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The impact of contractors

management capability
on cost and time performance
of construction projects in Nigeria

The impact
of management
capability
171

O.I. Aje
Department of Quantity Surveying, School of Environmental Technology,
Federal University of Technology, Akure, Nigeria

K.T. Odusami
Department of Building, Faculty of Environmental Studies,
University of Lagos, Akoka, Nigeria, and

D.R. Ogunsemi
Department of Quantity Surveying, School of Environmental Technology,
Federal University of Technology, Akure, Nigeria
Abstract
Purpose Management capability is one of the major criteria for evaluating construction contractors
during prequalification and tender evaluation This paper aims to investigate the impact of contractors
management capability as a prequalification criterion on cost and time performance of selected
building projects.
Design/methodology/approach Prequalification assessments of management capability of
wining contractors as well as cost data relating to 77 completed building projects executed between
2004 and 2007 are obtained. The data obtained from a questionnaire and archival data are analyzed
using one-way analysis of variance and multiple regression.
Findings The results reveal that contractors management capability has significant impact on cost
and time performance of building projects as evidenced by p-values of 0.042 and 0.039, respectively.
Practical implications The research could be of significant benefit at the research
implementation stage of public procurement practice especially in relation to the construction
industry in Nigeria. Construction practitioners involved in prequalification and tender evaluation
should continue to seek relevant information relating to management capability from the candidate
contractors during prequalification and tender evaluation.
Originality/value Models capable of predicting the final cost and duration of building projects are
eventually derived based on prequalification assessment of contractors on management capability,
proposed contract duration and the initial contract figure. The goodness of fit of the models as defined
by the value of R 2 is found to be 96.2 percent and 90.01 percent for cost and time, respectively; thus
signifying high predictive efficacy of the models.
Keywords Construction industry, Costs, Management skills, Time-based management, Nigeria
Paper type Research paper

The authors are grateful to the anonymous reviewers for their constructive comments which
have helped to improve the quality of this paper.

Journal of Financial Management of

Property and Construction
Vol. 14 No. 2, 2009
pp. 171-187
q Emerald Group Publishing Limited
1366-4387
DOI 10.1108/13664380910977619

JFMPC
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172

1. Introduction
The construction industry embraces a wide range of closely integrated organizations
that collectively construct and repair different categories of building and civil
engineering structures. Osoba (1993) observes that construction industry has featured
prominently in the physical development of Nigeria since the British rule. However, a
very striking feature of the industry according to him is that for well over hundred
years, foreign companies and expatriates have played the dominant role in planning
and executing major projects in Nigeria. Although indigenous construction companies
have made some impacts in the construction industry, most especially in the building
sector within the last forty years, however it is obvious that foreign related
construction companies are still the main stay of the industry presently with over
90 percent of civil engineering and 65 percent of building projects being executed by
this group of contractors (Akande, 1993).
Ajanlekoko (1990) submits that the construction industry is a prime motivator of
any national economy. He further confirms that the industry represents 60 percent of
the capital investment in Nigeria, while it contributed over N4.53 billion to the nations
gross domestic product in the late 80 second. To corroborate this view, Piertroforte et al.
(2000) affirm that the construction industry globally has a strong linkage with many
economic activities, and whatever happens to the industry will directly or indirectly
influence other industries and ultimately the wealth of the country. This
interrelationship therefore strengthens the need to ensure that project planning and
project management are cost effective (Mansfield et al., 1994), because improving
construction efficiency by means of cost-effectiveness and timeliness would certainly
contribute to cost savings for the country as a whole (Kaming et al., 1997).
In the last two decades, there has been a steady increase in the range of methods used
for procurement of construction works. Despite this, there has been no commensurate
improvement in the success rate of construction projects; instead there have been
extensive delays in the planned schedule, cost overruns, serious problems in quality and
an increased number of claims and litigation (Hatush and Skitmore, 1998). Construction
project outcome is usually measured in terms of time, cost and quality achieved. Of
these, cost and time tend to be the most important and visible, always considered as very
critical because of their economic implications if they are unnecessarily exceeded
(Ogunsemi and Jagboro, 2006). Furthermore, in Nigeria construction projects are almost
synonymous with time and cost overruns; hence the need for a pragmatic approach to
provide early warning devices to reduce these problems considering the present
economic climate where prices of goods and services has remained unstable.
Therefore, the construction client decision most impacting the superlative value
criteria is that of selecting the appropriate contractor (Holt, 1998). The most commonly
used criteria for contractors selection according to Hatush and Skitmore (1997a) are
those pertaining to financial soundness, technical ability, management capability,
health and safety performance, and past performance of contractors. Out of these
criteria, contractors management capability is the only criterion directly concerned
with construction resources, which in turn are the most significant ingredients of
construction projects delivery. Management capability is the ability of contractors to
effectively utilize resources and expertise to deliver projects to time, within cost and to
the required quality (Ajibade, 2006). The Budget Monitoring and Price Intelligent Unit
(2005) identified and rated the criteria for contractors selection under the Due Process

