Construction projects because of their exclusive characteristics are vulnerable and they are subjected to the influence of many external and internal factors. A large number of project participants because of their actions cause variations to the scope and design of the projects. In some cases natural causes also contribute to variation requests to construction projects. Variations have many adverse impacts on construction projects. The construction industry in the Sultanate of Oman is also subject to the influence of many factors, which are specific to the country. In this context, this research seeks to investigate the causes and impacts of variations in construction projects in Oman. The study apart from an extensive literature review, adopted a quantitative survey among engineers and construction management professionals working in public and private construction projects in Oman. Based on the review of the literature and the survey, the study concludes that lack of coordination among the parties and changes in specifications by the owners are the important factors leading to variations. The study also concludes that time overruns and cost escalations are the major impact of variations in construction projects. The survey findings indicate that terms of price an agreement on time are the factors that are considered by the contracting companies in Oman for finalizing the contracts. The research has provided few areas for further research and extension of knowledge in the field.
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Unscheduled changes in construction contracts cannot be ruled out and they often cause additional work than planned. Such extra works are likely to cause additional cost and time to complete the construction project. Understanding of the terms of the contract by the parties is bound to vary, which may give rise to changes in the scope of work. However, since the parties to the construction contract have diverse viewpoints chances for disputes to arise between owners, contractors and subcontractors are more. Moreover, in the present day’s context, because of the fact that construction schedules are compressed for faster completion, building activity starts even before the final design is completed (Chen & Hsu, 2007). This might lead to the following of inaccurate design. Because of the changes in the needs and preferences of the industry, changes in the employers’ needs from the contractors are inevitable. All these factors have led to significant increase in the change orders in construction projects, often leading to disputes among various parties involved in the project. It is to be accepted that owners and design professionals must have the liberty to provide change orders, so that appropriate changes can be made in the construction projects to suit particular needs of the employers. Any construction project is subject to change orders and change is defined t o include any modification in the original scope of the construction contract. Such changes may have significant implications on time, cost and quality of construction. If the contractor is unable to manage the changes swiftly, it might lead to serious issues in project completion giving rise to claims.
The contractors must also be willing to carry out these change orders; but they must be compensated properly for the additional time and cost involved in executing the changes. Although the owners realize that change orders are likely to have an effect on specific tasks, they fail to appreciate the ripple effects such changes might bring to the entire project schedule. Coffman (1996) observe that in mechanical construction, because of the interconnection between different activities, changes in one activity are likely cause changes throughout the entire project.
The additional cost of change orders to the contractors will reflect in the form of requirement of additional materials, conflicts in the schedule of existing project activities, occasions of rework of work already executed, stoppage in the momentum of the project progress and reduced labor efficiency. Financial impact of change order on most of the items affected by the change orders can be measured. However, it is difficult to precisely measure the effect of change orders on labor efficiency. Change orders thus might seriously impede the progress of the construction projects. Because change orders present a risk for both the contractor and the employer, they must be accepted and managed properly. In this context, this research attempts to find out from the all the project stakeholders such as clients, consultants, contractors and subcontractors, the impact of variation orders, the problems encountered because of the variation orders and the possible resolution to the problems and issues resulting from variation orders. Variations in the construction industry in Oman appear to be a common phenomenon as the working in the industry is affected by several factors such as weather conditions, lack of cost data, shortage of resources, lack of experienced contractors and frequent design changes by employers.
Variation Order – a Background
A variation order or change order as it is sometimes called, can be defined as a “written authorization provided to a contractor approving a change from the original plans, specifications, or other contract documents, as well as a change in the cost” (Means, 1991). For the purpose of this research a variation order is a modification provided in writing after the construction contract has been signed. Therefore, some of the variation orders can occur before the commencement of construction activity. The variation order includes
“(1) additional or modified scope of work; (2) errors and omissions in plans and specifications; (3) changes required by governmental entities; (4) design changes; (5) overruns or underruns in quantities; and (6) conditions impacting on schedule, the time of completion or the method or manner of performance of the work,” (Libor, n.d).
Most of the construction contracts provide for such variations by including a “changes” clause. Such a “Changes” clause is beneficial to both the contractor and owner as in increases the flexibility of construction contracts by providing for the variations without the necessity for a new contract for incorporating any addition, deletion or modification of a project requirement. The “Changes” clause allows suitable modifications to be made to plans and specifications, which would precisely reflect the intended project outcomes of design personnel and the employer. These modifications can be carried out without breaking contractual requirements, when the “changes” is present in the construction contract (Libor, n.d).
The clause provides the procedure for assessing the impact of changes to compensate the contractor for the additional work in respect of the variation orders. Another advantage of including the changes clause is that it enables the contractor to highlight modifications that will improve the project performance, as he is sure of receiving the differential cost for the extra tasks, which he is expected to perform following the variation orders. However, there are limitations on the employer to issue variation orders. For instance, the employer may not issue variation order which has the effect of brining fundamental changes in the scope of the contract. In view of the significant impact of variation orders on the project outcomes and the financial implications they have on the stakeholders, this paper attempts to explore the causes and effects and the likely remedies for the impact of variation orders.
Rationale and Purpose of the Study
The purpose of the current research is to explore the impact of variation orders on construction projects from the purview of clients, consultants, contractors and subcontractors, who are the major stakeholders of a construction contract. The impact is explored to ascertain the problems encountered by the stakeholders and the eventual resolution to the issues.
Engineer has the power to make any variation orders of the form, quality or quantity of the Works or part thereof subject to the approval of the Employer. Such order would result in increase or decrease the quantity of any work included in the contract. There are instances of omissions of work from the scope. Further the Engineer is empowered to change the character or quality or kind of any such work. This may result in change the levels, lines position and dimensions of any part of the works. At times it becomes compulsory, on the part of the Engineer to order for additional work of any kind necessary for the completion of the work. Further the faulty designs although the consultant fails to accept causes more concern, conflicts, cost and time over run. There are cases of interferences by the client results in variations. This state of affairs makes the consultant and contractor at tacit unease. Because of the misunderstanding created on account of variation orders, disputes and claims become a constant affair in the construction industry. In this context, the results of the current study are expected to add to the existing knowledge on the ways to resolve the problems encountered because of variation orders in construction contracts.
It is to be emphasized that such variation orders shall in anyway vitiate or invalidate the contract. The law provides the contractor to get compensated in a manner that valuation of such variations shall be taken into account when ascertaining the contract price. It’s being provided that orders for variations to be in writing but confirmation of verbal instructions considered as an order in writing. The basis of prices for variations shall be the rates and prices set out in the contract as decided by the Engineer who shall agree a suitable rate with the contractor, failing which the rates shall be fixed by the Engineer. Contractor’s prices at times found to be below the market prices. Contractors may at a loss if such prices are fixed for the variations. In such cases a controversy occurs between all parties concerned. The law is impartial by compensating the contractor on variations exceeding ten percent on certified completion of the works.
Though the procedures look simple but in reality a disagreement prevails between all the parties directly involved as to the agreement on time, money and quality. Though the consultancy agreement emphasizes the Consultant to obtain three or more quotations; in majority of the cases this activity is performed by the contractor who takes time until favorable quotations as to money and time are received at his hand before submitting to Engineer.
In Oman interdepartmental differences exist on payment issues. It takes more than three months to get the formal approval of such variation orders. Certain departmental circulars prevent the contractor from claiming this money through interim payment applications. Contractor’s long wait make them to seek various means; including and not limited to negotiating the quality or inflating the prices. This in turn leads to time over run and the contract price going beyond the budget. In case no savings on re-measurements or contingency is available, contractors again compelled to wait for longer period. This state of affairs prevents the client to establish a supply chain management. The delay of payment makes the other contractors refrain from actively participating in the future tenders too.
The main objectives of the study can be summarized as follows:
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- To verify the type of variations issued.
- To verify the circumstances under which such variations are ordered.
- Pricing policies carried out under usual circumstances
- Problem confronted by clients, consultants, contractors and subcontractors
- Analyzing the problems and means of resolving them.
Structure of the Dissertation
To present a comprehensive research report this dissertation is structured to have seven chapters. Chapter One introduces the research topic, provides the rational for the research and establishes aims and objectives and hypotheses to conduct the research. Chapter Two outlines the generic review of variation orders in construction contracts. In Chapter Three the reasons behind variation orders in construction projects are explored through a literature review. Chapter Four presents a description of the impacts of variation orders on construction contracts. Chapter Five restates the research objectives and illustrates the methodology that was used to achieve these objectives. The justification of using the questionnaire is stated. This chapter also describes the questionnaire design, survey sample scoring system and methods of analysis. Chapter Six contains data collected through the questionnaire and the analysis of the results from the questionnaire. The results are illustrated using bar charts and graphs. This chapter includes results interpretation and discussion on the results. Chapter Seven summarizes the research findings and based on the results of the research a relevant conclusion is drawn. Recommendations to avoid problems relating to variation orders and recommendations for further research in the area form part of this concluding chapter.
Variation Orders in the context of Oman Construction Industry
Several studies have been conducted on the impact of change orders on the productivity and efficiency of construction projects. Alnuaimi et al (2010) studied the causes and effects of change orders on public construction projects in Oman. The research undertook case studies of four large projects. The study found that altering owner requirements is the most important cause of changes in the construction projects in Oman and the study also found that such changes led to delays in completion of the projects and cost overruns. Moselhi et al (2005) studied the effect of variation orders on labor productivity and presented a model to measure the losses on variation orders.
