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599-613, 1995
Pergamon Elsevier Science Ltd
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ABSTRACT
Some measures have been formulated and implemented for contractor development
in Nigeria, but these efforts have achieved little success. Whereas the literature is
replete with details of constraints within the Nigerian construction industry and
their impact on indigenous contractors’ performance, little or no information is
available on contractors’ perceptions of the supports prescribed and implemented
for their development. It is premised that the uptake and success of any
contractor development initiative depend on whether contractors, the intended
beneficiaries, perceive proposed programmes as relevant and appropriate to their
needs. This paper reports findings on the perceptions of Lidigenous contractors
on the constraints on their performance in the Nigerian industry and the
measures they perceive as most appropriate to support their development.
The major constraints perceived are uncertainties in supplies and prices of
materials, delayed interim payments, fluctuations in work load and lack of
capital. Contractor development programmes most preferred are those primarily
required to ameliorate the major constraints identified as well as provision of
training to facilitate organisational and management development. The findings
indicate the need for more comprehensive programmes to develop the local
industry. Contractors should also be more involved in the formulation and
implementation of contractor development programmes.
INTRODUCTION
599
600 Olugboyega A. Adam
the Federal Works Registration Board increased six-fold between 1970 and 1979
while that of foreign-owned construction firms incorporated in the country also
doubled, increasing from 82 in 1970 to 161 in 1980.2 Though Nigerian equity
participation in foreign construction firms is now between 40 and 60% as a result
of Indigenisation Decrees of 1972 and 1978, expatriates still control management
and technical functions. They are, therefore, more appropriately referred to as
indigenised foreign firms.
Indigenous construction firms are predominantly small and medium-sized;
their participation in major construction works is marginal. It was estimated
in 1991 that indigenous construction firms undertake only 5% of the purely
civil engineering construction and 25% of the building works, while indigenised
foreign firms undertake not less than 85% of the civil and building construction
combined.3 An analysis of Federal Government projects between 1979 and
1987 showed that indigenised foreign firms undertook over 50% of all road
and highway projects valued at under five million Naira, over 80% of those
between five and ten million Naira and over 90% of those over ten million
Naira.4 They also undertook over 80% of building works valued at over ten
million Naira. Another analysis of over 1,100 construction contracts awarded
by Federal and state governments between 1974 and 1984 showed that while
indigenous contractors obtained 875 contracts, that is, 77% of the total number
of contracts considered, the total value of the contracts awarded to them was
under 11 million Naira, representing less than 7% of the total volume of works
involved.5 The on-going development of the new national capital, Abuja, is
also dominated by indigenised foreign construction firms, providing further
evidence of the perennial marginalisation of indigenous contractors in national
development projects.
RESEARCH OBJECTIVES
also showed that shortage of skilled labour is no longer a major problem in the
industry, contrary to an earlier observation.18
Nigeria is heavily dependent on imports, either as finished construction
materials or as inputs for domestic production. Supplies of building materials
therefore depend largely on availability of foreign exchange and government
fiscal policies on importation, which are both determined by revenue from
petroleum export, the mainstay of national foreign exchange earnings. Other
factors contributing to the irregular supply of construction materials and intractable
fluctuations in prices include inadequacy of locally manufactured materials in
terms of quality and quantity, the high cost of domestic manufactures arising
from high wages, the inadequate supply of basic services such as electricity,
transport, communications and water supply, as well as imported inflation
and the monopolistic structures of distributive trades in Nigeria and high
distribution charges. 19 Designers also compound the problem by specifying
imported materials which are sometimes inadequate for Nigerian conditions.20
Construction plant, equipment and spares are mostly imported, and hence very
expensive. Lack of capital means that indigenous contractors cannot afford the
basic equipment and plant required to undertake major projects. Unfortunately,
plant and equipment hire and leasing facilities are either grossly inadequate or
unavailable in many areas. The precarious nature of the construction business,
especially access to regular jobs to amortise investment, also makes equipment
ownership unattractive. Equipment maintenance constitutes a major problem
to the few who can afford to buy. Their fleet of equipment is not usually of a
particular brand type; rough usage, lack of spares and poor maintenance also
limit effective utilisation and maintenance.21
Summary
Though abundant normative information exists on difficulties in the Nigerian
construction industry, empirical studies on indigenous contractors’ perceptions
of the impact of constraints on their performance are sparse. Researchers have
focused on specific problems in the industry, for example, causes of project delay
and high cost overruns. Aniekwu and Okpala classified a range of problems
(a total of 27 variables) encountered by indigenous contractors in Nigeria
as structural variables (resulting from the inherent conditions and practices
within the environment) and systemic variables (resulting from the application
of systems not suitable to the environment) .33 Though most of the variables
identified are similar to those often mentioned in the literature as constraints
on indigenous contractors’ performance, their studies failed to provide details
on indigenous contractors’ perceptions of the impact of the variables identified.
