Identification of use issues and effectivity of the CVR cost-control method in the UAE construction industry
M.Sc. in Quantity Surveying
Page
Rationale for the Study 3
Aim of the Dissertation 5
Objectives . 5
Hypothesis 5
Research Methodology . 5
Dissertation Structure .. 7
References . 9
1. Working Title
Identification of use issues and effectivity of the CVR cost-control method in the UAE construction industry
2. Rationale for the Study
The construction industry is not only a key player in the national economic growth; but also a crucial sector affecting the economic and social welfare of citizenry, particularly in its primary function in providing reliable and decent shelter. Although potentially profitable, it is also highly capital-intensive so that failure of managers in control project costs can result to massive losses, crippling investors and financiers as well as the industry’s capability to discharge its social duties. Thus, cost control is crucial. Cost needs to be regularly and effectively monitored and controlled both to anticipate potential problems and to anticipate profit margin (Chigara, Moyo, and Mudzengerere, 2013, p. 1; cf. Pilcher, 1992).
Moreover, contractors, the executors of construction works, are imperatively bound to effectively monitor and control project implementation cost with the ultimate end of keeping the cost within budgetary limits as defined by the clientele (Chigara, Moyo, and Mudzengerere, 2013, p. 2). This job is doubly difficult in an inflationary environment wherein cost of materials may change many times while the construction works progress, making the use of dependable and accurate cost-control crucial and, thus, imperative.
Cost Value Reconciliation (CVR) is the premier of three project cost-control systems that is favoured among infrastructure contractors. Its primary purpose is to ensure that accounted profits are accurate and realistic in reflecting the company’s current financial position (Potts, 2008, p. 199). While the other two cost-control systems (standard costs and variance analyses) are extensively used in the site level on individual project and are capable of weekly control and monitoring, CVR is the preferred method by the upper management, usually head of project offices (Fellows, Langford, Newcombe, and Urry, 2008, p. 205). Its outputs constitute statements of the total costs and values of each project in specific time scale, usually monthly. CVR provides interim financial reports on the progress of the site work, which quantity surveyors are usually in-charge in its preparation.
Meanwhile, after a timid 2013, the construction industry in the United Arab Emirates (UAE) is showing dependable signs of recovery and potential growth (EC Harris Research, 2014, p. 1-2). Real gross domestic product (GDP) growth continued to show firmness with non-oil activity as its primary driver. Its construction sector has neared full capacity with major megaprojects in the move and social infrastructure spending surging. Both Abu Dhabi and Dubai continued to dominate the industry. Dubai continued its growing strength and better sustainability while Abu Dhabi remained stable. Sharjah is growing as movements from citizens affected by the Arab Spring continue to pour out pushing the industry higher for 2015. This development creates growing prospects for profitability as well as enormous loss risks when cost control becomes ineffective. CVR will be fully tested if employed among the top managers in the industry.
However, while the CVR method is the globally accepted standard in cost control, not all countries make use of it as its first-choice system. In Zimbabwe, for instance, CVR is only used among contractors at a rate of 31.8 percent with more than half favouring resources management and variance analysis at 59.1 percent and 54.5 percent, respectively (Chigara, Moyo, and Mudzengerere, 2013, p. 5). Olawale and Sun (2010), moreover, found it among the most commonly used cost control techniques in 70% of studies in the UK. Its use, however, in the United Arab Emirates (UAE) remains unknown and its application and use barriers unexplored.
This study proposes to explore the use of CVR in UAE in order to identify best practices that are both unique in this region and common in other countries around the world.
3. Aim of the Dissertation
The aim of this study is to identify use issues and effectivity of the CVR method as a cost control system in the UAE construction industry.
4. Objectives
The objectives of this study are:
1) To determine the most common issues in the use of the CVR method as the cost-control system in the UAE construction industry;
2) To determine the use effectivity of the CVR method among UAE contracting companies.
5. Hypotheses
The hypotheses of this study will be based upon the themes obtained by thematic analysis and the theoretical base thereof.