This model identified several factors affecting the productivity and highlighted the timing of change orders to have a large impact on project completion within schedule. Keane et al (2010) presented the several suggestions to avoid or to minimize the number of change orders in construction projects. Lee et al (2003) worked on the impact of multiple change orders on productivity and suggested methods for quantification of loss of productivity resulting from the influence of change orders. Work of Hanna and Swanson (2007) focused on the type of changes on different construction projects and suggested compensation that might payable to contractors for each type of change. The results of all these studies have relevance to the functioning of the construction industry in Oman, where the number of change orders is more because of frequent changes in the owners’ requirements.
Prior Studies on Variations in Construction Projects
Literature on construction project management has identified that variation orders are common to all types of construction activities (Thomas et al. 2002, Oladapo, 2007). According to Ssegawa et al (2002) because of the presence of variation clauses in all types of construction contracts, it can be inferred that every project will have some type of variation or other. Change orders are most likely to have negative impact on both completion time as well as cost of projects. Design changes will eventually result in both cost and time overruns. Because designs in construction contracts have never been perfect, owners often need the flexibility for making revision in the plans and take benefit from the adoption of better technological advancements. Alternatively, in certain instances the owner might want the contractor to take of the risk of unanticipated events
Hanna & Swanson (2007) observed three types of changes – actual or directed changes, which are requested by the owner or his representation and which have the consent of all parties, constructive changes which arise because of different interpretation by the owner and the contractor about the scope of the contract, whether they are included in the contract document or not and cardinal changes, which are considered breach of contractual terms. Cardinal changes may occur when the contractor is authorized by the owner to undertake tasks which are beyond the scope of the contract and when the owner requests a number of changes which might lead to comprehensive changes from the original terms of the contract agreed between the parties. Alnuaimi et al (2010) observe that the causes for issuing variation orders may vary from one country to another. The authors found that the number of change orders issued in developing countries generally is more than those issued in developed countries.
Al-Momani (2000) found that changes initiated by the owners are one of the major reasons that led to delayed completion of projects in 130 cases studied. Goudreau (2001) found that delayed payments to contractors, change orders initiated and discrepancy in contract documents were among the important elements that increase cost and time of completion of construction projects. According to Acharya et al (2006) change orders were the third important factor identified for the occurrence of conflicts in construction projects. Out of the studies conducted on 76 projects in Saudi Arabia Assaf and Al-Heiji (2006) most common reason for project delays as reported by clients, consultants and contractors was “change order.” The results of all these prior studies confirm the impact of change orders on the construction projects in Oman. However the reasons for change orders may vary from country to country and between one project and another.
Causes for Variation Orders in Oman
Many reasons can be attributed for requesting changes in a construction contract. These changes become necessary for continuing with the projects after modification instead of terminating the projects. Hanna & Swanson (2007) define change to include any “activity that lead to modification in the original scope of the work, in the completion time of project, and in the cost of project and become part of most construction project due to limited resources.” Fisk & Reynolds (2009) define change order as “formal document that alters some conditions in the contract documents, such as changing in: the cost of project plans and specifications, project payments schedule.”
Keane et al. (2010) listed causes such as budgetary constraints of owners, improper determination of project goals, hard and tough nature of the owner, changes in scope and specifications by the owner and the quality of obstructing effective decisions, as related to owner-related causes for variations. Hanna et al (2002) identified the addition or deletion requested by the owner may lead to variations. Alnuaimi et al (2010) observed that not meeting the responsibility of the owner in supplying the materials and/or equipments, which are to be supplied by him, will also lead to changes to be requested by the owner at a later date.
Alnuaimi et al (2010) identified design errors and changes made to designs and failure of the consultant to suggest the best alternative design for project during the feasibility study as the changes relating to consultant’s acts. Keane et al (2010) found conflicts in contract documents and lack of information on the availability of materials and equipments are consultant-related causes for variations in construction agreements. Keane et al (2010) also identified lack of coordination among the parties as one of the most important causes for change requests relating to consultant. Change in specification suggested by the consultant and insufficient details in drawing leading to poor understanding of the parties are also consultant-related causes for variation orders.
In this context, Alnuaimi et al (2010) out of their case study of a water transmission project identified the issuance of four change orders for different reasons. They are (i) first one was issued to include the cost of rerouting a pipeline. This was necessitated because the project had to provide a right-of-way for a main highway. The change was necessary to change the water storage foundations adopting piles instead of raft footing; (ii) second change order was to be issued because of the delay caused by the first change order. This order included the cost of leveling some area of land and the construction of additional facilities which were not covered by the original contract scope; (iii) third change order was issued to provide for the cost of delay in providing various facilities at the inception of the project; and (iv) fourth change order was issues for rerouting the pipelines to pass through a different route away from the lands and houses of private parties. The total cost of these changes was US $ 7,539,216, which was 14% of the originally estimated cost of the project.
On an analysis of these four change orders, it may be inferred that the variations can be grouped under two types – consultant-related and client-related. The consultant-related variation orders include the changes requested because of design errors. The second group of variations has been necessitated because of additional scope requirements. In addition to the cost overrun, the project was granted additional time of 8.57% more than the scheduled time. Alnuaimi et al. (2010) observe that the first group of variations could have been avoided by undertaking soil investigation in a proper way, with precise knowledge of local regulations and proper coordination with other government departments. The authors are of the opinion that the second category of variations could have been reduced by proper planning and phasing of the projects.
Factors or causes of variations are not cognate at every project but these vary from project to project according to the nature, location and complexity. Variations in the construction industry are frequent and they are critical issues for the management to address. The timely completion of a construction project right from inception has always has a great importance in the construction industry. Variations and the resultant delays in completion of the projects cause financial losses to the project owner. Because of the financial losses incurred by the project, the project owner may find it difficult to settle the payments to the suppliers as well as wages and salaries to the project team members. Consequent to the liquidity issues, the delayed completion of the project affects the economy of the country.
Completion of construction projects within the allotted time is always difficult. Most of the time construction schedules have been revised due to various delay factors including variations. “Completing projects on time is an indicator of efficiency, but the construction process is subject to many variables and unpredictable factors, which result from various sources,” (Assaf and Al-Heiji, 2006). This causes the initiation of change orders.
Project delays caused by variations result from the poor performance of parties connected with the project. For example, delay in supply of materials by the suppliers will lead to delay. Similarly non-availability of resources like men and materials at the required time will also impede the progress of the project. Environmental conditions affect the progress of the project and lead to delays in the completion. Above all, lack of coordination among project stakeholders including contractors is the main cause of delays in completing the projects.
Globalization, research and use of IT in production industry have reduced the risk of delay but construction industry due its volatile nature still suffers delays. These delays are normally related to the project planning, owner’s decision making (variations), manpower, supervision, late issue of drawing, slow decision making by government authorities and lack of coordination. In recent years due to global recession, many projects were abandoned or delayed due to lack of finance. Today’s construction project has become a very complex, high-risk, and multiparty endeavor. Construction projects are composed of many interrelated elements of labor, cost, material, schedule, other resources, and lot of coordination, making it difficult to define, which factors were the main causes for delay on a given project. Identifying the main causes of delay in large construction projects is very difficult and often leads to disputes about responsibility for the delay. This review leads to the research question “What are the general causes of variations in the construction industry of Oman?”
Types and Causes of Variations
Variations become an inevitable element in almost all construction projects (Ibbs et al. 2001). Owner may prefer to change the scope of the contract at any time during the progress of the project to meet his various needs. Similarly market conditions may necessitate some changes in the parameters of the project. Based on the latest technological developments the engineer might decide to alter the design or construction method, which will also lead to variations in the construction project.
“The engineer’s review of the design may bring about changes to improve or optimize the design and hence the operations of the project. Furthermore, errors and omissions in engineering or construction may force a change. All these factors and many others necessitate changes that are costly and generally un-welcomed by all parties” (Arain & Pheng, 2010).
Thus, variations may be the result of a number of factors. This chapter presents a discussion on different factors that are likely to cause variations in construction projects.
Types of Variations
Based on the purposes, changes can be classified in different ways. Changes in a construction project can be classified depending on the cause that necessitated the change. Classification of changes based on originator facilitates better calculation of the cost impact of changes and hence are considered ideal. Number of causes has been identified, which lead to issue of change orders. Design changes, which are the major source of variation orders, have been found to cause more than 52% of the variations (Burati et al. 1992). Design changes can be categorized into (i) variations resulting from improvements in design process – changes necessitated based on review of designs, advancement in technologies or review of activities from constructability aspects are some of the examples of this type. (ii) Owner initiated changes, which include changes in the scope of the contract and (iii) process changes introduced by the architect or consultant based on his expertise – this type include changes like addition of instrumentation that might have an impact on the facility.
A classification of changes can be made based on the net effect of such variations on the scope of the contract. They are (i) additive change involving additional work to the scope, (ii) deductive change eliminating some activity and thus reducing the scope of the contract, (iii) rework caused by deficiency in quality of work already executed, (iv) changes necessitated by force majeure – these changes entitle the contractor a revision in the project schedule in addition to cost adjustments subject however to the conditions of the contract.