There is a need, therefore, for further empirical studies to establish the relative
importance and impact of factors identified as constraints on the performance
of indigenous contractors in the Nigerian industry.
a number of smaller jobs within the capacity of indigenous contractors) was one
of the earliest attempts made by Federal and regional governments to increase
indigenous participation in government contracts, but this tapered off by the mid-
196Os.35 There were informal, unsystematised preferences given to indigenous
contractors in the 1970s to increase indigenous contractors’ participation in public
projects. There was a Federal Government 2.5% price preference for Nigerian
owned firms and an implicit understanding pervading the government structure
that indigenous firms were to be favoured. 36 Some contracts were reserved
exclusively for indigenous contractors while petty contracts were shared on a
simple rotational basis among contractors registered in the area.37 Ten per
cent of contract sums was also paid up-front as mobilisation allowance on
government contracts to minimise the perennial problem of under-capitalisation
faced by Nigerian contractors. In order to address the problem of shortages of
skilled staff, some state governments directed their project supervisory staff to
assist indigenous contractors in solving some of the technical problems they
encountered on government works. 3s Unfortunately, this was short-lived due
to shortages of government supervisory staff. In order to facilitate access to
scarce materials, especially on public projects, government bulk purchase units
(now defunct in most states) and government-owned firms producing building
materials were directed to give priority to contractors. Many contractors
however diverted supplies to other projects or sold them at open markets for
quick high profits. Special management training for contractors was provided
briefly between 1978 and 1980 by the Centre for Management Development,
jointly sponsored by the IL0 and the United Nations Development Programme
(UNDP). This was discontinued at the end of the sponsorship period.
Past efforts directed to promote the development of indigenous contractors
seemed to be ineffective as indigenised foreign firms still dominate the industry.
Support programmes offered have not been pursued consistently for long enough
to effect tangible results. Measures providing direct financial benefits were over-
emphasised, despite obvious indications of their ineffectiveness. For instance,
malpractices and corruption were rife in the implementation of the mobilisation
advance. It was often used as kickbacks for government officials and for party
financing by civilian governments, while many ghost contractors vanished after
collecting the money. 39 Attempts to curb abuse led to intermittent withdrawal
of much needed support. Other concomitant programmes proposed to promote
sustainable development have been neglected. 40Unfortunately, many indigenous
contractors also lacked commitment to produce goods results.41 They did not
take advantage of available opportunities to develop their firms. In addition,
political instability has caused frequent government policy changes or wavering
commitment to the implementation of formulated policies.
The literature is replete with problems of domestic contractors in developing
countries and recommended solutions. Many of the proposed remedies have
not been very effective for aforementioned reasons. The expectations of the
contractors are critical to the use or success of proposed programmes. It is
necessary, therefore, to evaluate indigenous contractors’ perceptions of their
problems in order to establish felt needs, hence programmes that will be effective
in enhancing their performance and development in the Nigerian industry.
other factors not listed. A six-point numerical rating scale with verbal end-points
(1 for little importance and 6 for very important) was used. Draft questionnaires
were discussed with some British and Nigerian experts prior to pre-testing on five
Nigerian contractors to check the suitability and appropriateness of questions.