(now Public Procurement) as evidence of financial capability and banking supports

(15 percent); management capability (25 percent); experience in similar projects and
evidence of knowledge of the industry (20 percent), equipment and technology capacity
(20 percent), annual VAT registration and evidence of past VAT remittance (5 percent),
annual turnover (5 percent); evidence of local content emphasis (5 percent); and
community social responsibility in support of federal governments local contents
policy (5 percent). From the foregoing therefore, it can be deduced that management
capability of contractors is an important variable for achieving project delivery
judging from the percentage of scores allocated to this criteria. However, Adams (1990)
opines that the extent of contractors participation in construction work is not
proportional to their managerial strength in the industry as a result of their managerial
incompetence. Therefore, a research into the managerial capabilities of construction
contractors to determine its impact on construction project performance in Nigeria
would be worthwhile. This becomes more important at this time considering the
present policy of Nigerian government on public procurement; which is geared towards
ensuring the application of fair, competitive, transparent, value for money standards
and practices for the procurement of projects (Bureau of Public Procurement, 2007).
This will assist construction clients and consultants to effectively assess contractors on
this criterion when selecting them for construction projects execution.
2. Theoretical background
Management is the co-ordination of all resources through the process of planning,
organizing, leading and controlling in order to attain process objectives (Abiola, 2000).
It entails planning, organizing, staffing, directing, and dedicating resources and
expenditure of fund in order to produce a concept, a product, an activity or a project.
Contractors performance is crucial to success of any construction project as it is the
contractors who convert design into practical reality. Therefore, a potential contractor
must provide qualified and skilled staff that have project management responsibilities
and execution capabilities in terms of cost and time management during construction.
According to Wong and Holt (2003), the following should be considered under
contractors management capability: type of control and monitoring procedures, ability
of the contractor to deal with unanticipated problems, i.e. risk management, provision
of trained/skilled supervisors for the proposed project and the contractors information
technology knowledge, e.g. project management software and electronic document
management system. Considered under past performance and quality as a sub-factor of
management capability of contractors according to Hatush and Skitmore (1997a) are
the performance of contractors in past projects executed, the quality control programme
put in place and quality of work on past projects. Others include possession of quality
assurance certificates, the quality level achieved in terms of aesthetics, confidence in
design and flexibility in accommodating design input by client.
On the other hand project management organization concerns experience in
completion on schedule; planning, programming and general progress on site, site
organization and supervision; engineering coordination, the present workload of the
contractor and capability to support the current projects. However, the amount of
workload for a contractor must be within the contractors resource constraints prior to
invitation to tender (Jaselskis and Russell, 1992). Furthermore, it includes capability to
manage subcontractors, drawing control procedures, capability to perform material

