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ASSESSMENT
OF THE SURVIVAL PRACTICES OF QUANTITY SURVEYING FIRMS IN A RECESSED ECONOMY
CHAPTER ONE
INTRODUCTION
1.1 Background to the study
The construction
industry plays an important role in a nation’s economy and its activities are
also vital to the achievement of national socio-economic development goals of
providing shelter, infrastructure and employment. According to Aibinu and
Jagboro (2002) the construction industry continues to occupy an important
position in the nation’s economy even though it contributes less than the
manufacturing or other service industries. Ayodele and Alabi (2011) opined that
a healthy economy usually experiences an increase in construction activities.
Saka and Lowe (2010) stated that the importance of construction to economic
growth and development can never be overstressed as construction makes
significant contribution to the GDP, capital formation and employment etc. The
construction industry as a whole has a significant relationship to the economy,
in that a change in economic output of an economy can result in a proportionate
change in demand and, as a result, a change in the output of the construction
industry (Richardson, Nwankwo, and Richardson (2003). The follow-on effect of
this change is that firms within the industry have to dramatically adapt to the
changing economic climate (Green, Larsen, and Kao, 2008).
Research
have shown that employees in the construction industry form a very large
workforce constituting one-half of the gross capital, and three to eight
percent of the gross domestic product (GDP) in most countries (Arditi and
Mokhtar, 2000; Mee-Edowe and Andawei, 2000). The construction industry is
responsible for employing approximately 20% of the Nigeria’s workforce, making
it perhaps the largest employer of construction labor in Africa (National
Bureau of Statistics, 2006). The industry accounts for about 69% of the nations
fixed capital formation which implies that 70% of the net capital investment in
the country goes into the construction industry (Business Monitor International
(BMI), 2007). The National Bureau of Statistics (NBS) (2014) presentation of
preliminary results of the rebased nominal gross domestic product (GDP)
estimates for Nigeria 2010 to 2013 reported that the NCI records an average of
3.4% contribution to the GDP within the considered years. This contribution
though small yet exerts both direct and indirect impact on the national economy
as it stimulates the growth of other sectors through a complex system of
linkages (Alabi, 2010).
Nigeria is
one of the largest African countries but sadly have been facing decline in
economic output. This economic recession has led to so many construction
companies adopting several survival practices in order to remain in business.
According Musso and Schiavo (2007) to survival practice of any construction
company is defined as their ability to run or manage a small business with
little resources to keep track of nation and regional, economic indicators that
might affect the construction industry and the companies’ operations. This is
in line to the findings of Geroski, Mata, and Portugal (2003) which states that
for a conation firm to survive in a recessed economy, they must be aggressive
and imaginative in operations. this means that the company should innovate
ideas to gain market share by taking it away from competitors unable to adjust
to shifting market conditions, maintain a strong cash stream throughout the
downturn, in contrast to other construction companies that may have liquidity
problems, become a leaner, more effective and more efficient operation, better
positioned to do well when the market improves. With this constrain, Madhoushi
and Ghaedi (2013) was of the opinion that construction firms who survive and
even prosper during hard times most be able to look beyond the present to
overcome the constraint of tradition to see the firm from a new perspective and
to do business differently.
Through the
construction industry, the Government is able to provide adequate public
infrastructures for its citizens. According to Oluba (2008) public
infrastructure touches on a wide range of basic amenities, which enhance the
capacity of economic agents to conveniently engage in productive activities
with reduced stress levels. However, in the delivery of these public
infrastructures, several participants are brought together. According to
Alintal-Abel and Nnadi (2015) there are diverse interests in the construction
industry with the principal actors being the client, the consultant and
contractors. In the realization of a construction project, consultants and
contractor are brought together to satisfy the desire of the client. According
to Munns (1996) construction project involves three groups of people who are
brought together for a temporary period in which they are expected to work
together towards a mutual goal. This group includes the client, the consultants
and construction contractors. The role of the Client is to instigate the
project set goals, determine the constraint to work within, and provide the
required financial recourses to ensure the projects goals. The Contractor is
responsible for converting the plan into final reality while the Consultant is
expected to convert the client requirement into a proposal that can be achieved
within any constraint set by the client (Salami and Mustapha, 2015).
