure that return on investment is increases
0.345
129
0.000
0.702
129
0.000
generates cost data for benchmarking of
potential future projects
0.432
129
0.000
0.576
129
0.000
Helps in decision making that impact on the
project objectives and organisational goals
0.329
129
0.000
0.750
129
0.000
Help to reposition businesses for effectiveness
0.440
129
0.000
0.548
129
0.000
Helps to establish overspending on an element
or component
0.306
129
0.000
0.755
129
0.000
The long-term trends of a business can be
analysed
0.390
129
0.000
0.678
129
0.000
Helps to predict future expenses
0.472
129
0.000
0.512
129
0.000
Project specific cost and that of the businesses
can be controlled
0.431
129
0.000
0.581
129
0.000
Help reduce wastage and expenses
0.487
129
0.000
0.463
129
0.000
Improve operational efficiency need
0.481
129
0.000
0.491
129
0.000
Ensures Procurement effectiveness
0.405
129
0.000
0.642
129
0.000
Streamline technological need
0.350
129
0.000
0.725
129
0.000
30 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
Figure 2: Methodological flow chart
4.0 RESULTS AND DISCUSSION
4.1 Respondents background
characteristics
Table 5 shows that 62.02% of the organisations
of the respondents are privately owned and
37.98% are owned by the public. In terms of the
distribution of the respondents by states, the
highest is from Rivers state with 29.46%,
followed by Cross River (18.605), then Edo
state (16.28%), Delta state (15.50%), Akwa
Ibom (12.4%) and lastly Bayelsa state (7.75%).
Their professions show that the Engineers are
more by 37.98%, followed by Quantity
Surveyors (29.46%), then Architects (22.48%),
and Builders (10.08%). The average working
experience of the respondents is about 12.04
years. This shows a considerable length of time
to gain adequate experience and knowledge and
attainment of managerial positions in the
industry. The educational qualification shows
that 14.73% have HND, 10.08% have PGD,
50.39% have B.Sc/B.Tech., 22.48% have
MSc./M.Tech., and PhD is 2.33%. The
professional status of the respondents shows
that 83.72% of them are chartered members of
the respective professional bodies, and only
16.25% are yet to obtain their professional
qualifications.
The result obtained here shows a fair
representation of the participants across the
states that participated in the study. It also
revealed a reasonable representation of the key
construction experts that are employed by
construction organisations. Also, participants
have the requisite experiences and are
educationally and professionally qualified to
participate in this study.
Conceptualisation
of idea
Design of
Questionnaire
Literature
review
Descriptive
analysis
Internet-mediated
Sampling
Reliability
evaluation
31 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
Table 5: Respondents background characteristics
Variables
Classification
Freq.
%
Ownership of organisations
Public organisations
49
37.98%
Private organisation
80
62.02%
TOTAL
129
100.00%
States in the study area
Akwa Ibom
16
12.40%
Bayelsa state
10
7.75%
Cross River
24
18.60%
Delta
20
15.50%
Edo
21
16.28%
Rivers
38
29.46%
TOTAL
129
100.00%
Participants professions
Architect
29
22.48%
Builders
13
10.08%
Engineers (Civil/structural & Services)
49
37.98%
Quantity Surveyors
38
29.46%
TOTAL
129
100.00%
Years of experience
5-10years
37
28.68%
11-15 years
49
37.98%
16-20 years
25
19.38%
21-above
18
13.95%
TOTAL
129
100.00%
Educational Qualification
Higher National Diploma (HND)
19
14.73%
Postgraduate Diploma (PGD)
13
10.08%
Bachelor of Science/technology
(B.Sc./B.Tech)
65
50.39%
Master’s Degree (MSc./M.Tech.)
29
22.48%
Doctorate degree (PhD)
3
2.33%
TOTAL
129
100.00%
Professional Status
Member Nigerian Institute of Architect
(MNIA)
24
18.60%
Member Nigerian Institute of Builders
(MNIOB)
10
7.75%
Member Nigerian Society of Engineers
(MNSE)
43
33.33%
Member Nigerian Institute of Quantity
Surveyors (MNIQS)
31
24.03%
Probationer
21
16.28%
TOTAL
129
100.00%
4.2 Factors influencing cost management
The result of the analysis of the data gathered
on the factor influencing cost management of
construction projects is shown in Table 6. It can
be seen that the top ten (10) factors influencing
cost management are; Experience and
competence of the project managers
(RII=0.898), Weak management support and
control (RII=0.895), Poor project
communications (RII=0.893), external
economic environment (RII=0.891), Lack of
use of project management tools (technology)
(RII=0.890), Poor leadership and coordinating
skills (RII=0.887), underutilization of plant and
equipment (RII=0.884), Excessive materials
wastages on-site (RII=0.878), Poorly
developed project brief (RII=0.873), and
Materials theft on sites (RII=0.871). While the
least factor influencing cost management are;
poor updating of cost management information
systems (RII=0.798), Poor risks management
(RII=0.791), building materials unavailability
32 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
in the local market (RII=0.780), Climatic
conditions (RII=0.775), poor contract
administration and management (RII=0.774),
and insufficient project information
(RII=0.738).