A third way of classifying the changes is based on the procedure followed to effect the respective changes. This type of categorization of the changes is considered important from a legal purview. The changes are (i) formal or directed change – when the owner or his representation introduces the change by operation of a change clause under the contract, (ii) Constructive change necessitated by the acts or omission to do certain acts by the owner or his representative. Normally, the changes effected by the acts or failure of the owner are not regarded as changes and hence are potential sources of disputes and resultant claims. Mistakes in the contract documents or wrong understanding of the clauses by the stakeholders happen because of lack of attention of the employers. (iii) cardinal changes are changes that take place in a construction project, which are outside the scope of the contract. These changes are executed only after the entire contract is renegotiated or the complete scope of the contract is redefined.
Causes for Variations
Aibinu and Jagboro (2002) studied the impact of delays on construction projects. The authors identified “time overrun, cost overrun, dispute, arbitration, total abandonment and litigation” as the effects of delay. According to Koushki et al (2005) observed that material selection time and their availability in the local market would result in cost and time overrun. Delays in construction projects influence the performance of the contractors and lead to disputes among the parties, low productivity and increased construction costs.
Sambasivan and Yau (2007) observed that contractor-related and client-related factors such as lack of experience on the part of the contractor and interference of the owner would result in time overrun. Koushki et al (2005) found contractor-related issues, material-related issues and financial constraints as the main causes for cost overruns in construction projects. Wiguna and Scott (2005) increased material cost because of inflation, changes in design requested by client, defects in design, inclement weather conditions, delayed settlement of bills of contractors and quality issues in construction works lead to disputes and resultant delays in construction projects. Hegab and Nassar (2005) found that delays in commencement of the project led to subsequent time overruns.
Ebsworth and Ebsworth (2008) found that misleading information at the tendering stage results in delays and consequent claims. Semple et al. (1994) observed that 37.5 % of the samples selected for their study cited weather conditions as a contributing factor for the delay. Delays and huge claims may arise because of major redesigning of foundations caused by different ground conditions, which would not have been revealed by field surveys undertaken before the commencement of the project. Assaf and Al-Hejji (2006) found delays in approval of drawings, changes in designs and conflicts in work schedules of sub contractors were the significant causes of delays in construction projects in Saudi Arabia. Delays become an inevitable element in construction projects (Ibbs et al. 2001).
Arain and Pheng (2010) find that review of designs will result in delays and increase the cost of the project. Design changes, which are the major source of variation orders, have been found to cause more than 52% of the delays (Burati et al. 1992). Variation orders requested because of many reasons cause delays in construction projects. Harbans, (2003) point out that even if careful planning has been done in respect of a project, it is possible that some variations might become necessary as the construction progresses and these will cause delay in the completion of the projects. Therefore, construction contracts provide for possible variations considering the nature of the works involved covering all the above causes (Finsen, 2005). Variations can occur because of number of reasons including improvements in constructions (Ssegawa et al., 2002). Most of the variation orders result in construction delays.
Variations during the Progress of the Project
The construction process is subject to the influence of changes in various events, the course of which is difficult to predict. These variables may emanate from various sources. “These sources include the performance of construction parties, availability of resources, environmental conditions, involvement of other parties and contractual relations,” (Furaih, n.d). Interestingly some of these factors give rise to opportunities for making additions to the existing construction works. This section discusses the variations resulting from additions to the construction works.
Additions normally are suggested by the owners so that the construction project meets his expectations. Owners are likely to change the plans or scope of the work because of insufficient planning at the stage where the project scope is defined. Addition to works may also be caused by the reason of the lack of involvement of the owner in the planning and designing phase of the project. Under normal conditions the cost of additions will have to be bear by the owner if the additions are introduced in the works to facilitate the owner. There may be instances where the contractor might suggest some additions to improve the performance of the project so that the project can be completed before schedule. Even in such instances variation orders issued by the owner for effecting such improvement may have to be carried out by the contractor at the expense of the owner as the owner will become the ultimate beneficiary of such additions to the contract works.
Additions may also result because of changes in health and safety consideration of workers. For example, it might be necessary to add health centers or children crèches in an industrial building on the consideration that number of employees is likely to increase and such provisions are mandated by the applicable labor laws.
Variation requests may arise because of the omission to include some precise requirements of the project. Omissions to include certain requirements of the owner in the contract documents or the design specifications will lead to the necessity of issuing variation orders (Hanna et al. 2002). It may so happen that the design team has omitted to consider peculiar ground conditions or the neighborhood considerations while planning the construction project. Some of these factors may lead to variations in construction contracts. The omissions may also relate to some of the health and safety conditions overlooked by the design team. Although most contracts provide for the possible variations of these omissions in the form of a variation clause included in the construction clause, certain omissions are likely to have significant impact on the work schedule and cost. In these cases the variations on account of omissions are to be discussed among the parties to agree on the cost and time before a variation order is issued amending the existing contract conditions.
Similarly, alterations in construction works are common. The alterations may be suggested to facilitate either the owner or the contractor. In some instances the alterations may be needed to carry out the construction activities in an efficient manner. These alterations may be in the construction method or in the work already executed. In any case the cost impact of the variations because of the alterations suggested is an important factor to consider for fixing the responsibility on a particular party. In case the alterations are suggested to facilitate the contractor the variation orders have to be executed at the cost of the contractor. A mutual agreement may be arrived in sharing the cost and in providing additional time in cases where the alterations need to be undertaken for efficient performance of the project
In the context of Oman variation requests resulting from addition, omissions and alterations to be undertaken during the construction process can be found more common. The reason behind the increased variation requests is that the owners do not possess some technical knowledge to understand the work of the design team or what the design specifications signify. The owners also do not involve them in the discussions on the technical aspects of the construction projects. Only when the structure is physically constructed they will find that some of the design features are not up to their expectations. Because the owners are not in a position to explain in clear terms, their expectations on the project, they would request for frequent changes in the designs in the form of additions, deletions or alterations. In some instances, the owners may change their mind to change the construction designs based on current economic trends. Since construction projects have a long gestation period, the economic scenarios may change over the period during the process of construction. Depending on the economic changes the owners would prefer to have the constructions altered. This would give rise to more variation requests from the owners.
Variation Requests from the Clients and Contractors
Variation in a construction contract may be classified as “one of the following: an unavoidable variation; a variation for the convenience of the client; or a variation for the convenience of the Contractor (or Consultant),” (New South Wales Government, 2008). Variations to facilitate the client include those changes requested by the owner because of a change in his expectations. These changes do not represent unavoidable variations, because it is possible to continue and complete the project even without carrying out the proposed changes. The variations initiated for the convenience of the clients are most likely to change the scope of the contract and almost in all instances will lead to additional costs.
Even the variations suggested to reduce the scope of the work may entail some additional cost.
“This is because variations are valued by adding the cost of the extra work, plus a margin and subtracting the contractual value of the work taken out of the contract. The actual cost of the added work can often be greater than the contractual value of the work taken out of the contract,” (New South Wales Government, 2008).
Reworks suggested under the variation and the delay and disruptions caused by variations ordered to facilitate the client will have associated costs increasing the total outlay on the project.
It is essential to provide the required money and to approve the variations, before any variations to facilitate the clients are ordered to be carried out. The money provided should be adequate to cover the additional cost needed to carry out the changes. The cost in the case of variations may include the actual expenses and losses of the contractor and other additional amounts of fees if any.
Al-Moumani (2000) studied the impact of change order in public construction projects undertaken in the Sultanate of Oman. The study included case studies and field survey and found that alterations in owner requirements is the most frequent cause of changes in the construction projects. The research also concluded that changes in requirements lead to delays in completion and cost overruns and consequent claims on parties to the contract.
Variations requested by the contractor are the ones which are issued for the convenience of the contractors. These variations represent “unavoidable variations”. It is not obligatory on the part of the owner to agree for a variation which is intended to facilitate the contractor. However, the variation may add to the value of the project. Whenever a contractor makes a variation request to facilitate himself, the owner may consider the request just to keep better relations with the contractor. It is important that the contractor provides sufficient details to the owner to make proper evaluation of the variation request of the contractor. The owner may choose not to authorize the variation to facilitate the contractor, until he evaluates the variation request and agrees for the full impact of such variation. The owner may also insist that the contractor takes full responsibility to ensure that the proposed variation does not affect the remainder of the activities of the project.
Variations because of Other Reasons
Variations in a construction contract may arise because of a number of factors including design factors. Normally a construction project started before the completion of the design aspects is likely to face more number of variation requests (Finsen, 2005). The variations in works contracts may occur because of defects, errors or omissions in designing or in planning. These errors and omissions include mistaken quantity estimates, mistakes in planning, lack of adequate arrangement of contract interfaces, lack of consistency between drawings and site conditions, improper citation of specifications in the contract documents. The responsibility for variations because of design factors will fall on the planning and design department.
Variations may be requested by either the owner or the contractor to ensure health and safety of workers.
“In certain construction processes, there are unforeseeable situations where the contractor needs to do whatever it takes to maintain the work schedule by making certain changes without violating safety regulations. Such changes can be either as minor as to lead the construction to clearing out an unplanned site path or vehicle route, or so overwhelming as to have to reschedule project activities or even adopt a new construction method,” (Hseih et al., 2004).
Where there is the need to change the construction method, it is necessary to issue a variation order.