One of such
consultants whose role in the delivery of construction projects cannot be over
emphasized is the Quantity Surveyor. Ashworth and Hogg (2000) described a
Quantity Surveyor as a person that cost designs and produce procurement and
construction documents. Ojo (2011a) further stated that a Quantity Surveyor
estimate and manage the cost of construction projects. A practicing Quantity
Surveyor is mostly found in Quantity Surveying Firms (QSFs) which are service
based firms providing consultancy, financial and allied management services to
their clients (Abidin, Yusof, Hassan and Adros, 2011). Oyediran (2011) views
QSFs as knowledge based firm because quantity surveyors sell knowledge and not
physical product when in operation. It is noteworthy that this knowledge is
transformed into service that
gets delivered to
clients eventually.
Thus, with
the present downturn in the Nigeria economy which is as a result of the decline
in the price of crude oil and other associated factors (Sanusi, 2010; Eboh,
2015; National Bureau of Statistics 2015), which is bound to have a negative
effect on the construction industry (Ogbu, 2017) it is necessary to assess the
survival practices of Quantity Surveying firms whose role in the construction
industry is crucial. This shall be done with a view to identifying possible
ways to help Quantity Surveying Firms survive in times of recession
1.2 Statement of the Problem
Eboh (2015)
observed that the Nigerian economy currently faces difficulties due to the
decline in crude oil prices in the international market. Added to this is the
huge burden of payment of subsidies to petroleum products importers mounting to
billions of Naira and to make things worse, there have been a constant
political drift away from the due process were construction contact allocation
is awarded only to political and
government agent thereby back beating professionals such as the Quantity
Surveyors and as such driving these professionals / construction firms into
adopting other measures of survival in order to remain in business. In 2014 alone,
N971.1 billion ($4.88 billion) was budgeted for subsidy payments. The
repercussions of these have been the sharp decline in revenues accruing to the
federation. Up to 8.97% of Nigeria’s GDP is accounted for by proceeds from oil
and gas industry activities, and crude oil earns more than 90% of Nigeria’s
foreign exchange (Sanusi 2010; National Bureau of Statistics 2015). As a
result, fluctuations in revenues from this source have grave implications for
the survival of construction practitioners in Nigeria as the government remains
the biggest client of the construction industry in Nigeria (Aniekwu, Anthony,
Kehinde, 2014). Not only that, private sector clients of the construction
industry are equally linked to government expenditure; thus, a decline in Nigeria’s
national income has both direct and indirect effects on the survival of
construction practitioners (Quantity surveyors inclusive) and this could
influence their mortality rate (Ogbu, 2017).
Olatunji,
Oke, Aghimien and Ogunwoye (2016) opined that with the challenging economy in
Nigeria, it is not uncommon to see construction professionals acting in manners
that go against the ethics of their profession during the course of carrying
out their professional duties just to make ends meet. Murdoch and Hughes (2008)
stated that Quantity Surveyors as construction cost managers are the cynosure
of all eyes both within the construction industry and the country at large.
Bearing in mind that construction professionals operate in a highly fragmented
industry which includes different skills and professions, and where
relationships and boundaries are not always clear, Quantity Surveyors are
expected to display a high level of professional competence founded on genuine
ethical conduct.
It has been
observed that the primary aim of every profession is to serve the public. This
commitment means that true professional places the public good before mere
financial reward. Acting in such a manner may on occasion conflict with an
individual or client’s interest. This concept is embodied in many of the
profession’s codes of conduct (Murdoch and Hughes, 2008; Olatunji et al.,
2016). Seeley (1997) assert that upholding professional ethics underpins the
primary objectives of professional codes of practice. Providing a professional
service may therefore be viewed as delivering technical skills competently and
in a way society expects of professionals.