Factors that inhibit true random sampling in survey research in developing
countries and in the small-business sector have been highlighted in the literature.43
Lack of comprehensive lists of contractors from which accurate sampling frames
could be developed, and difficulty in obtaining the co-operation of potential
respondents necessitated the use of non-probability sampling techniques. Purposive,
convenience and snowballing sampling techniques were used. Key professionals
employed by major public and private clients were identified and used as agents
to reach contractors (snowballing) for inclusion in the sample. Only contractors
known to be actively involved in construction business were selected (purposive
sampling) to avoid the experience of an earlier study in which many contractors
on the list of the Federal Works Registration Board could not be traced in the
field.” Contractors available on many of the researchers’ unscheduled visits to
contractors’ head offices, construction sites or professionals’ offices were also
included in the sample (convenience or accidental sampling).
Questionnaires were hand-delivered to a sample of 200 owner-managers of
indigenous construction firms operating primarily in the formal sector, selected
by non-random sampling techniques from three south-western states in Nigeria:
Lagos, Oyo and Ogun. A sample size of 200 was considered reasonable for this
exploratory study. A total of 69 questionnaires were returned, that is, 34.5%
of the total sent.
Total 69 100.0
None 2 2.9
14 4 5.8
5-10 17 24.6
1l-24 17 24.6
25-49 15 21.7
50-100 5 7.3
> 100 9 13.1
Total 69 100.0
Further analysis showed that 75% of the sample have at least one other
management staff apart from the owner-manager. It is possible that the
management staff of respondents include some non-salaried employees, particularly
graduates undertaking 1 year compulsory national service. Economic recession
has forced many highly skilled unemployed construction supervisory/managerial
personnel to take up employment with small firms which they used to shun.
Most respondents have been in the construction business for less than 15 years
as shown in Table 3. About 62% of the respondents have been in business for less
than 10 years. This age distribution shows that most of the respondents entered
the construction business in the 1980s in the wake of economic recession in
Nigeria. Fifty-five per cent operate as limited liability companies while the rest
of the respondents are sole proprietorships (23%) or partnerships (22%). The
average number of owners in partnerships or limited liability companies was
found to be three.
Total 69 100.0
Tables 4 and 5 describe the nature of the construction works and the value
of contracts the respondents were registered to undertake. Seventy-two per cent
of the respondents undertake both building and civil engineering works while
86% are registered to tender for small/medium sized contracts valued at under
Perceptions of the Constraints on Contractors’ Performance 607
2 million Naira. Of the contractors sampled 66% undertake mainly new works
while government is the main client of 56%. Thirty-three per cent are involved
in other construction related business activities while only 24% are involved in
other non-construction related businesses.
Total 69 100.0
Total 69 100.0
Uncertainties in supplies & prices of materials 37.7 37.1 13.1 4.3 2.9 4.3 4.90 1
Obtaining interim payment 29.4 27.9 13.2 20.6 1.4 1.5 4.47 2
Procuring work regularly 32.8 19.4 26.8 1.5 6.0 7.5 4.43 3
Access to capital 31.7 13.0 15.9 20.3 10.2 2.9 4.39 4