Natural incidents such as typhoons and torrential rains affecting the safe progress of the construction work. In these instances and in other instances such as landslides, flooding it may become necessary to change the original schedule of the project by issuing necessary variation orders. Change of work rules is another significant cause of variation, especially when the project runs for a longer duration. The work rules and regulations which were effect at the planning and design stage might be changed by the governing authority later at the construction stage necessitating the issue of requests for variations. Similarly, changes in decision-making authority during the period the project continues give room for variations in construction contracts. With the change in decision-making authorities, the interpretation of regulations might vary and the risk to the continuance of the project because of changes that are not within the control of both the contractor and the owner must be mitigated by issuing variation orders. It is usual that in any construction project the neighborhood concerns are taken into account at the planning and design stage to avoid expensive variations at a later stage of construction. However, in some instances factors like “lack of experience, absence of proper authorization or simple shortage of time” the neighborhood considerations might have been omitted to be considered and some of them might arise at a later stage leading to variations in contract terms.
In practice, a number of factors lead to the generation of variation orders in construction contracts. This chapter contained a discussion on some of the major causes for the variations to arise. Owners might decide to change the scope of the construction work to meet any change in their expectations from the contract outcomes. Under such circumstances the owners might add new works to the scope of the contract which is an important cause of variation. Omissions by the planning and design team also are a factor that leads to large number of variations in construction projects. Apart from additions and omissions, there may be instances where the consultant, the contractor or the owner might suggest some alterations to the existing working methods or work completed. The alterations may be suggested for an effective improvement in the project performance. Change of lines and levels may also be an element brining in variations. Variations in construction contracts may be categorized to include variations because of unavoidable events, variations to facilitate either the client or the contractor. Changes in designs may also lead to variations and the chapter also cited a number of other reasons for variations to arise. The next chapter presents a discussion on the impact of variations. This review gives rise to the research questions:
- What are the owner-related causes of variations in the Oman construction industry?
- What are the contractor-related causes of variations in the Oman construction industry?
Impact of Variations
Types of Impacts
Impact of variation orders has been the subject matter of several research works. This chapter presents a discussion on the impact of variation orders on the construction projects. According to Jawad, et al. (2009),
“The impacts of a variation are classified as follows:
- Direct cost impact
- Direct schedules impact
- Indirect or Consequential impact”
The direct cost effects are limited to the construction activities in which the variations are to be applied. The owner may experience a positive or negative impact of the change, which in turn will be the opposite for the contractor. In some instances, the changes may not have any effect for both the contractor and the owner. Direct cost impact comprises of two elements – labor cost and material cost. It is always easier to determine the material cost impact with certain level of accuracy. On the other hand, it is not easy to calculate the effect of labor charges precisely because of the impact of variations on labor productivity and the uncertainty on the scope of the changes on the works. Impact of labor cost may lead to degradation in productivity, delays in completion and demolition of already constructed portions and rework of them.
Direct impact of changes on the schedule of construction activity can be documented easily after the change is effected, because one could get all the necessary data for estimating the effect. However, such estimation is not possible before carrying out the variations because of unexpected changes in labor productivity, accessibility of required materials and schedule changes. When there is a penal provision in the contract, the loss on account of changes in schedule may become very expensive.
It is the normal tendency of the project stakeholders to overlook the indirect or consequential impacts of changes in construction contracts. Indirect or consequential impact may affect the progress of other associated works at a later date and thus will lead to delay in the completion of the total project. Therefore, it becomes important that the owner and the contractor take into account the direct and indirect impact of variations, while incorporating a change clause in the construction contract.
Thus variations in construction contracts lead to consequences that significantly affect the progress of different work packages and thus causing delay in the entire project.
Variation Requests and Cost Overrun
When the contracts are supported by proper planning and schedules, they will be completed smoothly and in time and with the expected quality of construction. However, seldom construction projects are completed in time to meet the original time table because of the influence of several factors including design slippage and amendments (Al-Hakim, 2005). Frequent incidence of variation orders has a negative effect on the progress of construction projects (Thomas et al. 2002). By adversely affecting productivity and project costs, variation orders impede project performance largely. Arain and Pheng (2005) observe that variation requests, though undesirable cannot be eliminated altogether. Hanna et al (2002) are of the opinion that projects with many variation orders affect productivity and thus lead to delay in execution of the contracts. Variation orders affect the project performance in terms of cost overruns.
Variations may be categorized as beneficial and detrimental variations. Beneficial variations include those variations which help improving quality of construction and reduction of cost overruns. They also help in improving project performance by better scheduling and reduce the degree of difficulty in executing the project. Ibbs et al (2001) find detrimental variations will affect the project performance negatively and will result in a reduction in the value to the client. Variations involving cost of the project may be beneficial or detrimental depending on their impact on the total project cost. Because the need to order for changes in the construction contract is a matter of practical reality, the owner has to be careful in requesting variation orders resulting in additional costs to the project. On the other hand the project team may be able to take advantage of beneficial variations which work to reduce the cost of the project. Variations in construction contracts may result in significant variations in direct and indirect cost of the project. The variations and variation orders involving changes in costs may be detrimental to all the parties.
Material costs are a major cause of escalation of costs in construction projects. Construction projects involve two major phases – preconstruction phase and construction phase, with the construction phase consuming more resources than the preconstruction phase. Therefore, in the construction phase more attention is focused on cost planning. The employers are keen to know the total cost of completion of the project in advance and they also prefer to have the cost of completion equal their original estimate as per the tender.
Nevertheless, many of the construction projects are subject to cost overruns. It is to be noted that all variation orders do not result in cost overruns. Variation orders that cause deletion of works lead to reduction in costs, while on the other hand variation orders involving additional works lead to escalation of project expenditure (Ssegawa et al. 2002; Arain and Pheng, 2006). Arain and Pheng (2005) found that change orders issued during institutional building constructions have led to considerable escalation of construction expenses. Mohamed (2001), based on the study of the impact of change orders in different sewer overflow projects found that expenses increased up to 7% of the estimated costs. Bower (2000) identified the following direct costs, as being associated with change orders.
“Bower (2000) identified the following direct costs associated with variation orders: Time and material charges related to immediately affected tasks; Recalculation of network, increased time-related charges and overheads; Reworks and standing time; Timing effects for example winter time; Inflation, change to cash flow and loss of earnings; and Management time, head office and site charges. While the direct costs associated with a variation order can be easily calculated, Bower (2000) argued that indirect costs are more difficult to quantify,” (Ndihokubwayo, 2008).
Any change or alteration in the design of a project is most likely to result in increased project cost. In order to protect against the cost impact of variations involving additional cost because of unexpected events, every construction contract provides for a contingency sum at a certain percentage of total project cost. The purpose of the contingency amount is to ensure that the project progresses without difficulty even in case of the occurrence of any detrimental variations. Increase in indirect cost results from the necessity to supply additional materials to take care of reworks or additional works taken up as a result of the change order initiated. Loss of productivity because of change order may also have an effect on the direct and indirect cost of the project. When the productivity of labor is affected because of variations the contractor may have to employ additional workers to complete the work within the agreed schedule. Loss of productivity however cannot be measured precisely to arrive at the addition to the project cost because of variation orders issued. Change in scope of work is the most significant variation that is likely to have an adverse impact on the project cost. Change in the scope of work is again within the decision of the owner. Therefore, the owner has a significant role to play in preventing the occurrence of any cost variation in the project.
Variation Requests and Time Overrun
It is the wish of the clients that their construction projects are completed within the scheduled time and they expect to achieve monetary gains, when the project is completed within the shortest time possible. The employers apply heavy penalties to the contractors when they exceed the original project schedule and prolong the delivery period. The contractor is made to make good the losses incurred by the client because of delays in completion. Variation orders have been found to be one of the causes of time overruns in many construction projects (Mohamed, 2001). Change orders issued at different stages of construction projects result in time overruns and lead to delays in completion (Koushki, et al. 2005). Hanna et al (2002) found that frequent change orders lead to considerable reduction in productivity. Reduced productivity leads to time overruns and consequent delays in completion. Yogeswaran et al (1997) have categorized time overruns into excusable and non-excusable. Excusable delays, “relieves the contractor of liability for liquidated damages and the latter is due to the contractor’s culpable delay,” (Ndihokubwayo, 2008). Non-excusable delays arise because of the culpability of the contractor.
Other Impacts of Variations
Number of other construction project aspects is affected by the variation requests, irrespective of the party who has made the requests. The following sections present a discussion on these impacts.
In contracts with considerable degree of risk for unexpected events, in the fear of having to pay damages for time overruns, contractors have a tendency to cut corners on quality of materials so that they may be able to maximize their earnings from the contracts. If variation orders occur frequently because of uncertainties, it will affect the quality of the construction. “Quality may be compromised as contractors try to compensate for losses they are not optimistic about recovering” (Ndihokubwayo, 2008). It is observed that the quality of the work may become poor because of frequent variation orders issued, as the contractor may attempt to make good his losses by compromising on the quality of materials and project outcomes. Low productivity caused by variations may also lead to quality issues as the contractor may have to employ new manpower some of whom may not have the required experience.
Health and Safety Issues
Provision of health and safety measures may have to be revisited in case of frequent incidence of change orders. For instance Clause 5.3 (e) of the OHS (2003) prescribes that in the case of variations, the contractors must be provided with sufficient information on health and safety considerations, where there is variation orders issued in respect of construction projects. The contractor must also be provided with appropriate resources for maintaining good health and safety conditions. This requirement becomes valid because variations in construction procedures, supplies and implements may need extra provision of health and safety measures (Arain & Pheng, 2005). Clause 5.14 of the OHS (2003) places an obligation on the contractor to provide adequate information to the principal contractor on the health and safety of workers who might be affected by the variations in the construction works. The principal contractor must be informed about the circumstances which might need a review of health and safety plans because of variations.