The impact
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173

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174

control, the methods of procurement adopted and the experience of technical personnel
available.
Holt (1996) states that home office locations are important in terms of speed of
decision making between head office and site management of contractors. McCaffer
(1979) found that effective use of plant and equipment has a significant impact on
construction time performance. The suitability of the contractors equipment and plant
for proposed project is of vital importance in construction activities. The efficient
management of plant and equipment on the side of contractors enhances proper
execution of the project and helps in urgent delivery of project. Omole (2002) opines
that the aim of cost management is to ensure that resources are employed to the best
advantages to produce a maximum value for money. Odusami (1998) also evaluated
managerial ability of contractors in the pre-qualification and selection of contractor by
concluding that any contractor that lacks managerial capabilities is an incompetent
contractor.
Generally, resources are being managed by contractors to satisfy clients requirement,
therefore contractors management capability enhances project performance and
hence the need for contractors to improve their managerial capability to deliver
construction projects on schedule (Ajibade, 2006). The award of contract to a competent
contractor should also ensure effective delivery of construction project to time, cost and
quality standard. Chua et al. (1999) submit that it is generally accepted that the major
goals in any construction project are budget, schedule and quality. Corroborating this
view, Russell et al. (1997) opine that the overall success of a construction project includes
meeting goals related to cost, schedule, quality, and safety. Contractor performance is
critical to the success of any construction project as it is contractors who convert
designs into practical reality (Xiano and Proverbs, 2005). Improved contractor
performance leads to increased client satisfaction, an improvement in the reputation of
contractors and hence their competitiveness in the market. Therefore, the objective
of taking all the required precautions and due process in the selection of contractors to
execute any construction project is to ensure performance of the project in relation to
the above-mentioned variables. The engagement of a competent contractor with track
records of management capability should enable clients and the project team members
achieve the objective set for the project. Cheung et al. (2006) also note that selecting a
competent contractor is paramount to successful delivery of construction project.
Therefore, the competence of any contractor in terms of its managerial ability
reflects heavily on the performance of the project. Considering this fact it is important that
due care be taken in the selection of contractors for construction project so as to achieve
the expected performance of the project in terms of cost, time and quality.
Harris and McCaffer (1995) observe that effective use of plant and equipment
contributes significantly to construction time performance. Furthermore, Holt et al. (1995)
considered contractors reputation and image as effective measure of company stability,
reliability and experience. The more experience the contractor has, the more will be his
performance in terms of cost, time and quality. Improved contractor performance leads to
increased client satisfaction, an improvement in the reputation of contractors and hence
their competiveness in the market. Contractors of high repute and better past performance
will bring about improved client confidence and raise the possibility of future business.
Project management organization relates to the organizational structure of the
company and this usually has significant impact on construction project performance.

This is because effective management of the organization brings about teamwork

resulting into effective project delivery to time, within cost and to the required quality
standard. Moreover, safety performance is concerned with the well being of the workforce
within an organization. Establishment of safety policy therefore encourages workers in
the execution of their work thereby encouraging high productivity. Experience of
technical personnel within the organization also boosts contractor performance because
these personnel are responsible for formulating and taking decision at the right time for
project to be completed within cost, time and quality.
3. Objectives of the study
The following research objectives were framed in order to achieve the aim of this
study:
.
To identify and assess the variables of contractors management capability.
.
To determine the relationship between contractors management capability and
construction project performance.
4. Research methodology
The data for the study were collected through a well structured questionnaire
administered on the respondents within the Nigerian construction industry.
Additionally, archival data relating to prequalification assessment of contractors on
management capability, initial contract sum, initial contract duration, final contract sum
and final contract duration of completed building projects were also sourced. The
questionnaire was developed through review of literature in contractors prequalification
and construction project performance. The review was also complemented by discussing
with researchers in construction contract procurement as well as construction
professionals in private practice. Prior to the data collection, pilot study was carried out
using the initial draft of the questionnaire to ensure that the research instrument will
establish the most productive form of data analysis. The input and the results generated
from the pilot study were used to refine the questionnaire before the industry wide
survey was carried out. Reliability test was also conducted on the research instruments
using Cronbachs alpha (a), and the a value for the research instruments ranged from
0.670 to 0.959 signifying that the instruments used for the study were reliable.
The target population for this study was in two major categories. The first category
was the major actors in the construction industry, i.e. clients, construction
professionals and the contractors. The second was the construction projects, which
had already been completed within the study area. In order to have a defined sample
size the list of all practicing professionals and contractors who were financial members
of their respective professional institutions as at march 2007 who are based in the
study area were obtained from their professional bodies. Furthermore, the list of
building projects executed between years 2004 and 2007 in the study area was also
sourced from the Bureau of Public Procurement (BPP) in Abuja, Nigeria. The BPP is
the central office that coordinates contract documentation and awards in Nigeria.
In all a total sampling frame of 1,517 respondents was determined and this represents
Architects, Civil/Structural Engineers, Quantity Surveyors, Builders, Contractors,
clients and completed building projects. Based on this, the sample size for the various
categories of respondents was calculated from the following formula as used by Shash
and Abdul-hadi (1993):