6. Research Methodology
The study will use the sequential mixed-method approach, consisting of thematic analysis (qualitative portion) and survey research (quantitative portion) (Creswell, 2008, p. 14). Data collection will be conducted using two approaches:
1. Literature review
2. Fieldwork
6.1 Literature Review
The review of literature for the CVR method for cost control will follow the thematic analysis approach. It will be carried out using peer-reviewed literature, such as professional journals and magazines (including industrial survey reports), published books, and profession websites, which can contribute significantly in the thorough understanding of the method. Use-issue themes to be covered about CVR will depend on their commonality in articles and sources obtained using the search procedure consistent with thematic analysis methodology. The “X” most common themes will be selected as the hypothetical bases for the study plus a pre-determined theme of “use effectivity” for the CVR method as cost-control system among UAE practitioners and managers.
6.2 Fieldwork
Field work data collection comprises the survey research portion of the study’s methodology. It will be conducted using the following three (3) stages.
The first stage is the design and development of a structure online questionnaire and personal interview guide, using the themes obtained from the literature review and the pre-selected theme.
The second stage involves the administration of the questionnaire online to professionals currently or previously working in the contacting industry. A list will be compiled together with their individual contact information such as email address, office telephone number, and mobile number. Data obtained from the questionnaires will be uploaded to Survey Monkey (www.surveymonkey.com) for basic data processing statistics (e.g. mean, median, mode, variance, and standard deviation) according to pre-determined themes.
The third stage involves personal interviews of two senior members. The first senior manager (e.g. Project Director or equivalent title) manages the overall construction of their company projects. The second senior manager (e.g. Commercial Director or equivalent title) manages the commercial side of the project. The transcripts from the interview will be coded and processed using the same statistical tools used in processing the online interview data.
6.3 Data Analysis
Analysis of thematic data: Depending on the stage in the data collection process, not all data will be processed simultaneously. Themes gathered from the literature review will be analyzed using mode to rank all themes identified in the thematic analysis and ranked from the highest mode to the lowest. Themes ranked in the top “X”, in addition to the pre-selected theme of “use effectivity”, will be the base themes from which the structured online questionnaire will be derived from. These themes will then be analyzed for theory generation in order to create hypotheses from which further stages in the research process will aim to test
Analysis of the online survey and personal interview data: There will be two standard data in the study. Standard Group 1 constitutes the processed data from the literature review. Standard Group 2 consists of the processed data from the online survey. The processed personal interview data will constitute the Test group.
7. Dissertation Structure
The study report will be structured based on the following contents and as described therein:
Chapter 1. Introduction
The chapter will contain the background of the study, aim, and objectives.
Chapter 2. Literature Review
The chapter will cover the themes mentioned in this proposal’s literature review (i.e. CVR definitions as a cost-control method, objectives, strengths and weaknesses, applicability and limitations, remedial solutions, and current and related methodological and conceptual trends) but expanded to accommodate new and additional information about the CVR method.
Chapter 3. Research Methodology
The chapter will discuss in depth the approaches used in the study (e.g. design, data collection and processing approach, including changes implemented not mentioned in the research proposal.
Chapter 5 – Presentation of Results
This chapter will present the results and analyze them in relation to the aim and objectives and hypotheses of the study.
Chapter 6 – Discussion
This chapter will discuss the results from different perspectives, identifying trends that may emerge in relation to the literature review and results.
Chapter 7 – Conclusion and Recommendation
This chapter consolidates and summarizes the main findings of the study, identifying limitations of the study in relation to the results, providing recommendations for improvements and approaches for further studies where applicable.
8. References
Chigara, B., Moyo, T., and Mudzengerere, F.H. 2013. An analysis of cost management
strategies employed by building contractors on projects in Zimbabwe. International Journal of Sustainable Construction Engineering & Technology, 4(2), pp. 13.
Creswell, J.W. 2013. Research design: Qualitative, quantitative, and mixed methods
approach. 4th ed. New York: Sage Publications. pp. 273.
EC Harris Research. 2014. UAE’s construction market remains strong, whilst economic
growth remains stead. International Focus on United Arab Emirates, pp. 6.
Fellows, R., Langford, D., Newcombe, R., and Urry, S. 2002. Construction management in
practice. 2nd ed. Oxford, UK: Blackwell Sciences. pp. 395.
Olawale, Y.A. & Sun, M. (2010). Cost and time control of construction projects: Inhibiting
factors and mitigating measures in practice. Construction Management Economics, 28(1): 509-526.
Pilcher, R. 1992. Project cost control in construction. 2nd ed. Oxford, UK: Oxford Blackwell
Science.
Potts, L. 2008. Construction cost management: Learning from case studies. Oxon, UK:
Taylor & Francis. pp. 306.