Misunderstandings among Parties
A construction project cannot be considered just a business venture; but it leads to the creation of a professional association among the parties to the construction contract. With the completion of each project the experience of the participants go up and their reputation also enhances. However, variation orders lead to disputes and claims among the parties, as a result of which misunderstandings may arise. Opportunities for misunderstandings may arise because of the dissatisfaction of the contractor with the valuation process of the variation orders by the consultant. Variation orders give rise to arguments over the cost, time for completion and payment of compensation under variation orders (Bower, 2000).
“Possibly because contractors are not confident about the outcome of such negotiations, they usually request higher values for variation orders than the actual cost incurred. Bower (2000) opined that consequently there is tension between parties as the contractor continually pushes the client to settle claims for additional costs while invariably feeling that the reimbursement has been insufficient,” (Ndihokubwayo, 2008).
This misunderstanding affects the relationship between the parties (Bower, 2000). Mismanagement of variation orders is most likely to lead to disputes between the owner and the contractor (Charoenngam et al. 2003).
Loss of Reputation
Variations in construction projects arise mainly because of misinterpretations of the clauses of the contract, as it is always not possible that the employer can precisely express the project objectives and his expectations by incorporating them in the clauses of the construction contracts. The ambiguity in some of the provisions will lead to misunderstanding among the parties (Sun & Meng, 2009). In cases where the parties are unable to reach an amicable resolution of the issue, disputes arise necessitating the submission to arbitration for settlement. Some of the issues may have to be decided by the courts if they cannot be resolved through arbitration. When the dispute as a result of variation orders is submitted to courts for settlement, such instances create negative publicity for both the contractor and the owner.
Any supplier or other counterparties transacting with the owner or creditor may consider the transaction with either of them undesirable and therefore would become cautious in dealing with the parties under dispute. This represents loss of credibility to the contractor and the owner. Similarly, when the contractor or owner is not successful in executing his claim and recover damages from the other party, financial constraints may ensue affecting the progress of the construction activities. This may result in withholding the payments to others including its employees and suppliers. The withholding of the payments by the contractor or owner will be viewed as the step leading to the insolvency of the parties and will act to reduce the credibility of the parties acting under the construction contract.
Loss of Chain Management
Variation orders in construction projects are likely to cause serious disruptions in construction supply chain management. Impact of these change orders will have serious impact resulting in team effect of claims, which eventually will result in extension of time and productivity degradation including quality issues. Reduced work pace in some schedules of the construction project, because of variations is most likely to affect the progress of work in the other project activities. Consequently there will be disruption in the chain management, which is likely to impede the progress of the construction project. (Hanna et al. 2005).
Negative Impact of Variation Requests
In general variation requests result in significant increase in the project costs and delays in the completion of the projects. Such escalation in time and cost are the most frequent effects of variations in the construction industry. In many construction projects, the cost and time overruns have a combined effect to result in reduced earnings to the owner. Especially in the Omani construction industry variations affect the productivity adversely because of the frequency of variation requests. In many instances, variations will result in difficulties for the contractor to meet his financial obligations. Earlier research has found negative correlation between variations in contracts and the productivity. Variations in construction projects, while affecting the present working schedule of the projects are likely to impede the future schedules leading to delays in completion. In the context of Oman, because project completion is delayed by variation orders issued by owners and other project stakeholders, the contractor may be inclined to proceed with certain project activities in an accelerated phase affecting the quality of work completed. This in many projects would lead to rework.
One of the most important effect of variations in that the owner and the contractor are most likely to lose the floats available in the different project activities because of the time lost in the process of claiming and settling the disputes among them. In the Omani construction industry, such instances have led to delays in the completion of several projects. The major harmful effect is the strain on the relationship between the contractor and the employer. Since claims arise from changes in the contractual terms, which define such relationship, any claim is bound to affect the normal and cordial relationship between the two parties. Differences in understanding the reasons for variations in contractual terms lead to claims and counter claims. Variations in construction contracts make the contractor face financial issues, which in turn may lead to use of inferior quality materials in the construction affecting the quality of final outcome of the project.
Variation orders leading to disputes and resultant claims in the construction industry impede the progress of the construction project largely. The impact of variations may lead to strained relationship among people resulting in slow pace of work. Variations also affect the quality of construction and lead to lesser lower employee morale and higher staff turnover. Cost-related issues such as extra payments to the contractors and problems in cash flows, extra funds required to replace the materials and equipments are the result of frequent variation orders. Besides creating strained relationships among the participants to the construction project, Variations may also result in loss of reputation in the market and health and safety issues concerning the workers involved in the construction project.
The construction activity in the entire Gulf region including Oman witnessed an unprecedented construction boom during early 2008, with more number of large construction projects taking place. This increase in the construction activity has strained the available construction labor and material resources and as a result the prices labor and commodities increased significantly. The effect of increase in prices and scarcity of materials made some project sponsors decide to scale down their operations by either cancelling or amending the scope of their projects or by using alternative contracting structures. This situation had given rise to a number of variation requests in the construction industry of Oman. Recently labor has been one of the subjects of escalation clauses in some of the construction contracts. The request for increase in labor costs by the contractors also leads to number of variation requests. The discussion in this chapter leads to the following research question – what is the major impact of variations in the Oman construction industry?
Denzin and Lincoln (2003) state that a researcher has the liberty to choose a research design which in his opinion will enable him to achieve the objectives of his research. However, it is critical that the researcher considers the nature and scope of the research inquiry in his selection of the research design. While choosing the research method it is imperative that the factors affecting the research process are taken into consideration. It is also critically important that the research method proposed to be used by the researcher assist him in finding plausible answers to the research questions and the research method must take place within the scope of the research subject. For choosing the research method for the current research, the researcher considered all the associated factors and chose the quantitative approach to achieve the objectives of the research. The objective of this chapter is to describe the research methodology adopted for the current research.
The first step in formulating the research design is to define the research issue clearly and well-defined research problem will lead to the formulation of an appropriate research design suitable for the research (Fisher, 2007). Theorists have observed that it is not possible to use a single method for all types of research inquiries. Over the year several research techniques have been developed in the field of social research to enhance the validity of research findings. This has increased the options of the social researcher about the methods that he could adopt. However, in many instances the researcher has to consider some trade-offs, while selecting the research method (Bryman, & Bell, 2007). The quality of data, cost of data collection, time involved in data collection and number of samples are some of the factors which influence the choice of the research method. The cost and time factors are the most important factors that determine the research method. Social research may follow a descriptive or causal design. Descriptive research goes into the details of the generation of a research issue and the manner in which the research issue develops. On the other hand Causal studies have the objective of studying the impact of one variable on another.
The research process for the current study incorporate various elements like research technique, research tool and data collection and analysis method which are which have adequately covered the scope and nature of the research inquiry. The complete details regarding these elements constitute the research methodology and the research strategy covers the way in which the research was conducted including the procedure for collecting the required data. The research process is explained in the following sections.
Basic Research Approaches
Social researches follow either a quantitative or qualitative approach depending on the nature of research inquiry. In the case of quantitative research, the approach is to follow an analysis based on numerical values of the variables. Data for the purpose of quantitative research is collected as numerical figures and later statistically analyzed (Bernard, 2000).
Research using quantitative method makes use of the research techniques of questionnaire surveys and structured interviews. Large number of empirical studies on varied social research contexts has used surveys as the research technique. Variables like local social and political conditions, laws governing construction activities, attitude of the owners and other project participants seemed to affect the selection of the quantitative methods as these are some subjective factors having a large influence on the construction management practices. Therefore, studies conducted to assess the perceptions and opinions of the construction industry population are found to be usually prescriptive in nature, although most of the studies engage quantitative research method. These aspects make the results of a quantitative study weak; however they can be generalized covering the total population.
Several criticisms have been raised against the quantitative research technique of survey method, even though the results of the survey could be generalized. One of the major criticisms is that the method does not facilitate the prescription of precise directions on the best practices in construction management. Another criticism against the approach is that because of extensive usage of survey method, the studies tend to give results which are dispersed in nature. The findings are also likely to be superficial and simple, without the rigor required for effective implementation of any new practices. The reason behind the lackluster findings of the research can be attributed to the non-availability of descriptive empirical data about the operation and performance of different organizations within the industry. Fragmentation of the industry may probably be another reason for ineffective data gathering. With the result earlier researches have provided large volume of theoretical contribution on the industry best practices.
Qualitative approach in social research on the other hand involves the study of the perceptions and opinions of people involved in the research inquiry. The researcher takes into account the viewpoints of the participants on the research issue for further analysis and reporting. One of the major limitations of this approach is that the approach normally uses smaller sample size, the study of which may not facilitate the generalization of the findings extending to the entire population. The method does not use any data collection method, where quantitative data or information is collected as a part of the research (Lofland & Lofland, 1984). The focus of qualitative studies is on the quality of information collected, analyzed and presented to the readers rather than on the quantitative considerations. Based on the consideration of the nature of current research inquiry on the impact of variations in the construction industry of Oman and because of the relative merits of the quantitative approach, the current research engaged the quantitative research method.
Social science theorist and practitioners have developed a deductive and inductive approach for pursuing the research processes. Saunders et al. (2009) describe the deductive approach in which the researcher evolves different hypotheses. Based on the hypotheses developed, a research strategy is arrived at to test the hypotheses. Therefore, formulation of a general idea about the research issue is the starting point for following the research approach. The researcher then chooses those research techniques and tools which would help him in testing the hypotheses. When the findings of the research are able to test the hypotheses positively, then the original idea generated by the researcher about the research issue could be considered as correct.
