EFFECTIVE CONTRACT PLANNING ON CONTRACTORS PROFIT AND ITS IMPACT

EFFECTIVE CONTRACT PLANNING ON CONTRACTORS PROFIT AND ITS IMPACT

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY AND ORGANIZATIONAL PROFILE

Seeley (1997) described the construction industry as one of the most important sectors of the economy, which integrates a wide variety of skilled and unskilled professionals. These professionals engage in the provision of goods and services ranging from construction, alteration, refurbishment to repairs of building and civil engineering structures. All these professionals work together under various types of contractual agreements to actualise the client’s brief and deliver the project. Contractors Profit

Each project is unique and has its main objectives outlined by the client and project circumstances. Amongst the most common objectives of any successful project are deliveries at the right time, within authorised cost and meeting the envisaged quality standards (Love et al, 1998).

Construction projects, like all others, are not risks free and thereby can result to financial loss. Construction risks are events that generally influence any or all of the project objectives. Risk events could either be positive in terms of opportunities or negative in terms of threats to either or the entire project objectives (Hillson, 2002).

A lot of academic and professional literature has developed in the field of effective contract planning and management within construction contexts. The degree of application of contract planning and management techniques by contractors especially, was found to differ in various construction industries across the globe. Most countries in the MiddleEast and some part of Africa do not utilise project planning and management techniques in the delivery of construction projects (El-Sayegh, 2008; Laryea and Hughes,2009). Akintoye and McLeod (1997) found that low usage of formal contract planning techniques was essentially due to lack of knowledge and doubts on the suitability of the techniques to real life situations. This was supported by the findings of Shen (1997). Kartam and Kartam (2001) however attributed the low usage of risk analysis techniques to subjective judgement and contractor’s reliance on their experience and intuition. El-Sayegh (2008) identified financial loss as the most significant in the Kuwaiti construction industry due to the boom in construction activities and inflationary trend of the market.

EFFECTIVE CONTRACT PLANNING ON CONTRACTORS PROFIT AND ITS IMPACT