Bearing the
economic recession facing the country in mind and the need for Quantity
Surveyors to demonstrate high ethical standards, this research therefore set
out to assess the survival practices employed by Quantity surveying firms in
Nigeria.
1.3 Aim and Objectives of the Study
The aim of
this research is to assess the survival practice of Quantity Surveying firms in
a recessed economy with a view to identifying possible ways to help Quantity
Surveying Firms survive in times of recession. The objectives stated out for
achieving this aim are to:
• identify the factors
affecting the survival practices of Quantity Surveying Firms in a recessed economy in Imo State;
• assess the level of these
survival strategies by Quantity Surveying Firms in Imo State;
• evaluate the impact of
these survival practices on the survival of Quantity Surveying Firms in Imo
State
1.4 Research Questions
The
following Research Questions were formulated to guide the study:
• What are the survival
strategies available for Quantity Surveying Firms in a recessed economy in Imo State?
• What is the level of
adoption of these survival strategies by Quantity Surveying Firms in Imo State?
• What is the impact of these survival
practices on the survival of Quantity
Surveying Firms in Imo State?
1.5 Research Hypotheses
The
hypotheses set for this research are as follows:
(1) Ho:
There is no significant difference in the view of the various categories of
Quantity Surveyors as to the survival strategies available for Quantity Surveying Firms in Imo State.
HA: There is a significant difference in
the view of the various categories of Quantity Surveyors as to the survival strategies
available for Quantity Surveying Firms in Imo State.
(2) Ho:
There is no significant difference in the view of the various categories of
Quantity Surveyors as to the level of adoption of various survival strategies
by Quantity Surveying Firms in Imo State.
HA: There is a significant difference in the
view of the various categories of
Quantity Surveyors as to the level of adoption of various survival strategies
by Quantity Surveying Firms in Imo State.
(3) Ho:
There is no significant difference in the view of the various categories of
Quantity Surveyors as to the impact of the various survival strategies on the
survival of Quantity Surveying Firms in Imo State.
HA: There is
a significant difference in the view of the various categories of Quantity
Surveyors as to the impact of the various survival strategies on the survival
of Quantity Surveying Firms in Imo State
1.6 Significance of the Study
Several
researches have been conducted on survival practices within and outside the
construction industry (Ajayi, Pearce and Mafimidiwo, 2012; Madhoushi and Ghaedi
2013; Ogbu, 2017; etc.). Ayopo (2011) revealed that firm location is related to
firm survival, for firms in different sectors of the Nigerian economies,
respectively. Ajayi et al., (2012) sought the opinion of construction
professionals on the survival practices of construction firms in Lagos,
Nigeria. Furthermore, Ogbu (2017) focused on the opinion of indigenous
construction firms. This was done out of the assumption that as business
entities, indigenous construction firms are affected by the dynamics of the
economic environment; therefore, they deploy survival practices in order to
survive.
While
several studies on survival in the construction industry are available, not
much has surfaced on the survival practices of Quantity surveying firms in
Nigeria. This gap is what this research sets out to fill. With this economic
downturn, Quantity surveying firms will need to develop new survival strategies
to help the stay afloat and survive this recession period. Thus, assessing
these survival practices of Quantity surveying firms will go a long way in
assisting the management of these firms in making critical decisions that will
help in the survival of the present recession within the country. This study
will enable Quantity Surveyors within the country as it hopes to bring to light
other possible areas of diversification that will help them survive in terms of
recession.
1.7 Scope of Study
This
research sets out to assess the survival practices of Quantity Surveying Firms
in a recessed economy. The research shall be restricted to Quantity Surveying
Firms in Imo State Nigeria. Although this research sets out to assess the
survival practices of Quantity Surveying Firms in a recessed economy, as a
result of limited available finance for the execution of this project, coupled
with the associated time constraints, using every single Quantity Surveying
Firm within the country will prove impossible.
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