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176

nl
1 n l =N

where n sample size: n l S 2 =V 2 .

N, total population; V, standard error of sampling distribution, 0.05; S, the
maximum standard deviation in the population elements; P, the proportion of
population elements that belong to the defined class.
The sample size for the various categories of respondents was therefore found to be
427 while that of the building projects was 61 totaling 488. Having defined the study
population, the research adopted probabilistic sampling technique; in which case every
respondent in the defined population was given equal chance during the
administration of the questionnaire. A total of 194 questionnaire were collected out
of 427 questionnaire distributed while archival data on 77 completed projects executed
between years 2004-2007 were also sourced. The response rate represents 55.53 percent
of the sample size that is far above the typical of the norm of 20-30 percent response
rate in questionnaire survey of the construction industry (Akintoye and Fitzgerald,
2000, Fellow and Liu, 1997). Of the archival data 80 percent (62 projects) were used for
model calibration while the remaining 20 percent (15 projects) were used for validation
(Ogunsemi and Jagboro, 2006). The data collected for the study were analyzed using
four different statistical methods. Firstly, the aspects of the questionnaire relating to
background information of respondents were analyzed using percentiles. Secondly, the
evaluation of the main criteria for contractors prequalification and variables of
contractors management capabilities was carried out using mean score. Thirdly, the
effect of contractors management capability on construction project performance was
determined with the aid of analysis of variance (ANOVA) while regression analysis
was used to establish the relationship between the prequalification assessment of
contractors on management capability and construction project performance.
Furthermore, a regression test was carried out between the observed and predicted
values to validate the models. A good model ought to show a high coefficient of
determination (R 2) while the intercept and slope should be close to zero and one,
respectively, (Ogunsemi and Jagboro, 2006). The Statistical Package for Social Sciences
version 13.0 was used for the data analysis.
5. Results and discussion
5.1 Background information of respondents
Table I shows the summary of the background information about the respondents. It is
observable from the Table that 35.6 percent of the respondents have postgraduate
qualifications while about 64.4 percent have minimum of Higher National Diploma in
their various fields of study. Furthermore, about 9.8 percent of the respondents are
Fellow members of their respective professional bodies, 71.1 percent and 19.1 percent
of them are also Corporate and Graduate members of their professional bodies,
respectively. Moreover, the respondents have an average of about 17.46 years
experience in the construction industry and have also participated in about 11
prequalification exercises on average within the last three years. Based on the above
analysis therefore, it can be concluded that the data provided by the respondents can
be relied upon for the purposes of analysis (Table I).

