Factors of Construction Time for Foodgrain Warehouses in Bangladesh

Introduction

Construction industry in Bangladesh

Bangladesh construction industry is growing steadily at a constant rate.  Total construction expenditure of the country has increased from Tk. 100 billion in the early 1990’s to about Tk. 200 billion in 2003. Figure 1 shows a steady increase of the country’s construction output which is presently over 8 per cent of its GDP (Bangladesh Bureau of Statistics, 2004). Most of the construction works are in the public sector. Funding for a high percentage of construction projects come from multilateral development agencies (MDA) like the World Bank or Asian Development Bank. For large MDA funded projects, the usual practice to go for international competitive bidding. Most public contracts are awarded on the basis of the lowest responsive tenders submitted by contractors. Local contractors are given a margin of preference to secure public sector tenders under MDA funding. The maximum premium is 7.5 per cent.

Figure 1 Share of Construction Sector in Bangladesh GDP

Construction of foodgrain warehouses

Ensuring food security for all is one of the prime objectives of food management of Bangladesh. Food security has primarily two aspects: (1) family or household food security and (2) national food security. Household food security depends on the ability of the household wage earners to secure enough food to ensure an adequate dietary intake of all of its members at all times for a healthy and active life. National food security depends on the ability of the government to secure enough food for the whole nation. In Bangladesh food security at the national level directly affects the social and political situation of the country. Economically, national food security is closely related to total food production, internal food procurement, food aid, importing capacity, and a host of national and international issues. In order to provide national food security, it is essential to build warehouses for procurement, storage and distribution of food grains and to maintain smooth and well organized food management (Asiatic Society of Bangladesh, 2006).

With the increase in food production as well as import of foodgrains to minimize the food gap, there is a continual need of increasing the foodgrain storage capacities. New construction of such ware houses and upgradation and retrofitting the existing ones are usually done with financial assistance from multilateral development agencies. Even though the responsibility of food management lies with the Ministry of Food of the Government of Bangladesh, the donor agencies employ private architectural/engineering companies to design, monitor, and supervise the construction and upgradation of warehouses funded by them. Contractors for such works are selected through competitive bidding (Asiatic Society of Bangladesh, 2006).

Timely completion of construction or rehabilitation of foodgrain warehouses is critical because of food security issues. The Asian Development Bank (1997) reported that 39 percent of the projects funded by them were completed within the scheduled time. Factors identified for time overrun were change orders and delays in making administrative decisions.

Time and cost are two main concerns in construction projects (Choudhury and Rajan, 2003; Choudhury et al., 2002; Walker, 1995). In the construction industry, contractors usually use previous experience to estimate the project duration and cost of a new project. Typically, a project is broken down into activities to which resources can be assigned and durations and casts estimated. The activities are linked according to work sequences to form network. CPM techniques are used to analyze the network to identify critical path(s) and project duration. In general, the more resources assigned to an activity, the less time it will take to complete the activity, but cost is usually higher. This trade off between time and cost gives construction planners both challenges and opportunities to work out the best construction plan that optimizes time and cost to complete the project. It is quite possible that the construction time required to complete the project may be underestimated, leading to overrun. Thus actual completion cost of a project can also be considered as an important factor influencing time overrun in construction projects.

Change orders represent one of the largest sources of cost growth and, consequently, time overrun for construction projects (Riley et al., 2005). Construction of food warehouse projects in Bangladesh is no exception. Because of the need of continuous improvement of the government’s food security program, there may be changes even in an ongoing construction project.

In Bangladesh, construction materials such as cement and steel are imported. As such, availability of these materials may be a problem either due to inadequate quantity of material imported by the traders or hording of materials to create an artificial shortage. Availability of materials at some sites, particularly in rural areas, may be affected due to lack of transportation. A good number of construction projects in Bangladesh are not completed within the scheduled time period for the lack of timely procurement of construction materials.

Political situation in Bangladesh, like many other developing countries, is not very stable. Occurrence of protest marches or events leading to work closures are not uncommon. A major concern for any construction company before venturing on a project is whether the political situation in the country will change in such way that the operating position will deteriorate. It is very a much subjective business-specific event. Haendel (1979) defines it as the occurrence of events that may change the projections for profitability of a business venture of a given investment. Sometimes these events may only be site specific that the constructors usually refer as “local interference.”

This paper attempts to find out the factors that may affect the construction and rehabilitation of foodgrain warehouses in Bangladesh. From a review of literature and personal interviews with local professional involved with such projects, it is hypothesized that the actual construction time of foodgrain warehouses in Bangladesh is affected by:

Actual construction cost

Availability of construction materials

Number of change orders

Local interference

Methodology

Data Collection Procedure and Sample Size

Data of 104 foodgrain warehouse construction projects were obtained from a leading design and construction management company in Bangladesh. The firm has provided design and construction management services for over 500 such projects funded by the European Economic Community, the Netherlands Government, and Asian Development Bank. The sample projects were undertaken and completed during last five years. The company was involved in design, preparation of construction documents, assisting the clients in the bidding process and selection of contractors, fulltime construction supervision, and project management of the works. All the projects were constructed by different contractors. The design and construction management company that provided the data did not provide any construction service for any of these projects.