On the other hand in the inductive approach, the researcher adopts data collection as the first step in the research process. Then he proceeds to develop a theory based on the data collected. Creswell (2003) observes that inductive approach enables the researcher to get a better understanding of meanings attached by human beings to events and therefore this approach supports qualitative studies aptly. One of the shortcomings of inductive approach is that there is the chance that the researcher may lose track of the original emphasis of the research as the approach, with its flexibility to provide varied information may affect the focus of the researcher. The major limitation of inductive approach is that it cannot possibly assist generalization of the findings of the research. On a consideration of the relative merits and demerits of both deductive and inductive approaches, the current research engages a deductive approach.
Sources of Data
A methodology of data collection has significant importance in research work and directly influences the results. Research studies use primary and secondary data collection methods. Primary data is the data collected by a researcher for the first time in respect of a research topic by engaging different research instruments. The researcher can retrieve secondary data from any of the sources currently available. The secondary data is collected by people other than the researcher and for a purpose other than the proposed research (Proctor, 2005). Data and information collected from the respondents to the survey form the primary data for the current study. Secondary data may be collected from many sources like professional publications and prior research findings. Secondary data carries the benefit of providing significant theoretical support to the research inquiry. This research uses case study method and interviews under qualitative research as the primary research method for data collection.
The current study engaged a quantitative survey for data collection. The survey used a self-administered questionnaire as the instrument for collecting the primary data from the samples. The questionnaire was distributed to the target samples via e-mail with a request to send the responses back to the researcher. Using e-mail was found to be a convenient means of distributing the questionnaire to the chosen respondents and thus collecting the primary data for analysis. From the time and cost perspectives electronic surveys can be considered the appropriate means of data collection. Yin (2003) observed that survey as one of the effective means of primary data collection in any social research. Because surveys use knowledgeable samples as data source, the method has been preferred by many social researchers. Survey technique is adopted, “To get a detailed and comprehensive view about the data obtained, which will be used for mapping” (Denscombe 1998). This technique has the advantages of an extensive and wide coverage and the data collected relates to the period, when the research is undertaken. Experimental researches can be conducted successfully using this research technique.
Ability to represent the findings of the study in numerical form has enabled survey method to be a popular research design. In many quantitative researches, the simplicity of the questions contained in the questionnaire promotes wider participation and retrieval of data from informed sources (Creswell, 2003). Validity of the research findings increases because a large population can be attracted to take part in the surveys.
Designing the Questionnaire
A self-administered questionnaire containing questions on variations in the construction projects of Oman formed the research instrument for collecting primary data for the current study. Questionnaire in a quantitative survey is an important document which is designed to enable the respondents to provide data and information within their knowledge, so that the data collected can be subjected to further analysis and reporting. Designing the questionnaire assumes great importance in the context of any quantitative survey as the questions must be able to draw as much precise and relevant information as possible from the respondents. The questions are constructed based on the information retrieved from the review of the literature and on the surveys conducted under earlier studies.
Questions in the area of variations in the construction industry of Oman were designed based on the information of the researcher about the industry because of his close association with the industry. Because of the utility of questionnaire in data collection in quantitative researches, this research instrument is preferred by most of social researchers (Creswell, 2003). Questionnaire as research instrument is highly valued because of its ability to collect the required data systematically from a wider section of the population. Such data collection also facilitates the analysis to be completed easily (De Witte and van Muijen, 1999). Different variables like the variation causes that originate from the clients, contractors and consultants are derived by the researcher based on the review of the prior studies. The following sections deal with the designing of the questionnaire as the research instrument for the current research.
Contents of the Questionnaire
The researcher considered many options of different questions to be included in the questionnaire. After several alterations in the contents of the questionnaire, the final questionnaire containing two sections was designed. Appendix I exhibits the sample of the questionnaire for the information of the readers. Questions on the personal details as well as details about the organizations to which the samples belonged, formed part of the first section of the questionnaire. The details pertain to details like educational background and experience of the samples and turnover and contract methods of the organizations. Questions to collect data and information on the issue of variations and the impact of such variations on the Oman construction industry were included in the second part of the question. The questions in the second part were closed-ended questions providing different options to the participant. In order to assign importance or preferences, the participants were asked to adopt a five-point Likert scale. Based on their perceptions, experience and knowledge, the participants were asked to rank the different options in order of their importance using the Likert scale, where “5” represents a highly important variable while a “1” is a least important variable.
Samples for the Survey
The success of any research depends largely on the selection of samples for the survey. Although the researcher need not precisely define his target samples, he has to use his expertise and judgment in selecting the samples, so that he can rely on the quality of data and information retrieved from such samples. The researcher has to arrive at the nature and size of the samples keeping in mind the research goals. In many instances the total population to be studied may not be large to warrant the selection of samples. In such cases, the researcher can consider extending the survey to the total population. In cases where the research inquiry covers a large population, the researcher has the responsibility to adopt a suitable method for selecting the samples so that the samples possess the characteristics of the total population. It is important that the samples represent the qualities of the population it represents. Social researches use probability or non-probability sampling techniques for choosing their respective samples. Under probability sampling the researcher will be able to consider each of the units in the population to represent the total population as sample. For the current research, the researcher selected the samples using a random sampling method under probability sampling.
First, a list of engineers working in the Ministry of Municipalities and Water Works and the contractors and consulting firms registered with the Ministry with available demographic details was prepared to select the sample, who could respond to the survey. Employees with reasonable professional qualifications who would be able to understand the impact of variations in construction industry were selected. An elimination process was undertaken to remove those professionals having lesser years of experience with the company. Out of 97 engineers screened, 56 engineers were identified as capable of answering the survey questions. Questionnaires were sent to 56 employees of whom 38 returned the survey questionnaire duly filled. The responses of six samples could not be considered making the effective response from 32 professionals. This has resulted in a response rate of 57.1% which can be considered a better response rate in this type of social researches. For example, Ellhag and Boussabaine (1999) consider such a response rate as good.
The extent to which the results of a research are found to be valid determines the level of acceptance of the data collected in the context of any social research. The purpose of testing the validity in any research is to confirm whether the research could achieve the proper measuring of the elements, which the research expected to measure. The accuracy of the findings can be estimated using experiments of validity. It is for the researcher to define the limits of validity of the research. In quantitative approach the validity of the findings can be tested using some techniques. While in qualitative research there are no such provisions. It is to be mentioned that, “to disregard validity is to put the trustworthiness of your work in question and to call into question others confidence in results” (Tariq, 2009). The quality of research report is determined by the degree of validity and reliability of the data collected under the research. Therefore, validity becomes an important element in the conduct of any social research. The philosophical stance taken about the issues involved in the research inquiry determines the application of validity to any conclusions of any research. The scientific nature of the research methodology adopted for carrying out the research contributes and enhances the validity of the findings of a research.
This chapter presented a discussion on the research methodology adopted for the current study. Research approach and techniques were discussed in detail within this chapter. Designing of the survey instrument of questionnaire and selection of samples are the other focuses of this chapter. The next chapter presents the findings of the survey and an analysis of the findings.
Results and Analysis
This research undertook to analyse the causes and impacts of variation requests in Oman construction industry. An extensive literature review formed part of the secondary data collection method for the research. The primary data was collected using a quantitative survey among the construction industry professionals working in private and public sector projects of Oman. The survey was conducted among 32 samples selected from the private construction firms and the Ministry of Municipalities of Oman on a random basis. The professional engineers have been able to respond to the questions based on their knowledge acquired from their personal experience in the industry. The questionnaire being the survey instrument was sent to the participants through e-mail. Out of 56 questionnaires sent 38 responses were received and 32 were taken for consideration of the responses. The response rate of 57.1%
Demographic Details of Respondents
The results of the survey reveal that most of the respondents are working as engineers with various departments of government ministries. The participants are civil engineers who have worked in different construction projects within Oman and other GCC countries. Review of the personal details for selection of the samples revealed the information that some of the participants have worked in large infrastructural projects in different geographical locations. This implies that the participants have considerable knowledge in the construction industry practices. However, for selecting the samples the research followed a non-probability sampling technique. Therefore, the samples cannot be said to have consistency in certain demographic characteristics meeting the statistical requirements for analysis. The experiences and educational backgrounds of the participants vary; however, the variations have not affected the results of the research significantly, as the participants have been working in the construction industry for periods ranging from eight to twenty years. Irrespective of the imbalances in sample characteristics, the survey has evoked reasonable response providing support to the findings of the research. Another important feature of the demographic information is that a majority of the participants to the survey were working in the management level and hence it can be assumed that they had sufficient knowledge in dealing with variation issues in the construction industry of Oman and are capable of answering the survey questions with authority. This increases the validity of the results of the survey.
The responses to the question on educational qualifications of respondents to the survey reveal that most of them have acquired higher educational qualifications of master’s degree and some of them have doctoral degree. This increases the capabilities of the respondents to answer the survey questions with profound knowledge, as with the qualifications, they would have acquired considerable expertise in the construction industry practices with respect to variation requests and their impact on the projects. Out of the 32 respondent organizations, 30 of them had turnover of more than R.O 10 million. A majority of the respondents has reported that they have been involved in construction projects valued between R.O 1 and 10 million. The turnover and individual project values indicate that the participants must be having good exposure to the construction industry issues including handling the variation requests and their impacts on the individual projects. Demographic details of the participants are helpful in evaluating the homogeneity of the samples and its effect on the research results. The possibility of generalizing the results can be judged based on the homogeneity of the sample population. This section contains the summary of responses on the questions on the demographic details of the participants.
