ASSESSMENT OF FACTORS AFFECTING CONTRACTORS TENDER FOR CONSTRUCTION PROJECTS IN NIGERIA
The paper critically analyses the assessment of factors affecting contractors tender for construction project. Designing and implementing an effective tender is a huge challenge for most contractors who seek government contracts in Nigeria. A study conducted by Obuji (2003) in some West African countries including Nigeria, revealed that some small scale contractors are not favoured during a tendering process by prospective clients because, they neglect various factors that affect the success and failures of submitting a tender for a contract. Some contractors do not structure and draft their tenders in an appropriate manner; hence their chance of being contracted is reduced. The major objectives of the paper are: to identify the challenges faced by contractors when applying for contracts in Nigeria and to assess the factors that affect contractors tender for construction project.
Concerning methodology, both secondary and primary sources of data was used for the study. A survey research design coupled with a multi-stage sampling technique was used with a sample size of 50 contractors selected from 5 local government areas of the state. Data was analyzed using chi-square statistical tool. Key findings from the study showed that majority of the respondents faced favouritism. Recommendations for the study include; There should be long-term industrial polices renewable after about 10 years to enable small and medium scale contractors compete with larger construction firms for bids/tenders and maximize the potentials of the economic environment.
TABLE OF CONTENTS
Title Page - - - - - - - - - i
Approval Page - - - - - - - - ii
Declaration - - - - - - - - iii
Dedication - - - - - - - - iv
Acknowledgement - - - - - - - v
Abstract - - - - - - - - - vi
Table of Contents - - - - - - - vii
CHAPTER ONE – INTRODUCTION
1.1 Background of the Study - - - - -
1.2 Statement of General Problem - - - -
1.3 Objective of the Study - - - - - -
1.4 Research Questions - - - - - -
1.5 Hypothesis - - - - - - - - -
1.6 Significance of the Study - - - - -
1.7 Scope of the Study - - - - - -
1.8 Definition of Terms - - - - - -
CHAPTER TWO – REVIEW OF RELATED LITERATURE
2.1 Introduction - - - - - - - -
2.2 Theoretical Framework - - - - - -
2.1.1 CONTINGENCY THEORY- - - - - -
2.2 COMPETITIVE TENDERING THE CONSTRUCTION INDUSTRY- - - - - -
2.2.1 Varying procurement strategy- - - - -
2.2.2 Competition in the construction industry- - -
220.127.116.11 Price VS Performance- - - - - - -
18.104.22.168 Experienced contractor VS Inexperienced contractor-
2.3 THE TENDERING PROCESS IN NIGERIA- - - -
2.3.1 Steps in Tendering Process in the Public sector- -
2.3.2 Duration taken in tendering process in Public Sector-
2.4 FACTORS THAT AFFECT CONTRACTORS TENDER IN CONSTRUCTION PROJECTS- - - - - - -
2.4.1 Need for Work- - - - - - -
2.4.2 Strength of Firm- - - - - - - -
2.4.3 Project Conditions Contributing to Profitability- -
2.4.4 Risk of the Project- - - - - - - -
2.4.5 Competition- - - - - - - - --
2.4.6 Strategic Considerations- - - - -
2.4 Ethical Practices and Its influence in Tendering Process in Public Sector- - - - - - - - --
2.5 Training of employees involved in tendering process in Public Sector Procurement- - - - - -
2.6 The use of ICT in Tendering Process in Public Sector Procurement- - - - - - - - -- -
CHAPTER THREE – RESEARCH METHODOLOGY
3.1 Introduction - - - - - - - -
3.2 Research Design - - - - - - -
3.3 Area of the Study - - - - - - -
3.4 Population of Study - - - - - - -
3.5 Sample size and Sampling Techniques - - -
3.6 Instrument for Data Collection - - - - -
3.7 Validity of the Instrument - - - - - -
3.8 Reliability of the Instrument - - - - -
3.9 Method of Data Collection - - - - - -
3.10 Method of Data Analysis - - - - - -
CHAPTER FOUR – DATA PRESENTATION AND ANALYSIS
4.0 Introduction - - - - - - - -
4.1 Data Presentation and Analysis - - - - -
4.2 Characteristics of the Respondents - - - -
4.3 Data Analysis - - - - - - - -
4.4 Testing Hypothesis - - - - - - -
4.5 Summary of Findings - - - - - -
4.6 Discussion of Findings - - - - - -
CHAPTER FIVE – FINDINGS, CONCLUSION AND RECOMMENDATION
5.0 Introduction - - - - - - - -
5.1 Summary - - - - - - - - -
5.2 Conclusion - - - - - - - -
5.3 Recommendations - - - - - - -
References - - - - - - - - -
Appendix - - - - - - - - -
1.1 BACKGROUND OF THE STUDY
Shash (1993) explains that a construction company can either negotiate with the client or use a competitive tendering process to obtain a contract. Fu and Drew (2002) suggest that competitive tendering is the most common method used for contractor selection. In competitive tendering process, a client selects a numbers of contractors to tender for the proposed project. The selected contractors must to decide whether to tender or not tender. The contractors need to submit an estimated cost to execute the project at hand, if they intend to tender. The client would select the contractor who submitted the best cost for executing the project.(Shash 1993, p.111). Therefore the decision to tender is the first step that contractors need to consider.