Notwithstanding the relative ranking of these
factors, they all have a high influence on the
cost management practices of construction
organisations. This is premised on the range of
RII of the factors, the higher RII= 0.898 and the
lowest is 0.738, with an average RII of 0.842.
The results of this section are in line with the
reports of (Enshassi et al., 2006; Akinsola et al.,
1997; Iyer and Jha, 2005; Fagbenle et al., 2018).
Iyer and Jha (2005) reported that poor
leadership, management, experience and
competencies of project managers play a critical
role in achieving effective cost management
functions. If the leadership of an organisation
are weak or lack the appropriate cost
management skills, the result will be losses and
wastages and poor resources allocations and
management. Project managers' competence is
a key determinant of how successful a project
will be. A cost management skill is a vital
knowledge the project manager must possess to
ensure that project baseline is not exceeded. The
experience and competence of the project
manager were identified by (Al-Juwairah, 1997;
Divakar and Jebin, 2018; Kissi et al., 2016) as a
critical factor influencing cost management
practices.
Poor leadership and management were also
highlighted by Fagbenle et al. (2018) as being
among the vital factors influencing the success
of cost management. Where there is no will by
top management to support efforts target at
strategically positioning the company, the order
will be wastage, high expenses and under usage
of resources. Leadership and management-
related factors were highlighted as being among
the top factors influencing effective cost
management of construction projects (Enshassi
et al., 2006; Akinsola et al., 1997; Meeampol
and Ogunlan, 2006; Obi et al., 2017). Poor
management leads to the underutilisation of
plants and equipment, thus, resulting in a lot of
wastes.
Material theft on site is another way projects
cost get wasted; theft ad pilferage on site should
be properly checked and controlled by the
project manager and other experts saddled with
resource management responsibilities. One of
the factors affecting cost management is
materials theft on sites (Enshassi et al., 2006;
Fagbenle et al., 2018; Akinsola et al., 1997).
Ineffective communications on a construction
project is a major cause of cost overrun and
conflicts on construction projects. Poor
communication among project team members,
poor communication between the management
team and production team is major problem
project baselines are not met. Owing to the vital
role communication play in project delivery and
organisation performance, especially in
communicating or disseminating cost impacting
information, (Annor-Asubonteng et al., 2018;
Meeampol and Ogunlan, 2006; Obi et al., 2017)
communication problem is one of the
influencing factors of cost management.
Poorly developed project briefs can cause a
serious problem at construction phases as a lot
of information would not be available. It can
lead to variations, design changes and serious
scope creep. Lall these have an impact on cost
and this could be the reason why poor project
brief development is among the factors
influencing cot management identified by
(Enshassi et al., 2006; Akinsola et al., 1997;
Divakar and Jebin, 2018). Lack of use of project
management tools (technology) by
organisations and the impact of the external
economic environment on the projects are other
factors affecting cost management. This is in
line with the findings of (Divakar and Jebin,
2018; Zhao et al., 2017; Obi et al., 2017; Kissi
et al., 2016).
