36 TH SOUTHERN AFRICAN TRANSPORT CONFERENCE AN INVESTIGATION

36 TH SOUTHERN AFRICAN TRANSPORT CONFERENCE AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) PRESENTED BY: CO-AUTHOR: VENUE: DATE: MR. MUBAMBE SHIMETE PROF. KEVIN WALL CSIR CONVENTION CENTRE, RSA 10 TH JULY, 2017 SESSION: 1 A - INFRASTRUCTURE

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) PRESENTATION OUTLINE q Brief Background/Problem Statement q Importance of the Study q Research Objectives q Research Limitations q Research Approach & Methodology q Discussion of Results q Conclusion

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) PROBLEM STATEMENT • Namibia has an ambitious program to develop and improve its road infrastructure. • Namibia is also striving to alleviate poverty through employment creation using road infrastructure development as one of the key drivers. • Further, Namibia is striving to integrate with the rest of the SADC region and realize some of the socialeconomic benefits associated with road infrastructure investments.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) PROBLEM STATEMENT However, Namibia has not been spared from excessive cost and time overruns associated with infrastructure development in general and road construction in particular.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) IMPORTANCE OF THE STUDY THREE QUESTIONS. . q Of what significance or value is the study? q Is the research relevant? (= appropriate to the current time or situation). q Why focus on the period between 2008 – 2013? What about 2017?

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) IMPORTANCE OF THE STUDY q Of what significance or value is the study ? ü IT IS SIGNIFICANT BECAUSE it highlights the pertinent issues that contribute to time and cost overruns in road construction projects in Namibia. ü IT IS SIGNIFICANT BECAUSE it narrows the gap in understanding and consequently help to change attitudes towards the implementation of road construction projects in Namibia.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) IMPORTANCE OF THE STUDY q Is the study relevant? ü YES BECAUSE it’s currently not uncommon for road construction projects in Namibia to experience time and/or cost overruns, ü YES BECAUSE most of the road infrastructure development is carried out using public funds amid tight fiscal provisions and therefore taxpayers expect benefits to be delivered timeously and cost effectively.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) IMPORTANCE OF THE STUDY q Why focus on period 2008 - 2013? Why not 2017? ü The period coincides with the implementation of the Third National Development Plan (NDP 3) building towards Vision 2030. ü Historical research forms a basis on which causal relationships for observed attributes can be established and possibly make propositions and further postulate that the phenomena may be occurring universally (Welman et al, 2005).

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) IMPORTANCE OF THE STUDY IN ADDITION…… q The study was necessitated by a gap in scientific knowledge with respect to time and cost overruns related to Road Infrastructure development in Namibia. q The study forms the basis on which advanced research can be embarked on in order to help integrate best-practice approach toward the implementation of road infrastructure projects.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) RESEARCH OBJECTIVES The following research objectives were set: 1) To conduct literature review to investigate what general factors cause cost and time overruns from a global perspective, 2) To determine what factors significantly contributed to time and cost overruns in the delivery of road infrastructure projects in Namibia (2008 – 2013) and, 3) To evaluate the impact of time and cost overruns on strategic program delivery with specific emphasis on projects embarked on between 2008 – 2013.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) RESEARCH LIMITATIONS The following were the limitations of the research: 1) Research focused on the road construction sector in Namibia and therefore results and conclusions may not be applicable to other countries in the Subregion. 2) Acquisition of data from the Namibia Roads Authority and other Governmental organizations proved to be a challenge owing to the poor record keeping, inconsistent and sometimes incomplete information.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) RESEARCH APPROACH & METHODOLOGY Stage II • Questionnaire Survey • Historical Data Analysis Stage III • Compare Stage I & Stage II results Conclude & Recommend

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) RESEARCH APPROACH & METHODOLOGY Step 1: Identify cost and time overrun factors through literature Survey. Step 2: Design Questionnaire. Stage I Questionnaire Survey Step 3: Conduct Questionnaire Survey (Convenient Sampling). Step 4: Test responses for Internal Consistency (Cronbach’s Alpha) = Reliability. Step 5: Rank Cost and Time Overrun factors (Relative Importance Index).

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) RESEARCH APPROACH & METHODOLOGY Step 1: Establishment of data sources for highway construction projects (NRA, Mo. WT, Consulting Engineers). Stage II Historical Data Analysis Step 2: Identify project work types and overrun characteristics from historic projects. Step 3: Determine project cost and time overruns. Step 4: Draw conclusions and report on findings.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) QUESTIONNAIRE SURVEY RESULTS q Questionnaires were sent via email to Employees of NRA, road Contractors, Consulting Engineers and Other Government institutions. Stage I RESULTS q Of the Seventy-Five (75) Questionnaires administered Forty. Two (42) were received from respondents representing a 56% response rate.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) QUESTIONNAIRE SURVEY RESULTS Consulting Engineers 32. 5% 47. 5% Stage I RESULTS 20. 0% Contractors Client/Govern mental Respondents by Category

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) QUESTIONNAIRE SURVEY RESULTS 2. 5% 5% 30% 15% Stage I RESULTS 45% Respondents by Qualification MSc/Meng BSc/Beng Btech HND Other

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) QUESTIONNAIRE SURVEY RESULTS 22. 5% Stage I RESULTS 25% 27. 5% Respondents by Experience <5 Yrs 5 - 10 Yrs 11 - 15 Yrs >20 Yrs

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) QUESTIONNAIRE SURVEY RESULTS q Cronbach’s alpha value of 0. 9496 for the questionnaire section relating to Cost Overruns was obtained. Stage I RESULTS q Cronbach’s alpha value of 0. 9498 for the questionnaire section relating to Time Overruns was obtained. This represents an “excellent” level of internal consistency (George & Mallery, 2003) and therefore, high reliability of the instrument used!!