There are various factors that need to be considered by the contractors in order to make the decision to tender or not. The decision is highly related to the specific project and macro environment. It is hard to make a decision in a limited time by the management team. The decision generally is made on the basis of experience, intuition and guesses. (Egemen and Mohamed 2007, p.1373)
There are many researchers that have discovered the factors that affect the tender/ no tender process. Unfortunately, there has not been any similar research projects carried out in Nigeria. Furthermore, during the global economic recession, construction related activities are decreased significantly. Construction contractors‟ original tender/ no tender decision making criteria may be changed.
1.2 PROBLEM STATEMENT
Designing and implementing an effective tender is a huge challenge for most contractors who seek government contracts in Nigeria. A study conducted by Obuji (2003) in some West African countries including Nigeria, revealed that some small scale contractors are not favoured during a tendering process by prospective clients because, they neglect various factors that affect the success and failures of submitting a tender for a contract. Some contractors do not structure and draft their tenders in an appropriate manner; hence their chance of being contracted is reduced.
Construction industry has complexity in its nature because it contains large number ofparties as clients, contractors, consultants, stakeholders, shareholders, regulatorsandothers. Construction projects in Nigeria suffer from many problems andcomplex issues in performance because of many reasons and factors. This project isvery important to identify and to evaluate the main factors affecting contractors’ tenders in construction projects in Nigeria. The practices concerning with Tenders such as time, cost, project owner satisfaction and safety checklists will be analyzed inorder to know the main practical problems of contractors who do not win tenders as well as practical solutions to help enhance the chances of our indigenous contractors in Imo state in winning Federal government and foreign contracts.
1.3 OBJECTIVES OF THE STUDY
The aim of this research is to analyze and assess the local factors that account for the success or failure of tenders submitted by contractors when applying for a construction project in Imo State. The aim of this research can be broken down into the following objectives:
1. To identify the challenges faced by contractors when applying for contracts in Nigeria
2. To assess the factors that affect contractors tender for construction project.
1.4 RESEARCH QUESTIONS
1. What challenges do contractors in Nigeria face when submitting tenders for projects/contracts?
2. What are the factors that affect contractors tender for construction projects?
1.5 SIGNIFICANCE OF THE STUDY
This research will help contractors become aware of what the factors which need to be considered when they intend to submit tenders for different projects. This research will also provide the information that would be used by any contractor to create a competitive bidding strategy.
This study will also give a clear insight into the various ways in which profit and efficiency from contracts and contracting can be increased and how the challenges facing contract tendering can be properly tackled. The study also gives a clear insight into the various factors affecting tenders and their effects on contractor’s efficiency and chances of winning a contract in Nigeria. The findings and recommendations of the researcher will help in building a strong and better contract policy and tendering guideline for contractors, especially small scale contractors in Imo State other construction companies in Nigeria.
1.6 HYPOTHESIS FORMULATION
Statements of Hypothesis for the study are:
Ho: There is no significant relationship between factors that affect contractor tender and contractor chances in winning a construction project.
Hi: There is a significant relationship between factors that affect contractor tender and contractor chances in winning a construction project.
1.7 SCOPE OF STUDY
This research focuses mainly on the assessment of the factors that affect tenders for construction projects, using construction companies and private contractors in Imo State as case study. Results and recommendations may not be used to generalise other construction companies or contractors in other parts of Nigeria, as the researcher could not cover a wider scope due to financial and time constraints.
Based on the findings of this study other possible researchable areas may include studies on the various effects of other aspects of contracts such as contract laws in Nigeria and contract management and control.
1.8 LIMITATION OF THE STUDY
The only limitation faced by the researcher in the course of carrying out this study was the delay in getting data from the various respondents. Most respondents were reluctant in filling questionnaires administered to them due to their busy schedules and nature of their work. The researcher found it difficult to collect responses from the various respondents, and this almost hampered the success of this study.
1.9 DEFINITION OF TERMS
⦁ Tender: According to Simmons (2002), a tender refers to an offer (usually by a contractor or a vendor) to undertake a job or supply goods.
⦁ Contract: Erikson (2002) defined Contract as an agreement that creates an obligation binding upon the parties thereto. The essentials of a contract are as follows: (1) mutual assent; (2) a legal consideration, which in most instances need not be pecuniary; (3) parties who have legal capacity to make a contract; (4) absence of fraud or duress; and (5) a subject matter that is not illegal or against public policy.
⦁ Contractor: According to Simmons (2002), a contractor refers to an organization or individual that contract with another organization or individual (the owner) for the construction of a building, road or other facility.
⦁ Construction/Projects: In the fields of ⦁ architecture and ⦁ civil engineering, construction is a process that consists of the ⦁ building or assembling of ⦁ infrastructure. Far from being a single activity, large scale construction is a feat of ⦁ human multitasking. Normally, the job is managed by a ⦁ project manager, and supervised by a ⦁ construction manager, ⦁ design engineer, ⦁ construction engineer or ⦁ project architect. For the successful ⦁ execution of a ⦁ project, effective ⦁ planning is essential. Involved with the design and execution of the infrastructure in question must consider the ⦁ environmental impact of the job, the successful ⦁ scheduling, ⦁ budgeting, ⦁ construction site safety, availability of ⦁ building materials, ⦁ logistics, inconvenience to the public caused by ⦁ construction delays and ⦁ bidding, etc. Marshall (2001)
1. Erikson O. U., (2002) Contract Planning and development in a Depressed Economy.Unpublished M.Ed. Dissertation Submitted to Florida University. Florida
2. Obuji P.I., (2007). Principle and practice of Contract Feasibility Studies In Nigeria (Aba: Springfield publishers, 2006) p.31
3. Simmons P.K. (2007) Understanding Feasibility and Viability Analysis New York: Westside Publishers.