Category

Classification

No

Academic qualification

HND
B.Sc/B.Tech
PGD
M.Sc/M.Tech
Graduate member
Corporate member
Fellow
1-10
11-20
21-30
31-40
*Mean
1-5
6-10
11-15
16-20
21-25
Over 25
*Mean
N 1 m-N 50 m
N 51 m-N 100 m
N 101 m-N 500 m
N 501 m-N 1Billion
Over N 1Billion

27
98
13
56
37
138
19
43
85
51
15

13.9
50.5
6.7
29.9
19.1
71.1
9.8
22.2
43.8
26.3
7.7

48
61
29
24
13
9

24.7
31.4
20.1
12.4
6.8
4.6

82
41
31
31
9

42.3
21.1
16.0
16.0
4.6

Professional qualification
Construction experience (in years)

No. of prequalification over the

last three years

Total value of projects executed in

the last financial year

The impact
of management
capability
177

17.46

10.94

Note: The conversion rate for $ and is N145.00 and N250.00, respectively

5.2 Criteria for contractors prequalification

Table II presents the information of the respondents on the importance of the major
criteria for contractors prequalification. The result shows that the major
prequalification criteria according to their order of priority are:
.
technical capability;
.
financial capability;
.
managerial capability;
.
general information about the company;
.
past performance; and
.
health and safety records.
The level of significance of the criteria as expressed by the corresponding p-values
show that there is general consensus among the respondents concerning the ranking of
the major criteria for prequalification. The fact that contractors technical capability
ranked first of the major prequalification criteria agrees with Tarawneh (2004) that
often clients and consultants feel more concerned about the technical competence of the
contractor to execute the project because it is the technical competence of the contractor
that determines the quality and rate of delivery of the project.
Contrary to expectation, financial capability ranked second and this may be as a
result of the fact that in projects executed through the public procurement act,

Table I.
Summary of background
information
of respondents

Table II.
Respondents rankings
of the major criteria
for contractors
prequalification
1
2
3
5
4
6

5.52
4.59
4.22
3.11
3.85
2.81

Rank

Notes: Significant at: *p , 0.05; * *p , 0.001

Technical capability
Financial capability
Managerial capability
General information
Past performance
Health and safety
records

Clients
mean

2.11

5.30
4.86
4.69
3.29
3.03

Consultants
mean

1
2
3
4
5

Rank

1.64

5.19
4.57
4.86
3.10
2.48

Contractors
mean

1
3
2
4
5

Rank

2.10

5.31
4.76
4.66
3.29
3.03

Overall mean
score

1
2
3
4
5

4.790

1.130
1.056
2.895
0.410
7.544

Rank F-stat.

178

Criteria for
prequalification

0.009 *

0.325
0.350
0.058
0.664
0.001 * *

Level of sig.
( p-value)

JFMPC
14,2

25 percent of the contract sum may be given to the contractor as mobilization advance
coupled with the fact that public clients under this act usually ensure that money is
appropriated for any project prior to award and hence the era of contractors securing
fund to execute projects are over. Furthermore, the managerial ability of the contractor
is ranked next to the contractors financial capability because it takes a contractor with
good managerial skills in terms of experienced technical and managerial personnel to
be able to manage both the financial and technical resources to achieve a successful
project as opined by Holt et al. (1994). Moreover, some of the respondents personally
interviewed confirmed that once a contractor is able to satisfy the technical, financial,
and managerial ability criteria, the next step is to further investigate some general
information about the firm and also evaluate his past performance against his present
rating so as to determine their level of correlation. The assessment of the respondents
on health and safety records further corroborates the fact that actors in the
Nigerian construction industry do not attach importance to health and safety policy on
construction sites. This is why frequent accidents are being experienced on
construction sites in Nigeria (Aje et al., 2007).
5.3 Variables of management capability
The analysis of the respondents rating of the variables of management capability of
contractors is presented in Table III. It is evident from the table that the variables of
management capability in order of importance are:
.
past performance and quality achieved;
.
contractors experience;
.
management knowledge;
.
quality control programme; and
.
amount of own workforce.
However, respondents opinion regarding the first three variables are significantly
different ( p , 0.050), nonetheless it is obvious from the overall ranking that
respondents are more keen about the past performance of the contractor and quality
achieved, the management experience of the contractors and the management
knowledge. This also agrees with Ogunsemi et al. (2006), which according to them will
impact on the ability of the contractors to discharge their contractual responsibilities
effectively.
Also considered very important is the quality control programme put in place by
contractor. However, contractors quality control programme experimented on site and
assessed by the prequalifiers practically is more important because most Nigerian
contractors do not have adequate quality control programme on site even when they
are detailed or indicated in their prequalification documents Furthermore, the amount
of own workforce is also considered very important and it is ranked fifth among the
variables. This is because the amount of workforce possessed by the contractor is
significant to achieving effective project time performance. Unfortunately in Nigeria,
the mentality of contractors is to convince the prequalifiers with all reasonable
evidence that they have enough and genuine resources in terms of manpower to
execute and complete the job but when they eventually get to site, they do otherwise.
Moreover, contractors in a bid to maximize profits do not engage enough workmen on

