Impact Of Delay On Economy Of Devloping Countries Construction Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Delay is a serious problem in the construction industry as if affects construction projects that play an important role in the fast growing economy of developing countries. In addition, many construction projects in these countries include basic infrastructure that needs to be expanded and it requires a lot of money which might be in the form of foreign or state investments. Hence, it is a priority of state organisations and private companies, who are the projects owners, to manage this limited budget and avoid the recurring problem as long as it is possible. This essay will analyse the problems of construction delay on economy and evaluate possible solutions that emphasize the likelihood of identifying the delay and an efficient project management of material and coordination of all parties such as government, project owners, contractor and suppliers.

The delay in construction projects including infrastructure, such as road, electricity, communication and similar might slow down economic growth in developing countries such as Saudi Arabia and Malaysia. In fact, there is a significant relationship between construction industry and economic growth because investment in infrastructure increases the physical capital stock of nation, thus expanding nation output level (Dang &Low. 2011, pp.118). The construction sector is one of the most important contributors to gross domestic product (GDP) of Saudi Arabia and Malaysia; it contributed 4.5% to the GPD in1995 and 3.3% in 2005 and employed 600,000 workers in Malaysia (Sambasivan & Soon, 2006). In the same way, the building and construction sector is the third largest sector of the Saudi economy (Australian Government, 2010) and it contributes the Saudi Arabia's GDP about 9% of its total value .The United Nations (cited in Dang & Low, 2011) indicates that construction development is a fundamental element to enhance the economy of Asia and Pacific region. The relationship between construction development and economy is reciprocal because construction investment has a strong short term effect on economic growth, whereas economic growth has long term effect on construction (Zheng & Liu, 2004;cited in Dang & low 2011) ,although when the economy start booming , the construction industry needs to expand faster than the economy as a whole (world Bank 1994;cited in Dang & Low,2011).Thus overtime and over cost in the construction projects would mean loss of productivity in the economy which is not sufficiently capable to install new factories in current infrastructure stage.

Estimation of the likelihood of delay which is comprised of different factors is essential to project success and helps managers reduce the distraction from the original plan. According to Lock (cited in Abdul-Rahman et al. 2006, pp.126) it is important to develop the methods of estimating of activity duration according to the actual skill levels, unexpected events, efficiency of work time, and mistakes and misunderstandings . Abdul-Rahman et al (2006) maintain that finding the most proper and economical solution requires predicting and recognizing the problem as well as determining the cause at the beginning phase of construction project. For instance, in Malaysia project managers and project owners utilise the Bromilow model of time-cost relationships as an appropriate and useful tool to predict the suitable time required for delivery of a construction project in Malaysia (Chan, 2001). It is quite clear that recovering the damage caused by delays would need to identify delays and parties which are responsible. However, delay situations are complex, because multiple delays can occur concurrently, and also they can be caused by more than one party. Therefore, there is a need to identify and classify different causes of project delay.

Moreover, unsuccessful construction projects, which are not finished within the schedule time or completely abandoned projects, would impose extra cost on the economy of developing countries. These projects squander materials, which are mostly imported, labour and national capital. For instance, products and skilled labour were not locally available in Saudi Arabia, which meant that over 80 per cent of construction material and equipment were imported (Australian Government, 2010). On the other hand, recent surveys In Saudi Arabia reveal that only 30% of construction projects were completed within the scheduled completion dates and that the average time overrun was between 10% and 30% (Assaf and Al-Hejji, 2006). Similarly, in Malaysia, during the financial crisis between 1997 and 2000 many projects were temporarily abandoned, because of lack of financial support and poor economic conditions. Many of these projects have now become so prohibitive which is why they have been abandoned permanently (MALBEX, 2005; cited in Sambasivan and Soon, 2006, pp.525). This evidence illustrates the vital importance of controlling resources in developing countries such as Malaysia and Saudi Arabia which are suffering from the profligate use of construction resources due to the delay in construction projects.

Managing efficiency is the key to mitigating delay in construction projects under constraint of materials. Project managers should use modern controlling methods and empirical techniques to offset the drawbacks of shortage resources. Abdul-rahman et al (2006) suggest that choosing an appropriate control system especially during the construction phase would be beneficial to achieve economic goals. This finding is consistent with Bart (cited in Abdul-rahman et al2006) that too much supervision due to conservative method of planning and controlling of projects can relatively reduce innovation of managers to run the projects properly. Moreover, Stuckenburck (cited in Abdul-rahman et al2006) comments that decision making process is used as the key to effective project management especially in value and risk analysis and also in order to avoid delay particularly in fast-track project, it is important to make the decision at right time Stuckenburck (cited in Abdul-rah man et al, 2006, pp.126). Ogunlana &Promkuntong (1996) believe that being slow in making decision and variable decision may result in wasting resources and delay. This clearly exemplify that project manager should use new methods to manage programs efficiency. For example, calculating the correlation between time-cost and estimating the risk of projects are samples of actions that project manager could use to make the right decision.

In addition, there is high demand for materials and qualified contractors, which includes engineers, skilled labourers and architects in fast growing economy ,thereby project managers insist on completing the projects on time, otherwise they would have to pay more price to keep skilled manpower and supplying materials .In some cases, to the contractor, delay means higher overhead costs because of longer work period, higher material costs through inflation and labour cost increases (Assaf & Al hejji ,2005,pp.349). Ogunlana and Promkuntong (1996,) note that the scarcity of technical personnel is due to the inelasticity of supply which results in decreasing the number of the constructional manpower, who are qualified and they can consequently easily get higher salaries by moving between jobs. As a consequence, they increase their salaries without a corresponding increase in technical ability. Nevertheless clients usually prefer to employ cheaper contractors who have poor qualification of technical staff to execute the projects .This process might intensify the problem and leads to a delay and also causes incapability of contractors of employing skilled personnel.

In order to overcome the high price of contractors and materials, there should be coordination in all parties. Ogunlana and Promkuntong (1996) point out that first, the government is responsible to give permission for the import of the materials. second, finding appropriate strategy to estimate the shortage of materials in next years would be beneficial .For example, if cement is predicted to be in short supply in the next year, it can be determined whether or not local manufacturers can increase output to provide demand and on what dates. In the same way the client or owner should provide sufficient finance in order to support contractors to be able to afford better quality manpower and equipment and bargain more with suppliers. And also there should be adequate communication with parties such as site, head offices and purchasing planning .These suggestions may even provide an opportunity for local contractors to compete with foreign contractors .It is clear that local contractors cannot beat the high price of materials and skilled labours solely without coordination among all parties in developing countries.

In conclusion, the impact of construction delays on the economy of developing countries is complex and it might have different effects in different countries. In Saudi Arabia and Malaysia it leads to slowing economic growth and wasting and increasing the price of materials, however; the influences of construction delay on economy may be mitigated by identifying the cycle of delay and managing projects materials efficiently and coordination of all parties such as government, project owners, contractors and suppliers. Unfortunately, there is no solution to completely offset the drawbacks of delay in construction projects. However knowledge of management is being developed and project managers are attempting to reduce the distortion of delay on whole project. They also try to adjust the project economically with new conditions within the scheduled time.