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Examining a new approach to cost control methods and mechanisms for SMMEs in construction projects: a case study of a road construction project in Limpopo

M.Ing.(Engineering Management) / A lot have been said and written about how South African Small Micro and Medium Size Enterprises (SMMEs) in the Construction sector of the economy have failed in the delivery of their projects and about how they have not measured up in terms of the requirements needed to be competitive in the global place. Services delivery protests by communities where SMMEs have either failed to deliver their projects adequately or have out rightly abandoned projects are common features in our various electronic and print media, and in many cases these days the most reasons given for this behavior is the total collapse or lack thereof of proper financial management of the project. Because of the ease of procedure required to register construction outfits at the Department of Trade and Industry many have flocked to the opportunity and established business enterprises with the intention that at least they will be considered for one tender or the other to carry out some sort of construction work or the other in their various environments. Others registered such companies because they have links and ties to these opportunities in the various government establishments responsible for creating these works in the name of service delivery to their respective communities. Many of the proprietors of these enterprises, when they eventually get the job, have little or no financial knowledge on how to successfully manage a construction project and sometimes always based their financial judgment on the bottom line without considering the various factors that influence the bottom line profit. Virtual calculations of their financial inputs and relative desired outputs are done with little or no consideration for cost implications of the individual building blocks of the project itself. Safe to say, in many instances, the project fail or is abandoned due to mismanaged funds or the exhaustion of such funds required to carry the project to the completion stage. It has been observed in many instances and in interactions with some SMMEs in the construction sector that not many of the appointed Project Managers and/ or Site Managers have Project Management skills, and those who do have, in most cases are unable to apply these skills to their projects. Usually they just result to invoking personal experiences obtained from their various earlier endeavors in financial projections and decisions involving the management of their projects. More often than not, these financial projections and decisions become inaccurate and tend to drive the project into financial losses. This now begs the question, that if there exits simple mathematical techniques and methods of evaluating the various costs during the project life cycle, and weighing those daily weekly and monthly costs against targeted objectives, both in the planning and execution of the projects, wouldn’t it then be easier to make sensible financial decisions if we are able to control and manage project resource costs so much so that the resultant will always be the desired financial objectives? The aim therefore, of this dissertation is to examine a simple but adequately comprehensive method, of managing resources cost as applied to road construction projects and how, by also weighing the influence of other trade-offs such as quality and time within the life cycle, the project is kept in good financial status and is subsequently able to make a profit at the end of the day. An illustration of the application of this cost control method is highlighted in a case study of a road construction project in Limpopo undertaken by an emerging South African construction company. The financial management style and those factors that govern some of the cost decisions made during the course of the project are taking into account. The resultant financial success of the work so far is evidence that the cost control mechanism employed largely contributes to its present successful state. It can therefore be concluded that if properly implemented, this method will assist SMMEs in the promotion of proper cost control practices, and subsequent financial breakthroughs when applied to other similar projects.

Identiferoai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uj/uj:7885
Date14 January 2014
CreatorsAdemola, Williams Olawale
Source SetsSouth African National ETD Portal
Detected LanguageEnglish
TypeThesis
RightsUniversity of Johannesburg

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