The impact
of management
capability
179

Table III.
Respondents rating of the
variables of contractors
management capability

Note: Significant at: *p , 0.05

Past performance/quality achieved

Contractors experience
Management knowledge
Quality control programme
Amount of own work force
Possession of quality assurance
certificates
Relationship with sub contractors
Flexibility in accommodating design
input by clients

1
2
5
4
3
6
8
7

3.46
3.07
3.39

Rank

4.29
4.21
3.57
3.64
3.68

Clients
mean

3.44

3.59
3.50

4.87
4.55
4.43
3.98
3.59

5
7

1
2
3
4
5

3.38

3.31
3.64

4.36
4.36
3.93
3.83
3.76

8
6

2
1
3
4
5

3.42

3.51
3.47

4.67
4.46
4.20
3.90
3.64

6
7

1
2
3
4
5

0.443
0.115
0.959

0.042 *

0.000 *
0.053 *
0.000 *
0.163
0.550

Level of sig.
(p-value)

0.818
2.184

19.152
3.203
17.290
1.834
0.599

Consultants
Contractors
Overall mean
mean
Rank
mean
Rank
score
Rank F-stat.

180

Criteria

JFMPC
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site and that is why timely delivery of projects procured through the Due Process is not
usually achieved (Aje, 2008). Possession of quality assurance certificates also ranked
sixth among variables of contractors management capability. Considering the
contractors ranking it is evident that majority of the Nigerian contractors do not
consider this as being important except only a few indigenous contractors who have
had construction experience with some organizations. Such organizations may want to
evaluate past performance of contractors in terms of quality through evidence of
possession of quality assurance certificate. On the other hand, respondents particularly
the clients did not consider the relationship between the main contractors and the
sub-contractors very important because of the arbitrary roles the contractors play in
the appointment of the sub-contractors in which case it is the main-contractor that
either execute the sub-contract work or award the sub-contract work to a domestic
sub-contractor.

The impact
of management
capability
181

5.4 The impact of contractors management capability on cost and time performance of
construction projects
The major aim of this study is to determine the impact of contractors management
capability on cost and time performance of construction projects. In achieving this aim
therefore, the study depended on archival data collected on prequalification
assessment of contractors on management capability, the planned contract duration,
actual contract duration, initial contract sum as well as the completion cost. ANOVA
was therefore carried out using the archival data and the results are presented in
Tables IV and V. From Table IV the observed value of F is 0.021 while the p-value is
0.042 and in Table V, the observed value of F is 0.955 with a corresponding p-value of
0.039. In summary, the p-values generally is less than 0.05 at 95 percent confidence
level. This therefore shows that contractors management capability has significant
impact on construction project performance in terms of cost and time. This also agrees
with Wong and Holt (2003) that good management skill of contractors together with
experience of technical personnel and management knowledge has potential for
achieving a successful project in terms of cost, time and quality.