Variables and their Operationalization

Actual Construction time (TIME): It is the actual time measured for the completion of a foodgrain warehouse construction project. It was measured in months.

Actual Project cost (COST): It is the total cost of construction works of a health sector construction project. It was measured in millions taka, which is the unit of currency in Bangladesh (1 US dollar = 65 Bangladesh taka).

Change Order (CHANGE): It is the total number of items, not included in the contract, the contractor was asked to complete. It was measured in number of change order items.

Local interference (LOCAL): It was the reported interference to constructions works due to local political turmoil. It was a dummy variable. A value of 1 was assigned for a project that faced at least one political turmoil during the construction period, and 0 otherwise.

Procurement of Construction Materials (MATERIAL): It was the reported procurement of construction materials in time for construction. It was a dummy variable. A value of 1 was assigned for a project in which the contractor failed to procure major construction materials as per schedule at least once during the construction period, and 0 otherwise.

Results

Analysis

A general linear model was used to analyze the data. The following model was used for the analysis:

TIME  = β₀ + β₁ COST + β₂ CHANGE + β₃ LOCAL + β₄  MATERIAL + e                 (1)

where TIME = actual construction time of a foodgrain warehouse project in months, COST = actual construction cost of a foodgrain warehouse project in million Taka, CHANGE = number change orders made during the construction period, LOCAL = reported local political interference at site during construction of a project, MATERIAL = reported procurement of construction materials as per schedule, β₀, β₁, etc. = regression coefficients, and e = error term.

The results of the analysis are shown in Table 1.

Interpretations

The F-value of the model used for multiple regression analysis was found to be statistically significant at less than the 0.0001 level. This provides evidence that a relationship exists between TIME and the independents variables used in the model.

An important aspect of a statistical procedure that derives model from empirical data is to indicate how well the model predicts results. A widely used measure the predictive efficacy of a model is its coefficient of determination, or R² value. If there is a perfect relation between the dependent and independent variables, R² is 1. In case of no relationship between the dependent and independent variables, R² is 0. Predictive efficacy of this particular model was found to be moderately high with an R² of 0.76, and an adjusted R² of 0.75. All the independent variables, except change order, included in the model were correlated to actual construction time at a very high level of significance with a p-value of less than 0.0001. The effect of interaction of LOCAL with MATERIAL was also found to be statistically significant with a similar p-value.

Conclusions

The results of the statistical analysis indicate that for a foodgrain warehouse construction project in Bangladesh, an increase in total construction cost results in an increase in total construction time. They also indicate that variability in actual construction time of such a project may be explained by local political unrest and procurement of major construction materials in time . The model is useful for all parties associated with the construction industry to predict the mean time required for the delivery of a project. It provides an alternative and logical method for estimating construction time, both by bidders and clients, to supplement the prevailing practice of estimation predominantly on individual experience. The study will hopefully generate enough interest to do further research for deriving models to predict construction time for projects in other sectors.

The study was limited to investigate only the effect of cost, change orders, availability of construction materials, and political unrest on construction time in the context of food sector projects in Bangladesh, keeping all other variables constant. For future studies, it will be useful to include other variables such as productivity of the workforce, impact of client decision-making, delays in making progress payments, etc. and analyze their effect on total construction time.

References

Asian Development Bank (1997). Country synthesis of post-evaluation findings in Bangladesh. Dhaka, Bangladesh: Bangladesh Resident Mission.

Asiatic Society of Bangladesh (2006). [WWW document] URL http://banglapedia.search.com.bd/HT/A_0293.htm

Bangladesh Bureau of Statistics (2004). Bangladesh statistical yearbook. Dhaka, Bangladesh: Government of Bangladesh.

Choudhury, I. and Rajan, S. S. (2003). Time-cost relationship for residential construction in Texas. Proceedings of the CIB W78 20^th International Conference on Information Technology for Construction. Auckland, New Zealand: University of Auckland.

Choudhury, I., Khan, M. M., and Matin, A. (2002). Relationship between construction time and project cost of health sector construction works in Bangladesh. Proceedings of the 38^th Annual Conference of the Associated Schools of Construction. Roanoke, Virginia.

Haendel, D. (1979). Foreign investments and the management of political risk. Boulder, CO: Westview Press.

Riley, D.R., Diller, B.F., & Kerr, D. (2005). Effects of Delivery Systems on Change Order Size and Frequency in Mechanical Construction. Journal of Construction Engineering and Management, 131 (9), 953-962.

Walker, D. H. T. (1995). An investigation into construction time performance. Construction Management and Economics, 13, 263-274.