From the responses to the question on the organizational belonging, it is observed that 22 of the engineers were working with departments of government ministries and 10 of them work with private sector. None of them were working for any public private partnerships as such form of organization is rare in the context of Oman. The following diagram shows the organizational belongings of the samples.
For the question on the nature of the business of the respondent organization, 81% of the respondents replied that they belong to owner organizations, 12.5% of them belonged to contracting firm and 6.5% were belonging to consultants’ firms. The results are represented in the following graph.
The turnover of the respondent organization is presented in the following diagram.
The following table indicates the professional capacity and position of the respondents in their respective organization.
Table 6.1: Position in the Organization.
|Position||No of Respondents||Percentage|
The responses to the question on the number of years of experience the participants have are represented by the following graph.
The question on the educational qualifications was responded to by the participants in the following manner.
Survey Findings on Variations in Oman Construction Industry
The second part of the questions contained questions on the issue of variations n the construction industry in general and in Oman. The findings of the survey from the responses of the participants are presented in the following sections.
General Information on Construction Industry
The first question in the second section of the questionnaire asked the respondents t indicate the procurement method followed by their respective organizations. Most of the respondents have indicated that their organizations follow the general contracting method. While cost plus contracts and design and build methods are also in use in the context of Oman, because of the more number of participants from government departments, the respondents have cited general contracting as the procurement method followed by their organizations. The responses to this question are represented in the following graph.
The next question required the participants to indicate the importance of different considerations taken into account by their respective organization while finalizing the contracts. The participants were given seven options and were asked to indicate the relative importance of each of the options by categorizing them in the scale of 1 to 5, where 5 denoted the most important and “1” implied the least important consideration. Because of the smaller number of samples and the nature of research inquiry, the researcher proposed to use simple statistical analysis method for presenting the results of the survey. Statistical measures like standard deviation, skewness and kurtosis are not feasible to use when the sample size is small. On the other hand a simple mean may not represent the choices of the respondents precisely. Therefore, the responses provided by the individual participant were averaged using weighted average method. The weights were given according to the importance attached to each factor. The mean values are represented in the following graph. Majority of the respondents have indicated that agreement on time is the most important factor for finalizing the contract by their respective companies.
The next question sought the opinion of the respondents on the most important factor causing variations. The participants were given eight options including lack of construction materials, change in design by consultant, errors in Design, conflicts in contract documents, lack of coordination among parties, change in specification by owner, problems in contractor’s company, lack of Supervision. The participants were asked to rank these options in order of importance in their perceptions. The participants found lack of coordination among the parties and change in specification by the owners as the most important factors for variations. The following graph presents the summary of the responses to this question represented by the mean values for the respective options.
The next question considered the opinion of the participants on the impact of variations. The questionnaire presented the options of cost escalation, disputes among parties, delays in completion, quality issues in construction, time overrun and issues of claims and loss of productivity as the factors to be considered. From the summary of responses it is observed that the issue of variation is critical to the progress of construction projects. This is evident from the fact that the participants have indicated time overruns, cost escalation and loss of productivity as the most important impacts of variations. Other issues like quality issues, completion delays and disputes among the parties have also been identified as important impacts of variations. The following graph presents the results.
Variations by the Actions of Project Stakeholders
By offering various options, the respondents were asked to rank the circumstances which had resulted in variations by the actions of different project stakeholders.
Variations originated by Client
The questionnaire presented the options of increase in scope, change in mind out of choice, changes forced, poor brief by client, inadequate preparation of contract document, shortage of funds being the circumstances under which the client might have been the reason for the variation requests. The participants were requested to rank these circumstances in order of importance according to their opinion. The participants have observed that the change in mind out of choice and poor brief by the client are the most important factors that are originated from the actions of the clients to cause variation requests in construction projects. The following graph prepared based on the mean values of the responses illustrates this position.
Variations originated by Consultants
The next question provided different options for the causes originated by the consultants. The options were change in design, defects in design, inadequate consideration of design, incorrect assessment of brief, defects in bill of quantities, shortcomings in contract documents and inadequate site investigation. The participants were requested to rank the options according to importance in their opinion. The results indicate that changes in design and incorrect assessment of clients’ briefs as the main
causes for variations in construction projects in Oman. The following graph shows this position based on the mean values of the responses.
Variations originated by Unforeseen Events
The questionnaire presented the options of restrictions due to neighbourhood demands, natural causes and land acquisition problems as the causes that originate from unforeseen events that lead to variations in construction projects. The participants were requested to rank the options in order of importance according to their perceptions. The respondents have identified restrictions due to neighbourhood demands as the most important cause for variations that originate from unforeseen events. The following graph shows the summary of responses from the respondents.
The respondents were requested to indicate any other reasons not listed in the questionnaire that might result in variation requests. Some of the respondents indicated changes in designs instructed by government departments as one of the main reasons for variations in construction projects in Oman. The respondents have offered various suggestions for avoiding frequent variation request, which are discussed in the next chapter.
Because of large capital outlays and long gestation periods, large construction projects face significant risks in terms of cost and the time required for completion. Actions of the large contingent of project stakeholders and natural and economic factors affect the progress of the construction projects resulting in delays in completion and consequent claims and disputes among the parties. In many instances clients or consultants on their behalf initiate changes to meet the changed requirements of the client or for any other purpose. The extensive review of the literature undertaken as a part of this research dealt with the types and causes for such changes in construction projects. The progress of the construction projects is also affected greatly because of such change requests causing additions, deletions or alterations to the already constructed areas. The effects of these changes are felt in the form of time and cost overruns affecting the owner as well as other project stakeholders financially. This research sought to examine the causes and impacts of variations in the construction industry of Oman by undertaking a quantitative survey among the construction industry professionals.
Previous section of this chapter presented the findings of the survey.
The participants have been asked to indicate the type of contracting followed by their respective organizations, as the procurement method will have an influence on the frequency of the variation requests. Especially in design and build method of contracting, where the contractor undertakes the responsibility for designs, chances o variation requests are likely to be more, when the owners do not involve themselves fully in the construction projects from the inception of the contract. In the review of the literature it was observed that Hanna and Swanson (2007) categorized constructive changes arising from the different interpretations of the owner and the contractor. The chances of constructive changes in the case of design and build contracts, especially the private contracts in the context of Oman therefore depend on the procurement method being followed by the organization. In the current study because most of the participants belong to government departments, general contracting has been reported as the contracting method.
Before finalizing the contracts the contracting company may have to consider the impact of a number of factors on the project performance. These factors may be external or internal to the organizations and are likely to affect the speed with which the project activities could be carried out. The factors will have an influence on the financial performance of the project. Because of the fact that the construction projects have long gestation period, changes in the economic situations are likely to affect the cost of materials and thus may lead to variations in the contracts. Therefore the factors that the organizations consider for finalizing the contract become important from the variations perspective. Time and price are the two important elements that determine the success of construction projects. The respondents have reported that their organizations consider the agreement on time as the most important factor in finalizing their contracts. Harbans (2003) observe that even if careful planning has been undertaken in respect of the execution of a construction project, variations are likely to occur as the construction work progresses. Therefore there is validity in this finding that in the context of Oman the contracting companies focus more on agreement of time to avoid variations.
The next important issue dealt with by the research is identifying the factors causing variations in the construction projects in Oman. Based on the responses from the participants to the survey, it is found that lack of coordination among parties and change in specifications by the owners are the most important factors that contribute to frequent variations in the construction projects in Oman. Lack of coordination may lead to frequent variation requests and time overruns in mega construction project. In the absence of proper coordination, the project participants may not have the opportunity to understand the project goals from the same perspective, which naturally will result in variations. Coordination is important in the context of a multi-participant environment. With due diligence in coordination, it is possible to manage the detrimental variations which the affect the projects adversely even at the early stages of the construction projects. Variations, disputes and claims in the projects may arise as consequential effects of lack of coordination (Keane et al 2010). Project management has a great responsibility in coordinating the activities of all the project participants even from the inception of the contract so that number of occasions giving rise to variations and consequent disputes among the parties could be avoided. Proper coordination will assist in reducing design discrepancies as with effective coordination, parties concerned will have the opportunity to review the contract documents and drawings for eliminating any misunderstanding and resultant variations.
Change in specification is the next important factor identified by the participants as causing variations in construction projects. Arain and Pheng (2010) found hat review of designs lead to variation requests. In the context of Oman variation requests resulting from addition, omissions and alterations to be undertaken during the construction process are common phenomena and lack of technical knowledge on the part of owners often lead to changes in specifications. It is also the case in Oman that the owners also do not involve them in the discussions on the technical aspects of the construction projects. Owners may find that the design features are not up to their expectations at an advanced stage of construction and request for variations. In addition the owners may not be in a position to explain in precise terms their project goals which might also lead to changes in specifications and consequent variation requests. In some instances, it may so happen that the owners change their mind during the progress of construction and change the specifications through variation requests. Quite recently changes in the global economic scenario as well as in the Middle East have necessitated several variations in large construction projects in Oman as well as other GCC countries.