Source

DF

SS

MS

F-ratio

Sig. (p-value)

Remarks

Between groups
Within groups
Total

2
74
76

2.607
4,539.918
4,542.525

1.303
61.350

0.021

0.042 *

SS

MS

F-ratio

Sig. (p-value)

Remarks

0.955

0.039 *

Note: Significant at: *p , 0.05

Source
Between groups
Within groups
Total

DF
2
74
76

Note: Significant at: *p , 0.05

846.659
32,791.191
33,637.850

423.329
443.129

Table IV.
One-way ANOVA on the
impact of contractors
management capability
on cost performance

Table V.
One-way ANOVA on the
impact of contractors
management capability
on time performance

JFMPC
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182

Furthermore, respondents generally are aware of contribution of contractors

managerial ability to construction project performance; this may have accounted for
the reason why management capability of contractors was rated high among the
important criteria for contractors prequalification in Table II. Moreover, in Table III all
the first four top sub-criteria of management capability comprising past performance/
quality achieved, contractors experience, management knowledge and quality control
programme as ranked by the respondents show that these variables are also important
to achieving a successful project. These variables according to Hatush and Skitmorse
(1997b) are important to scheduling and cost control, risk avoidance, responsibility,
productivity improvement, and time management.
5.5 The relationship between contractors management capability and performance of
construction projects
One of the major objectives of this study was to establish a relationship between
contractors management capability and cost/time performance of construction
projects. Such relationship would ease clients and consultants burden during
contractors evaluation process as the effect of management capability on cost and time
performance of building projects could be determined prior to contract award. This will
also benefit contractors by helping to eliminate incompetent contractors and thus
creating fairer competition among contractors (Ogunsemi and Aje, 2006).
In developing the models, archival data sourced from consultant Quantity
Surveyors relating to prequalification assessment of contractors on management
capability, the initial contract sum, completion cost, planned contract duration and the
actual contract duration were employed. The management capability of contractors
was assessed jointly by a team of consultants and the client during prequalification
evaluation. This was rated on a point scale of 20 that was transformed to 100 percent
by multiplying the scores of each contractor by five. Therefore, the relationship
between contractors management capability and project cost performance is thus
presented as:
Pcc 222599787:9 1326027:04Mc 0:987Ics 15318:82Pcd e
1
R 0:981; R 2 96:2 percent; Adjusted R 2 95:9 percent
where, Pcc, project completion cost; Mc, management capability; Ics, initial contract
sum; Pcd, planned contract duration; and E, error term.
A widely used measure for the predictive efficacy of a model is its coefficient of
determination, or R 2 value which according to Xiano and Proverbs (2005) measures the
strength of the linear association between two or more variables. If there is a perfect
relationship between the dependent and independent variables, R 2 is one. In case of
no relationship between the dependent and independent variables, R 2 is zero.
The predictive efficacy of the cost performance model was found to be very high with
an R 2 value of 0.962 and adjusted R 2 of 0.959. This result indicates that the project
completion cost is positively related to contractors management capability at the level
of significance of 0.0001. Moreover, the F statistic of a model basically tests how well
the model, as a whole accounts for the dependent variables behavior. However, the
constant estimate for this model is not significant ( p 0.349) signifying that the
constant value do not significantly contribute to the model. The F-value of this

particular model was found to be statistically significant at less than the 0.0001 level.
The regression analysis results are summarized in Tables VI and VII.
Moreover, the regression equation for the final contract duration from which the
project time performance can be determined is stated as:

The impact
of management
capability

Acd 227:682 4:267Mc 1:79 1027 Ics 1:008Pcd e

2
R 0:949; R 2 90:1percent; Adjusted R 2 89:6 percent

183

where, Acd, actual contract duration; Mc, management capability; Ics, initial contract
sum; Pcd, planned contract duration; and E, error term.
The predictive efficacy of the model as defined by the R 2 value is 0.901 while the
adjusted R 2 is 0.896. The F-value of the model was also found to be statistically
significant at less than the 0.00001 level indicating a high degree of fitness of this
model. Also the p-value of the constant estimate of 0.686 implies that the constant value
do not contribute significantly to the model. Tables VIII and IX summarize the result of
the regression analysis.
6. Model validation
Tables X and XI show the results of the regression test on the cost and time
performance models, respectively. In Table X, the coefficient of determination as
defined by the R 2 value is 0.995 while the intercept and the slope are 2 2.61 102 7
and 1.00, respectively.