Negotiating variation payment 29.0 14.5 26.1 7.2 14.5 8.1 4.10 5
Access to plant and equipment 23.2 23.2 14.5 18.8 8.7 11.6 3.99 6
Inappropriate contract conditions 18.8 17.4 18.8 23.2 10.2 11.6 3.77 7
Maintaining plant and equipment 18.8 13.1 17.4 18.8 17.4 14.5 3.54 8
Resolving contract disputes 14.5 16.0 13.0 8.7 27.5 20.3 3.20 9
Meeting contract deadline 11.8 5.9 19.1 29.4 19.1 14.7 3.18 10
Design changes 10.3 5.9 23.5 22.1 22.1 16.1 3.12 11
Incomplete contract documents 7.2 11.6 16.0 23.2 21.7 20.3 2.99 12
Transporting materials and equipment 5.8 10.2 18.8 21.7 21.7 21.7 2.91 13
Materials control on site 1.5 13.0 17.4 31.9 14.5 21.7 2.90 14
Providing reliable tenders 7.3 11.6 10.1 18.8 29.0 23.2 2.80 15
Communicating with client/representative 5.8 10.2 8.7 23.2 30.4 21.7 2.73 16
Shortages of skilled labour 5.8 8.7 11.6 16.0 27.5 30.4 2.58 17
Public image 4.4 7.3 11.8 22.1 25.0 29.4 2.56 18
Accounting and financial management 4.3 4.3 8.7 29.0 23.2 30.5 2.46 19
Inadequate supervision by client/representative 2.9 5.8 15.9 10.2 36.2 29.0 2.42 20
Planning of work and site management 1.5 4.4 13.0 15.9 33.3 31.9 2.29 21
Technical know-how 5.8 5.8 11.6 7.2 26.1 43.5 2.28 22
Commitment to construction 1.5 4.4 16.2 14.7 22.0 41.2 2.25 23
Company organisation 1.5 4.3 10.1 20.3 29.0 34.8 2.24 24
Personnel management 2.9 2.9 10.2 18.8 27.5 37.7 2.22 25
Providing quality workmanship 4.3 1.5 8.7 20.3 24.6 40.6 2.19 26
608 Olugboyega A. Adams
Problem Frequency
corruption 5
Changes in government and economy 1
Prejudice against indigenous contractors 5
Theft and fraud by own employees 1
Taxation 2
Breach of contract by public clients 1
More efficient payment procedures 71.0 17.4 7.2 4.4 0.0 0.0 5.55 1
Planned govt. demand for construction 63.8 15.9 11.9 4.3 1.5 2.9 5.28 2
Improved access to materials 58.0 26.1 7.2 4.3 1.5 2.9 5.26 3
Provision of loans/loan guarantee scheme 56.5 23.2 13.0 5.8 0.0 1.5 5.26 4
Provision of plant hire 47.8 31.9 13.0 5.8 1.5 0.0 5.19 5
Provision of mobilisation allowances 53.6 17.4 18.8 5.8 2.9 1.5 5.09 6
Training and advisory services 43.5 29.0 8.7 10.1 5.8 2.9 4.86 7
Improved tendering procedures 37.7 26.1 20.3 8.7 4.3 2.9 4.75 8
More efficient contractor registration 36.2 29.0 20.3 5.8 5.8 2.9 4.75 9
More equitable contract conditions 37.7 18.8 23.2 14.5 5.8 0.0 4.68 10
More subcontracting by larger firms 40.3 22.4 13.4 9.0 5.9 9.0 4.55 11
Standardisation of contract documents 30.4 31.9 14.5 7.2 11.6 4.4 4.49 12
Lower retention money 36.2 18.8 11.6 17.4 10.2 5.8 4.36 13
Incentives for small firms to team up 32.4 29.4 11.8 5.9 7.3 13.2 4.34 14
Tendering preferences 23.9 26.9 17.9 16.4 10.4 4.5 4.24 15
Standardisation of design 29.0 17.4 18.8 14.5 14.5 5.8 4.15 16
Contract splitting 21.7 20.3 24.6 15.9 13.0 4.5 4.09 17
Less use of direct labour 25.0 22.1 13.2 11.8 13.2 14.7 3.89 18
More active contractors’ association 20.3 21.8 14.5 15.9 15.9 11.6 3.80 19
Govt. sponsored contractor dev. agency 14.7 20.6 17.6 17.6 16.2 13.3 3.60 20
NOTES
1. Federal Republic of Nigeria (FRN), Third National Development Plan 1975-80 (Federal Ministry of
Economic Development, Lagos, 1975). FRN, Fourth National Development Plan 1981-85 (Federal
Ministry of National Planning, Lagos, 1980).
2. O.A. Adams, “Contractors’ Registration Requirements in Nigeria: Need for a Critical Review”,
Journal of Construction in Nigeria 4, 2 (1987), pp. 24-31. T.J. Biersteker, Multinationals, the State,
and Control of the Nigerian Economy (Princeton University Press, New Jersey, 1987).
FRN, National Construction Policy (Federal Government Press, Lagos, 1991).