33 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
Table 6: Factors affecting construction cost management
S/N
Factors affecting cost management
RII
Rank
1
Poor leadership and coordinating skills
0.887
6th
2
Poor resources deployment
0.819
28th
3
Excessive materials wastages on site
0.878
8th
4
Weak management support and control
0.895
2nd
5
Variations/design changes during construction
0.854
15th
6
Materials theft on sites
0.871
10th
7
Complex payment mechanism
0.865
12th
8
the experience and competence of project managers
0.898
1st
9
Unstable construction materials prices,
0.843
19th
10
climatic conditions
0.775
34th
11
Impracticable estimates by the estimators
0.868
11th
12
Poorly developed project brief
0.873
9th
13
Poor risks management
0.791
32nd
14
underutilization of plant and equipment
0.884
7th
15
poor pricing during tendering
0.843
19th
16
poor construction methods
0.856
14th
17
Poor project communications
0.893
3rd
18
Poor planning
0.836
21st
19
poor contract administration and management
0.774
35th
20
insufficient project information
0.738
36th
21
poor evaluation of project time and cost
0.836
21st
22
complexity of works
0.826
24th
23
poor contractors’ performance
0.819
28th
24
Conflict between project parties/stakeholders
0.822
27th
25
Unexpected ground conditions
0.806
30th
26
shortage of skilled personnel
0.826
24th
27
building materials unavailability in the local market
0.780
33rd
28
weak cost control systems
0.848
16th
29
Often changing subcontractors
0.826
24th
30
Low productivity of labour
0.848
16th
31
poor updating of cost management information systems
0.798
31st
32
Lack of use of project management tools (technology)
0.890
5th
33
key stakeholders influences
0.857
13th
34
quality of project team
0.845
18th
35
Regulations regarding building and construction
0.836
21st
36
external economic environment
0.891
4th
34 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
4.3 Benefits of cost management
The result of the analysis of the data gathered
on the benefits of cost management is shown in
Table 7. The result shows that the top ten (10)
benefits of cost management are; Help reduce
wastage and expenses (RII=0.946), Improve
operational efficiency need (RII=0.938), Helps
to predict future expenses (RII=0.912), Ensures
Procurement effectiveness (RII=0.904),
improve profit maximization (RII=0.898),
enables the correction of changes that will
impact projects outcome (RII=0.895), generates
cost data for benchmarking of potential future
projects (RII=0.891), Leads to Client
satisfaction (RII=0.887), improve value for
money for the parties and this can lead to repeat
patronage (RII=0.885), and Help to reposition
businesses for effectiveness (RII=0.884). The
least benefits of cost management according to
the rating of the respondents are; Helps to
establish overspending on an element or
component (RII=0.840), Streamline
technological need (RII=0.840), Help to
optimise financial planning of the company
(RII=0.833), Helps in decision making that
impact on the project objectives and
organisational goals (RII=0.792), and scope
creep is controlled (RIII=0.781).
Similarly, regardless of the relative ranking of
the assessed variables, cost management has
very high benefits to construction projects and
organisations. The relative importance index
(RII) is ranged from 0.946 to 0.781, with an
average RII score of 0.872. Therefore, cost
management is highly beneficial in the
construction industry.
Cost Management plays a critical role in
determining the construction organisations
strategic performance in the construction
industry. Cost management is a strategic
approach by businesses to ensure they are
successful and competitive. It increases the
competitive position of companies beyond the
local areas, encourages the adoption of new
technologies, changes businesses processes and
makes management dynamic and vital in the
industry the role of cost management on
organisational growth and survival is well
acknowledged in the reports of (Rounaghi et al.,
2021; EduPristine, 2015; Bidkon, 2021;
Doeren, 2020).
Table 7: Benefits of cost management
S/N
Variables
RII
Rank
1
Improve value for money for the parties and this can lead to repeat patronage
0.885
9th
2
Lead to Client satisfaction
0.887
8th
3
Ensures that project cost performance is monitored
0.878
11th
4
Enables the correction of changes that will impact projects outcome
0.895
6th
5
The financial health status of businesses is known via cost monitoring
0.865
14th
6
Helps companies to make an informed decision that will bring sustainable growth and
progress
0.868
12th
7
Help to optimise financial planning of the company
0.833
20th
8
Improve profit maximization
0.898
5th
9
Help project managers make clear business expectations with stakeholders
0.845
17th
10
Scope creep is controlled
0.781
22nd
11
Ensure that return on investment is increases
0.860
16th
12
Generates cost data for benchmarking of potential future projects
0.891
7th
13
Helps in decision making that impact the project objectives and organisational goals.
0.792
21st
14
Help to reposition businesses for effectiveness
0.884
10th
15
Helps to establish overspending on an element or component
0.840
18th
16
The long-term trends of a business can be analysed
0.865
14th
17
Helps to predict future expenses
0.912
3rd
18
Project-specific cost and that of the businesses can be controlled
0.867
13th
19
Help reduce wastage and expenses
0.946
1st
20
Improves operational efficiency need
0.938
2nd
21
Ensures Procurement effectiveness
0.904
4th
22
Streamline technological need
0.840
18th
35 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
4.4 Cost management and Strategic
performance of construction firms
The result of the analysis of the data collected
on the question "What is the level of impact
these benefits have on the strategic competitive
performance of your organisation?" in figure 3,
shows that cost management benefits have a
very high impact on the strategic competitive
advantage of construction organisations. This
is premised on the percentage of participants
who rated the strategic importance of cost
management on construction firms. 51%
indicated that the impact of cost management on
construction firm's strategic performance is
'very high', 32% indicated 'high impact', 12%
indicated ‘moderate impact’, 4% ‘low impact’,
and 2% ‘very low impact’.
Figure 3: Strategic competitive impact of cost management
Figure 4 show the result of the analysis of the
data collected on the question “What is the level
of impact these benefits have on the survival of
your organisation?” It can be seen that more of
the respondents rated the impact of effective
cost management very high with 43%; this is
followed by those who indicated that it has a
high impact (39%), then moderate impact
(16%), 2% low impact and 0% very low impact.