R
0.981

R2

Adjusted R 2

Standard error of the estimate

Sig.

0.962

0.959

19,249,569.35

487.910

0.0000

Note: Predictors: (constant); management capability; initial contract sum; planned contract duration

Variables in the equation

Constant
Management capability
Initial contract sum
Planned contract duration

R
0.949

Standard error

b
22,599,787.87
13,26,027.04
0.987
15,318.82

Beta

t-stat.

Sig.

2 0.002
0.977
0.020

0.943
0.935
2.026
0.773

0.349
0.003
0.000
0.002

2.3 10
1.4 107
0.031
19,794.09

R2

Adjusted R 2

Standard error of the estimate

Sig.

0.901

0.896

1.58 105

175.668

0.000

Note: Predictors: constant; management capability (Mc); initial contract sum (Ics); planned contract
duration (Pcd)

Table VI.
Result of the multiple
regression analysis
of the cost performance
prediction model

Table VII.
Coefficients in the model

Table VIII.
Result of the multiple
regression analysis
of the time performance
prediction model

JFMPC
14,2

Also in Table XI, the R 2 value is 0.818, the intercept is 2 9.73 102 5 and the slope is
1.03. It thus follows that there is no significant difference between the observed and
predicted values of the cost and time performance models. Therefore, the models
developed in this study can accurately predict cost and time performance of
construction projects since the result of the regression test carried out agree with
Ogunsemi and Jagboro (2006).

184
7. Conclusion
The result of the statistical analysis indicates that contractors management capability
is an important criterion for evaluating potential performance of construction
contractors during prequalification and tender evaluation. Also the study identified
past performance and quality achieved, contractors experience, management
knowledge and quality control programme as the major variables for evaluating
contractors management capability. The study further revealed that contractors
management capability has significant impact on cost and time performance with a
p-value of 0.042 and 0.039, respectively. This therefore corroborates the reason why
management capability was considered so important among the main criteria for
contractors prequalification in Nigeria. The study also shows that construction project
cost and time performance is correlated with contractors management capability.
Based on this, predictive models for project completion cost and actual contract
duration of building projects was established and validated. This will enable
consultants and clients determine the cost and time performance of construction
projects based on prequalification assessment of contractors on management
capability, the contract duration and tender figure quoted. This therefore implies
that it is possible to forecast the actual contract period and completion cost of projects
right from the onset based on the aforementioned variables. This will therefore provide
early sign of contractors likelihood performance to clients and consultants before the

Variables in the equation

Table IX.
Coefficients in the model

Constant
Management capability
Tech I initial contract sum
ManaI planned contract duration

Table X.
Regression result
between the observed and
the predicted cost

Table XI.
Regression result
between the observed and
the predicted duration

0.997

0.904

R2

Standard error

Beta

t-stat.

Sig.

27.681
4.267
1.79 102 7
1.007

68.106
4.031
8.83 102 8
0.056

0.046
0.098
0.903

20.157
0.822
2.398
18.608

0.686
0.002
0.001
0.000

Adjusted R 2

Intercept
2 2.41 10

27

Slope

Sig.

1.00

Not sig.

0.995

0.994

R2

Adjusted R 2

Intercept

Slope

Sig.

0.818

0.804

2 9.73 102 5

1.03

Not sig.

final award decision. It is believed that the practical application of these models will
significantly enhance their improvement thereby ensuring the selection of the most
competent contractors for construction projects.
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Corresponding author
O.I. Aje can be contacted at: aje_niyi2002@yahoo.com

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