0.0. Olugbekan, “The Construction Industry and the Nigerian Engineer”, paper presented at the
Tenth October Lecture of the Nigerian Society of Engineers, Lagos, October 1991.
B. Olateju, “An Evaluation of the Level of Participation of Indigenous Contractors in the Construction
Industry in Nigeria between 1974 and 1984”, Nigerian Engineer 26, 3 (1991) pp. 1-15.
G. Ofori, “Programmes for Improving the Performance of Contracting Firms in Developing Countries:
A Review of Approaches and Appropriate Options”, Construction Management and Economics 9
(1991), pp. 19-38.
7. J. Curran, “TECs and Small Firms: Can TECs Reach the Small Firms other Strategies Have Failed
to Reach?“, paper presented to the All Party Social Science and Policy Group, House of Commons,
1993.
ILO, Guidelines for the Development of Small-scale Construction Enterprises (ILO, Geneva, 1987).
t : A.N. Aniekwu and D.C. Okpala, “Contractual Arrangements and the Performance of the Nigerian
Construction Industry (the Structural Component)“, Construction Management and Economics 5
(1987), pp. >ll. A.N. Aniekwu and D.C. Okpala, “The Effect of Systemic Factors on Contract
Services in Nigeria”, Construction Management and Economics 6 (1988), pp. __ 171-182. 0. Diatchavbe,
“Indigenisation of Construction Industry in Zaria. A Case Study”, in Construction in Nigeria,
Proceedings of 1974 Annual Conference (Nigerian Economic Society, Ibadan, 1974). M.M. Dlakwa
and M.F. Culpin, “Reasons for Overrun in Public Sector Construction Projects in Nigeria”, Project
Management 8 (1990), pp. 237-241. G.A. Edmonds, Labour Substitution in Construction: A Case Study
of Nigeria, unpublished PhD Thesis, University of Leeds (1975). D.C. Okpala and A.N. Aniekwu,
“Cause of High Costs of Construction in Nigeria”, Journal Construction Engineering and Management
14 (1988), pp. 233-244. G.A. Ogunpola, “The Pattern of Organisation in the Building Industry: A
Western Nigeria Case Study”, Nigerian Journal of Economic and Social Studies 10 (1968) pp. 339-360.
K.A. Wahab, “Improving Efficiency in the Building Sector”, West African Technical Review (May
1977), pp. 81-89, M.T. Iyortyer, Limits to Growth in Effkiency of Contracting Firms in Nigeria,
unoublished MSc Reuort. Universitv Colleee London 0983). Intermediate Technoloev. Niaerian
Building Contractors:’ Practices, Problems &d Needs (Intermediate Technology, Lo&n, !970),
S.P. Schatz, Nigerian Capitalism (University of California Press, Berkeley, CA, 1977). A.U. Ehnwa
and S.A. Buba, “Construction Cost Factors”, Journal of Construction Engineering and Management
119 (19X), pp. 698-713.
10. Olugbekan (1991), see note 4. E.O. Olowookere, “Construction Practice and Management in Nigeria:
Ways and Means of Minimising Construction Costs”, paper presented at Commemorative Seminar of
the 10th Anniversary of the Nigerian Building and Road Research institute, Lagos, April 1988.
11. Aniekwu and Okpala (1987, 1988), see note 9.
12. Diatchavbe (1974), see note 9.
13. Ohtgbekan (1991) see note 4. Schatz (1977), see note 9.
14. FRN, Report of the Ministerial Committee on the Causes of the Excessively High Cost of Government
Contracts in Nigeria (Federal Government Press, Lagos, 1981).
Perceptions of the Constraints on Contractors’ Performance 613
of Small Business and Sources of Assistance”, Journal of Small Business Management 2i, 2 (1983),
pp. 5-12. K. Norris, Small Building Firms - their Origins, Characteristics and Development Needs
(The Chartered Institute of Building, Ascot, 1984). A. Mahmood, Educational Interests and Needs
of Owner-managers of Small Building Firms, unpublished PhD Thesis, Heriot-Watt University,
Edinburgh (1992).
46. FRN (1991), see note 3.