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) QUESTIONNAIRE SURVEY RESULTS Table 1: Some guidelines (Internal Consistency). Cronbach’s a Internal Consistency ≥ 0. 9 Excellent 0. 9 > a ≥ 0. 8 Good 0. 8 > a ≥ 0. 7 Acceptable Stage I 0. 7 > a ≥ 0. 6 Questionable RESULTS 0. 6 > a ≥ 0. 5 Poor 0. 5 > a Unacceptable Source: George & Mallery (2003).

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) QUESTIONNAIRE SURVEY RESULTS Table 2: Ranked Relative Importance Indices w. r. t Cost Overruns. Cost Overrun Factor RII Rank Increase in quantities due to increase in scope of work 0. 851 1 Inexperienced Contractor/Subcontractor 0. 845 2 Contractor’s cash-flow and Financial difficulties 0. 833 3 Increase in quantities due to inadequate or poor estimates 0. 815 4 Lack or poor prospection and planning 0. 815 5 Delayed payments by Client to Contractor/Consultant 0. 798 6 Poor site management and supervision 0. 798 7 Material quality issues 0. 780 8 Lack of skilled manpower 0. 780 9

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) QUESTIONNAIRE SURVEY RESULTS Table 2: Ranked Relative Importance Indices w. r. t Time Overruns. Time Overrun Factor RII Rank Inexperienced Contractor/Subcontractor 0. 905 1 Contractor’s cash-flow and Financial difficulties 0. 869 2 Poor site management 0. 869 2 Lack or poor prospection and planning 0. 851 3 Contract termination 0. 833 4 Poor planning and scheduling of works 0. 833 4 Adverse weather – Flooding 0. 827 5 Delayed payment to contractor/consultant 0. 827 5 Lack of skilled manpower 0. 827 5

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) HISTORICAL DATA RESULTS q Fifty-five (55) projects were identified from the NRA database. q However, due limitations setout above, only Sixteen (16) Capital projects were investigated out of a potential Twenty. Five (25) capital projects. Stage II RESULTS q Eight (8) or 50% of the projects surveyed experienced both Cost and Time overruns. q Only One (1) out of the 16 projects was completed within budget and time.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) HISTORICAL DATA RESULTS q 6 out of 16 projects had cost overruns less than 5%, q Another 6 out of 16 projects had cost overruns between 5 – 10%, Stage II q While 4 out of 16 projects had cost overruns > 10%, RESULTS q The max. cost overrun was 34. 69%. q The average cost overrun was 7. 69%. What do you think about estimated contingency amounts, normally 10%?

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) HISTORICAL DATA RESULTS q 1 out of 13 (7. 69%)projects had time overrun less than 5%, q While 12 out of 13 (92. 30%) projects had time overruns >10%, q The maxi. time overrun was 261. 5%. Stage II RESULTS q The average time overrun was 76. 0%. What about scheduling approaches? Deterministic vs Stochastic? ? ?

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) HISTORICAL DATA RESULTS NOTE: From a sample frame of 16, q It was observed that there was no correlation between Road length and Cost/Time overrun!!! (Check Article: Table 4). Stage II RESULTS q Something worth noting: Road Length ≠ Project Complexity!!!

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) COMPARISON OF STAGE I AND STAGE II RESULTS Ø Comparison of Stage I and Stage II results identified Ten (10) common factors reported to lead to either Cost or Time overruns or both, i. e: q q q q q Increase in quantities due to increase in scope of works(1), Contractor cash flow and financial difficulties (2) Contract Termination (4), Increase in quantities due to inadequate/poor estimates (4), Lack or poor prospection and planning (Incomplete designs)(4), Delayed payments by client to Contractors/Consultants (5), Poor site management and supervision (5), Adverse weather – Flooding (5), Material Quality issues (6) and Excessive rainfall (6).

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) CONCLUSION Ø We conclude from the above that the following factors contributed most significantly to either cost or time overruns or both i. e: q q q q q Increase in quantities due to increase in scope of works, Contractor cash flow and financial difficulties, Contract Termination, Increase in quantities due to inadequate/poor estimates, Lack or poor prospection and planning (Incomplete designs), Delayed payments by client to Contractors/Consultants, Poor site management and supervision, Adverse weather – Flooding, Material Quality issues and Excessive rainfall. DO YOU RELATE TO THE ABOVE?

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) CONCLUSION THREE QUESTIONS Ø Why do we still experience project cost/time overruns, even with so much research into the subject matter. Conclusion Ø Why do we get different results or conclude differently? Ø When we investigate the responsible factors are we measuring the “real culprit”?

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) CONCLUSION q Although the instrument used to measure the observed attributes is Realiable, questions linger about the Construct Validity. Conclusion q At best we are measuring “irrelevant constructs” perpetuated by “socially desirable responses”, i. e. subjects provide responses that they believe to be socially acceptable.

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) CONCLUSION Therefore in conclusion, we hypothesize that there MAY be other constructs that bear a causal relationship with the observed overruns. These constructs are: q Climatic and/or Environmental factors, Conclusion q Project Complexity, Uncertainty and risk, BUT MOST SIGNIFICANTLY, q HUMAN BEHAVIOR IN A PROJECT SET -UP!

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) CONCLUSION Project Complexity, Level of uncertainty and Risk H 2 Climate and Environment Human factors H 3 H 1 Conclusion Time and/or Cost overrun Figure 1: Schematic representation of proposed hypothesis

AN INVESTIGATION INTO FACTORS THAT CONTRIBUTED TO TIME AND COST OVERRUNS IN ROAD CONSTRUCTION PROJECTS IN NAMIBIA (2008 – 2013) THE END ANY QUESTIONS? . .