Thus, it is concluded that effective cost
management has a very high impact on the
survival of construction organisations.
Figure 4: Survival impact of cost management
51%
32%
12%
4%
2%
0%
20%
40%
60%
Very high impact
high impact
moderate impactlow impact
very low impact
43%
39%
16%
2%
0%
0%
10%
20%
30%
40%
50%
Very high impact
high impact
moderate impactlow impact
very low impact
36 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
5.0 CONCLUSION AND
RECOMMENDATIONS
The purpose of this study is to assess the role of
cost management practice on construction
firms' strategic performance in the construction
industry in Nigeria. With the specific objectives
of determining the benefits of cost management
of the project on the competitive position of
construction firms, and the factors influencing
cost management strategies of construction
firms. This study used a well-structured
questionnaire administered to construction
professionals via electronic means and using
snowball sampling techniques in the 6 states of
the south-south geopolitical zone of Nigeria.
Interesting findings were made and discussed.
The study found that the top factors influencing
construction cost management are; experience
and competence of the project managers, weak
management support and control, poor project
communications, external economic
environment, lack of use of project management
tools (technology), poor leadership and
coordinating skills, underutilization of plant and
equipment, excessive materials wastages on-
site, poorly developed project brief, and
materials theft on sites. Also, the top benefits of
cost management are; help reduce wastage and
expenses, improve operational efficiency need,
helps to predict future expenses, ensures
procurement effectiveness, improve profit
maximization, enables the correction of
changes that will impact projects outcome,
generates cost data for benchmarking of
potential future projects, leads to client
satisfaction, improve value for money for the
parties and this can lead to repeat patronage, and
help to reposition businesses for effectiveness.
However, based on the average weight of the
relative importance index scores of the assessed
variables, it was concluded that all the assessed
factors influence cost management and that cost
management is highly beneficial to projects and
organisations in the construction industry.
Effective implementation of cost management
practices has a very high impact on the survival
and sustenance of construction firms. Cost
management is a strategic tool for construction
firms to attain a better competitive advantage in
the construction industry. Therefore, cost
management plays a critical role in the strategic
performance of construction organisations.
Effective Cost management implementation on
construction projects ensure that the
construction project's budget is not exceeded,
lead to cost savings, waste minimisation,
stakeholder satisfaction, timely delivery of
work, reduced expenses, better quality, value
addition, fewer claims and disputes, less
conflict. The implication of cost management
practices implementation on the implementing
organisations are profit maximisation, better
revenue, shareholder’s satisfaction, repeat
patronage, business growth, improved
operational efficiency, and better procurement.
The ultimate impact is an increase in
competitive advantage and survival in the
construction industry. The outcome of this
study is critical to the success of the project
managers who are vested with the responsibility
of ensuring that projects are delivered within
baselines, and that profit is maximised and
organisational goals and survival is attained.
The growth and survival of construction firms
are anchored on how well they manage the
resources available to them. This study is a
pointer to the need to take cost management
very serious by construction firms. Leadership
and management are vital factors to the success
of cost management efforts; this study will help
the leadership of construction firms to support
and invest in tools and facilities that will aid the
smooth performance of cost management
functions. Estimation of project resources is a
vital function of the project managers. The
experts involved should take adequate care in
ensuring that adequate estimates of project
resources are produced. This study will also add
to the few existing bodies of knowledge on cost
management in developing countries. Project
managers should continuously upgrade their
skills for effective cost management to boost the
strategic competitive position of their firms.
This study however has some limitations. First
of all, this study is limited by geographical
location, and secondly, the sample size may not
be representative enough to enable the
generalisation of the results. Therefore, care
should be taken in the generalisation of its
findings. A similar study is therefore advised in
other regions or states or countries, this will
enable more results to be available for
comparison. While management plays a critical
37 Journal of Project Management and Practice Vol. 2(1), 20-39 ,June 2022 Zakariyau .M. et al
role in the strategic competitiveness of
businesses, the competencies and skills requires
of a project manager for a successful cost
management function requires investigation.
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Harris, F. (1997). Identification and
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variations on building projects.
International Journal of Project
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International Journal of Civil Engineering
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Petroleum and Mineral Dhahran Saudi
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5) Andres, K. (2021). The Importance of
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in-project-management
6) Annor-Asubonteng, J., Tengan,C.,
Asigri, T.M., & Napoleon, K. D. K (2018).
Investigating the Cost Management
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Ghanaian Construction Industry. Journal
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7) Ashworth, A. (2010), Cost Studies of
Buildings, 5th ed., Pearson Pretince Hall,
Harlow.
8) Atkinson R, & J, F. (2001). Accessing
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