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ASSESSMENT OF THE SURVIVAL PRACTICES OF QUANTITY SURVEYING FIRMS IN A RECESSED ECONOMY

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CHAPTER ONE

INTRODUCTION

1.1      Background to the study

The construction industry plays an important role in a nation’s economy and its activities are also vital to the achievement of national socio-economic development goals of providing shelter, infrastructure and employment. According to Aibinu and Jagboro (2002) the construction industry continues to occupy an important position in the nation’s economy even though it contributes less than the manufacturing or other service industries. Ayodele and Alabi (2011) opined that a healthy economy usually experiences an increase in construction activities. Saka and Lowe (2010) stated that the importance of construction to economic growth and development can never be overstressed as construction makes significant contribution to the GDP, capital formation and employment etc. The construction industry as a whole has a significant relationship to the economy, in that a change in economic output of an economy can result in a proportionate change in demand and, as a result, a change in the output of the construction industry (Richardson, Nwankwo, and Richardson (2003). The follow-on effect of this change is that firms within the industry have to dramatically adapt to the changing economic climate (Green, Larsen, and Kao, 2008).

Research have shown that employees in the construction industry form a very large workforce constituting one-half of the gross capital, and three to eight percent of the gross domestic product (GDP) in most countries (Arditi and Mokhtar, 2000; Mee-Edowe and Andawei, 2000). The construction industry is responsible for employing approximately 20% of the Nigeria’s workforce, making it perhaps the largest employer of construction labor in Africa (National Bureau of Statistics, 2006). The industry accounts for about 69% of the nations fixed capital formation which implies that 70% of the net capital investment in the country goes into the construction industry (Business Monitor International (BMI), 2007). The National Bureau of Statistics (NBS) (2014) presentation of preliminary results of the rebased nominal gross domestic product (GDP) estimates for Nigeria 2010 to 2013 reported that the NCI records an average of 3.4% contribution to the GDP within the considered years. This contribution though small yet exerts both direct and indirect impact on the national economy as it stimulates the growth of other sectors through a complex system of linkages (Alabi, 2010).

Nigeria is one of the largest African countries but sadly have been facing decline in economic output. This economic recession has led to so many construction companies adopting several survival practices in order to remain in business. According Musso and Schiavo (2007) to survival practice of any construction company is defined as their ability to run or manage a small business with little resources to keep track of nation and regional, economic indicators that might affect the construction industry and the companies’ operations. This is in line to the findings of Geroski, Mata, and Portugal (2003) which states that for a conation firm to survive in a recessed economy, they must be aggressive and imaginative in operations. this means that the company should innovate ideas to gain market share by taking it away from competitors unable to adjust to shifting market conditions, maintain a strong cash stream throughout the downturn, in contrast to other construction companies that may have liquidity problems, become a leaner, more effective and more efficient operation, better positioned to do well when the market improves. With this constrain, Madhoushi and Ghaedi (2013) was of the opinion that construction firms who survive and even prosper during hard times most be able to look beyond the present to overcome the constraint of tradition to see the firm from a new perspective and to do business differently.

Through the construction industry, the Government is able to provide adequate public infrastructures for its citizens. According to Oluba (2008) public infrastructure touches on a wide range of basic amenities, which enhance the capacity of economic agents to conveniently engage in productive activities with reduced stress levels. However, in the delivery of these public infrastructures, several participants are brought together. According to Alintal-Abel and Nnadi (2015) there are diverse interests in the construction industry with the principal actors being the client, the consultant and contractors. In the realization of a construction project, consultants and contractor are brought together to satisfy the desire of the client. According to Munns (1996) construction project involves three groups of people who are brought together for a temporary period in which they are expected to work together towards a mutual goal. This group includes the client, the consultants and construction contractors. The role of the Client is to instigate the project set goals, determine the constraint to work within, and provide the required financial recourses to ensure the projects goals. The Contractor is responsible for converting the plan into final reality while the Consultant is expected to convert the client requirement into a proposal that can be achieved within any constraint set by the client (Salami and Mustapha, 2015).

One of such consultants whose role in the delivery of construction projects cannot be over emphasized is the Quantity Surveyor. Ashworth and Hogg (2000) described a Quantity Surveyor as a person that cost designs and produce procurement and construction documents. Ojo (2011a) further stated that a Quantity Surveyor estimate and manage the cost of construction projects. A practicing Quantity Surveyor is mostly found in Quantity Surveying Firms (QSFs) which are service based firms providing consultancy, financial and allied management services to their clients (Abidin, Yusof, Hassan and Adros, 2011). Oyediran (2011) views QSFs as knowledge based firm because quantity surveyors sell knowledge and not physical product when in operation. It is noteworthy that this knowledge is transformed into  service  that  gets  delivered  to  clients  eventually.

Thus, with the present downturn in the Nigeria economy which is as a result of the decline in the price of crude oil and other associated factors (Sanusi, 2010; Eboh, 2015; National Bureau of Statistics 2015), which is bound to have a negative effect on the construction industry (Ogbu, 2017) it is necessary to assess the survival practices of Quantity Surveying firms whose role in the construction industry is crucial. This shall be done with a view to identifying possible ways to help Quantity Surveying Firms survive in times of recession

1.2       Statement of the Problem

Eboh (2015) observed that the Nigerian economy currently faces difficulties due to the decline in crude oil prices in the international market. Added to this is the huge burden of payment of subsidies to petroleum products importers mounting to billions of Naira and to make things worse, there have been a constant political drift away from the due process were construction contact allocation is awarded only to  political and government agent thereby back beating professionals such as the Quantity Surveyors and as such driving these professionals / construction firms into adopting other measures of survival in order to remain in business. In 2014 alone, N971.1 billion ($4.88 billion) was budgeted for subsidy payments. The repercussions of these have been the sharp decline in revenues accruing to the federation. Up to 8.97% of Nigeria’s GDP is accounted for by proceeds from oil and gas industry activities, and crude oil earns more than 90% of Nigeria’s foreign exchange (Sanusi 2010; National Bureau of Statistics 2015). As a result, fluctuations in revenues from this source have grave implications for the survival of construction practitioners in Nigeria as the government remains the biggest client of the construction industry in Nigeria (Aniekwu, Anthony, Kehinde, 2014). Not only that, private sector clients of the construction industry are equally linked to government expenditure; thus, a decline in Nigeria’s national income has both direct and indirect effects on the survival of construction practitioners (Quantity surveyors inclusive) and this could influence their mortality rate (Ogbu, 2017).

