1. Problem recognition, definition and evaluation
As a result of unpredictable influence of inflationary trend in Nigeria, the initial construction costs of projects become outdated by the time projects are actually completed, a course for concern. Hence, problem statement this week is to determine worst cases of inflation affecting project management and delivery system in Nigeria.
2. Development of the feasible alternatives
The modern construction economic theory describes three types of inflation:
1. Cost-push inflation is due to wage increases that cause businesses to raise prices to cover higher labor costs, which leads to demand for still higher wages (the wage-price spiral).
2. Demand-pull inflation results from increasing consumer demand financed by easier availability of credit.
3. Monetary inflation caused by the expansion in money supply (due to printing of more money by a government to cover its deficits).
3. Development of the outcomes and cash flows for each
4. Selection of the acceptable criteria
Among selected attributes subject to ordinal ranking; Time overrun, Cost overrun, Dispute, Litigation and Abandonment are top most ranked attributes, which constitute acceptable criteria for determining influene of worst cases of inflation in project management and delivery system in Nigeria.
5. Analysis and Comparison of the alternatives
The findings showed that loss of time and cost overruns were frequent effects of delay due to Cost-Push inflationary trend as compared to Demand-Pull and Monetary inflation that may have significant impact on completion cost and time of construction projects studied.
6. Selection of the preferred alternative
Cost-Push Inflation with the highest scoring attributes is therefore considered worst case of inflation that could affect project management and delivery system in Nigeria.
7. Performance Monitoring and Post Evaluation of Results
Sequel to performance monitoring and post evaluation of results, it is recommended that acceleration of site activities coupled with improved clients’ project management procedure and inclusion of appropriate contingency allowance in pre-contract estimates would mitigate the adverse effects of construction delays due to inflationary trend.
8. References/Bibliography
1. HCi Services, Cause & Effect Diagram. Retrieved from: http://www.hci.com.au/hcisite3/toolkit/causeand.htm#Cause enumeration
3. Brassard, M., & Ritter, D. (2010).The Memory Jogger 2: Tools for Continuous Improvement and Effective Planning.
Great case study Austin and you did a good job on your analysis.
ReplyDeleteSo my next challenge to you (which solves the various types of inflation and currency manipulations is why not use Gold equivalency??
http://pmworldjournal.net/?article=exploring-gold-as-alternative-currency-for-future-cost-estimation-in-telecommunication-projects
http://aacemahakam.blogspot.com/2012/10/w15tri-steel-prices-and-lending-rate.html
I can assure you, that if you start to use Gold equivalency to do your cost estimating, your cost estimates are likely to be MUCH more accurate, reliable and precise.
Keep up the good work and looking forward to seeing what you can do with gold equivelency.
BR,
Dr. PDG, Jakarta