The next important consideration of the research was the impact of variations on construction contracts in the context of Oman. Based on their professional background and personal experience in the industry, the participants to the survey have reported that the construction projects in Oman suffer from time and cost overruns as well as loss of productivity because of variation requests. This finding is in agreement with the findings of the previous studies. For instance, Koushki et al (2005) found that change orders issued at different stages of construction projects result in time overruns and lead to delays in completion, Hanna et al (2002) found that frequent change orders lead to considerable reduction in productivity. Arain and Pheng (2005) found that change orders issued during institutional building constructions have led to considerable escalation of construction expenses.
The study considered the impact of variations by the actions of different stakeholders and found that changes in the mind of owners out of choice and poor brief by the clients are the reasons for variations originated by the actions of the clients in the context of Oman. These situations are peculiar to the conditions prevailing in Middle Eastern countries like Oman, where there is no involvement of owners in the progress of construction projects. Lack of technical knowledge on the part of the owners also leads to different actions by the consultants in requesting variations. Mostly this is the reason that the respondents have identified changes in design and incorrect assessment of brief as the actions originated by the consultants in requesting variations in construction projects in Oman.
This chapter presented the findings of the survey and a detailed analysis of the findings. The important findings of the survey are cost and time escalations and loss of productivity are the important impacts of variations on construction projects in Oman. Lack of coordination among the parties and changes in specifications by owners have been found to be the important factors causing variations in the context of the construction industry in the Sultanate of Oman.
The objective of the current research is to examine the causes and impacts of variations in the construction industry of the Sultanate of Oman. A quantitative survey was undertaken as a part of the research to collect primary data from the samples represented by construction professionals working in the construction industry of Oman. The survey used the research instrument of a questionnaire containing closed ended questions to draw information on variations in the construction industry of Oman. A detailed survey of the relevant literature provided theoretical support to the research. The review helped in adding to the existing knowledge on the causes and impacts of variations in the construction industry of Oman.
The research had specific objectives to achieve. The first objective formulated was to verify the type of variations requests in the construction industry of Oman. The literature review provided information on different types of variations and their causes. The next objective was to verify the circumstances under which such variations are ordered. The findings from the survey provided information on the circumstances originating from the actions of the clients, consultants and also from natural events. The third objective was to investigate the pricing policies carried out under usual circumstances. Although the survey covered the procurement methods followed by contracting companies, no concrete evidence could be produced to investigate the pricing policies, because of the limited scope of the research. The fourth objective was to assess the problems confronted by clients, consultants, contractors and subcontractors. The impacts of variations are the problems faced by these project stakeholders and these were examined by the survey and the review of literature. The last objective of analyzing the problems and means of resolving them was achieved by the survey findings.
Findings from the Research
Extended knowledge on the causes and impacts of variations on construction projects in general could be acquired by the extensive review of literature. The responses of the sample subjects to the questions on variations contained in the questionnaire survey covered the factors leading to variations and impacts of such variation requests. The questionnaire gave different choices of variables for the samples to choose in respect of the various aspects concerning causes and impacts of variation requests in construction projects. Based on the responses of the samples, the research concludes that lack of coordination among the parties and changes in specifications by owners are the most important factors causing variation requests in construction projects. The research also concludes that contracting companies consider terms of price and agreement on time before finalizing the construction contracts in Oman.
The study finds that changes in mind out of choice by the owners and poor brief by the clients are the causes for variations originated by clients. Changes in designs and incorrect assessment of brief were the causes originated by consultant for variation requests in the context of Oman. On the variations caused by natural causes, the study found that restrictions due to neighbourhood demands were the important factor for causing variations. The research has found that cost escalation and time overruns as the serious impacts of variations in the case construction projects in Oman. The important finding of the research is that lack of coordination is the most important factor leading to variation requests in the construction projects of Oman.
The review of the literature and the survey conducted being the research designs for the current study concludes that lack of coordination among the parties and changes in specifications by the owners are the important factors leading to variations. The study also concludes that time overruns and cost escalations are the major impact of variations in construction projects. The survey findings indicate that terms of price an agreement on time are the factors that are considered by the contracting companies in Oman for finalizing the contracts. The next section provides the implications for the owners, consultants and contractors and few recommendations for further research.
The findings of the current study have wider implications for all project participants like clients, consultants, contractors and subcontractors involved in large construction projects.
Few of the participants to the survey suggested that it is important that the contractor must check the accuracy and adequacy of design specifications before commencing the work on the project. This would reduce the chances of variation requests at a later stage of the project. In the context of Oman, because of the lack of involvement of the owners in the project progress, this process of checking the accuracy of designs becomes important to avoid variations. The study suggests that the contractor must have frequent meetings with the clients to ensure that the clients are updated on the progress of the project. This will facilitate an effective communication between both the parties and will reduce the opportunities for variations.
The project manager must ensure that he coordinates the project activities effectively so that all project participants understand the project goals and work towards achieving them. The project manager must apprise the owners the intricacies of the construction designs so that the owners are able to assess whether the designs would enable meeting their expectations. This study further suggests that the project management must institute and use sophisticated software applications in the project environment to improve the efficiency of the project team.
The research has greater implications for the clients of construction projects in Oman. The clients will be able to avoid the frequency of variation requests by prescribing their requirements and expectations without any ambiguity. Because poor briefing leads to improper understanding of the project goals, it is important that the owners take the advice of their clients in time to specify their requirements clearly. When the owners are able to avoid frequent variation requests in construction projects they would be able to avoid possible claim situations and protect their financial losses. In many instances commencing the construction before the completion of the designs give rise to variation requests and therefore the owners must insist on the completion of the designs before the construction activities are started.
The research findings have some implications for the consultants also. The consultant by extending proper and timely advice to the client on designs and on the progress of the project will be able to help the avoidance of frequent variation requests. The consultant must meet the client and the contractor frequently to apprise them of the deficiencies in the process if any and avoid variation requests. Consultants based on their expert knowledge can assist the clients to a proper understanding of the goals.
Recommendations for Future Research
Because the factors affecting the construction projects in Oman are different than those prevailing in other countries, variation requests may arise in different circumstances. A comparative study of the causes and effects of variations in construction industries of different countries with Oman will provide enhanced knowledge on the area. Results of an empirical study assessing the financial implications of variations in two different projects would yield meaningful results on the effects of variations on construction projects.
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Appendix I Questionnaire
As you know, construction industry is prone to variations requested by owners, architects and contractors for various reasons. My current research focuses on the reasons, problems related impacts and resolution of variations in the construction industry in the context of Sultanate of Oman. This survey is a part of my research leading to the award of …Degree from the University ….. I request your cooperation to answer the questions included in this questionnaire based on your experience in the industry. I am sure the answers backed by your knowledge and expertise in the construction industry will add value to my research. Your answers will be treated as confidential and only summary information will be presented in my research report. I thank you for your time and attention.
Section 1 Profile of Respondents
Please indicate the nature of your organization
- Private sector
- Public-private Partnership
- Others (please specify)
Please indicate the Nature of business of your organization
- Owner organization
- Consultant firm
- Design organization
- Other type (please mention)
Please indicate the approximate turnover of your organization
- Less than R.O 5,000,000
- Between R.O 5,000,000 and R.O 10,000,000
- More than R.O 10,000,000
- Not Applicable (e.g. consultant organization)
Please indicate your position in the organization:
- General Manager
- Project manager
- Other (please specify) _______________________________________
Please indicate the number of years of experience you have:
- Less than 5 years
- Between 6 and 10 years
- Between 11 and 15 years
- More than 15 years
Please indicate your educational qualification
- College Degree
- Post Graduation
Please indicate the highest cost of the projects you are/have been involved in Oman
- Less than R.O 500,000
- Between R.O 500,000 – 10,000,000 million
- More than R.O 10,000,000
Section 2 Construction Industry Related Questions
Please indicate the procurement method followed by your organization.
- General Contracting
- Cost Plus contracts
- Design and Build
- Management contract
- Others (Please specify) _____________________
What is the important consideration that your organization takes into account while finalizing construction contract? Please mention the order of importance in the Likert scale of 1 to 5 where “1” is least important and “5” is the most important.
- Terms of price
- Owner’s involvement
- Agreement on time
- Chances for design changes
- Chances of variations
- Clear contract documents
- Degree of complexity
What according to you are the most important factor causing variations? Please mention the order of importance in the Likert scale of 1 to 5 where “1” is least common and “5” is the most common.
- Lack of construction materials
- Change in design by consultant
- Errors in Design
- Conflicts in contract documents
- Lack of coordination among parties
- Change in specification by owner
- Problems in contractor’s company
- Lack of Supervision
What is the most important impact of variations in construction contracts in the context of Oman? Please mention the order of importance in the Likert scale of 1 to 5 where “1” is least probable and “5” is the most probable.
- Cost Escalation
- Disputes among parties
- Delays in completion
- Quality issues in construction
- Time overrun
- Issues of claims
- Loss of productivity
From the following list of circumstances, which may result in variations, please rank the circumstances in order of priority.
- Originated by Client:
- Increase in scope
- Change in mind out of choice
- Changes forced
- Poor brief by client
- Inadequate preparation of contract document
- Shortage of funds
- Originated by consultant
- Change in design
- Defects in design
- Inadequate consideration of design
- Incorrect assessment of brief
- Defects in Bill of quantities
- Shortcomings in contract documents
- Inadequate site investigation
- Originated by unforeseen events
- Restrictions due to neighbourhood demands
- Natural causes
- Land acquisition problems
Please specify any other reason for variation not included in the above lists.
Based on your experience please mention the ways to avoid major variations in the construction projects in Oman
Thank you very much for your cooperation