Olatunji, Oke, Aghimien and Ogunwoye (2016) opined that with the challenging economy in Nigeria, it is not uncommon to see construction professionals acting in manners that go against the ethics of their profession during the course of carrying out their professional duties just to make ends meet. Murdoch and Hughes (2008) stated that Quantity Surveyors as construction cost managers are the cynosure of all eyes both within the construction industry and the country at large. Bearing in mind that construction professionals operate in a highly fragmented industry which includes different skills and professions, and where relationships and boundaries are not always clear, Quantity Surveyors are expected to display a high level of professional competence founded on genuine ethical conduct. 

It has been observed that the primary aim of every profession is to serve the public. This commitment means that true professional places the public good before mere financial reward. Acting in such a manner may on occasion conflict with an individual or client’s interest. This concept is embodied in many of the profession’s codes of conduct (Murdoch and Hughes, 2008; Olatunji et al., 2016). Seeley (1997) assert that upholding professional ethics underpins the primary objectives of professional codes of practice. Providing a professional service may therefore be viewed as delivering technical skills competently and in a way society expects of professionals.

Bearing the economic recession facing the country in mind and the need for Quantity Surveyors to demonstrate high ethical standards, this research therefore set out to assess the survival practices employed by Quantity surveying firms in Nigeria.

1.3       Aim and Objectives of the Study

The aim of this research is to assess the survival practice of Quantity Surveying firms in a recessed economy with a view to identifying possible ways to help Quantity Surveying Firms survive in times of recession. The objectives stated out for achieving this aim are to:

•                     identify the factors affecting the survival practices of Quantity Surveying Firms in            a recessed economy in Imo State;

•                     assess the level of these survival strategies by Quantity Surveying Firms in Imo     State;

•                     evaluate the impact of these survival practices on the survival of Quantity Surveying Firms in Imo State 

1.4       Research Questions

The following Research Questions were formulated to guide the study:

•                     What are the survival strategies available for Quantity Surveying Firms in a           recessed economy in Imo State?

•                     What is the level of adoption of these survival strategies by Quantity Surveying     Firms in Imo State?

•                     What is the impact of these survival practices on the survival of Quantity   Surveying Firms in Imo State?

1.5       Research Hypotheses

The hypotheses set for this research are as follows:

(1) Ho: There is no significant difference in the view of the various categories of Quantity Surveyors as to the survival strategies available for   Quantity Surveying Firms in Imo State.

    HA: There is a significant difference in the view of the various categories of Quantity Surveyors as to the survival strategies available for Quantity Surveying Firms in Imo State.

(2) Ho: There is no significant difference in the view of the various categories of Quantity Surveyors as to the level of adoption of various survival strategies by Quantity Surveying Firms in Imo State.

  HA: There is a significant difference in the view of the various categories   of Quantity Surveyors as to the level of adoption of various survival strategies by Quantity Surveying Firms in Imo State.

(3) Ho: There is no significant difference in the view of the various categories of Quantity Surveyors as to the impact of the various survival strategies on the survival of Quantity Surveying Firms in Imo State.

HA: There is a significant difference in the view of the various categories of Quantity Surveyors as to the impact of the various survival strategies on the survival of Quantity Surveying Firms in Imo State

1.6       Significance of the Study

Several researches have been conducted on survival practices within and outside the construction industry (Ajayi, Pearce and Mafimidiwo, 2012; Madhoushi and Ghaedi 2013; Ogbu, 2017; etc.). Ayopo (2011) revealed that firm location is related to firm survival, for firms in different sectors of the Nigerian economies, respectively. Ajayi et al., (2012) sought the opinion of construction professionals on the survival practices of construction firms in Lagos, Nigeria. Furthermore, Ogbu (2017) focused on the opinion of indigenous construction firms. This was done out of the assumption that as business entities, indigenous construction firms are affected by the dynamics of the economic environment; therefore, they deploy survival practices in order to survive.

While several studies on survival in the construction industry are available, not much has surfaced on the survival practices of Quantity surveying firms in Nigeria. This gap is what this research sets out to fill. With this economic downturn, Quantity surveying firms will need to develop new survival strategies to help the stay afloat and survive this recession period. Thus, assessing these survival practices of Quantity surveying firms will go a long way in assisting the management of these firms in making critical decisions that will help in the survival of the present recession within the country. This study will enable Quantity Surveyors within the country as it hopes to bring to light other possible areas of diversification that will help them survive in terms of recession.

1.7       Scope of Study

This research sets out to assess the survival practices of Quantity Surveying Firms in a recessed economy. The research shall be restricted to Quantity Surveying Firms in Imo State Nigeria. Although this research sets out to assess the survival practices of Quantity Surveying Firms in a recessed economy, as a result of limited available finance for the execution of this project, coupled with the associated time constraints, using every single Quantity Surveying Firm within the country will prove impossible.

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