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Hindawi Publishing Corporation

e Scientific World Journal


Volume 2014, Article ID 165158, 9 pages
http://dx.doi.org/10.1155/2014/165158

Research Article
SEM-PLS Analysis of Inhibiting Factors of Cost
Performance for Large Construction Projects in Malaysia:
Perspective of Clients and Consultants

Aftab Hameed Memon and Ismail Abdul Rahman


Faculty of Civil and Environmental Engineering, Universiti Tun Hussein Onn Malaysia, Parit Raja, 86400 Batu Pahat, Johor, Malaysia

Correspondence should be addressed to Aftab Hameed Memon; [email protected]

Received 7 December 2013; Accepted 31 December 2013; Published 13 February 2014

Academic Editors: C. W. Chang-Jian and Y. H. Chiang

Copyright © 2014 A. H. Memon and I. A. Rahman. This is an open access article distributed under the Creative Commons
Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is
properly cited.

This study uncovered inhibiting factors to cost performance in large construction projects of Malaysia. Questionnaire survey was
conducted among clients and consultants involved in large construction projects. In the questionnaire, a total of 35 inhibiting factors
grouped in 7 categories were presented to the respondents for rating significant level of each factor. A total of 300 questionnaire
forms were distributed. Only 144 completed sets were received and analysed using advanced multivariate statistical software of
Structural Equation Modelling (SmartPLS v2). The analysis involved three iteration processes where several of the factors were
deleted in order to make the model acceptable. The result of the analysis found that 𝑅2 value of the model is 0.422 which indicates
that the developed model has a substantial impact on cost performance. Based on the final form of the model, contractor’s site
management category is the most prominent in exhibiting effect on cost performance of large construction projects. This finding
is validated using advanced techniques of power analysis. This vigorous multivariate analysis has explicitly found the significant
category which consists of several causative factors to poor cost performance in large construction projects. This will benefit all
parties involved in construction projects for controlling cost overrun.

1. Introduction Compared to the developed countries, the cost overrun


experienced in developing countries is more serious. In India,
Poor cost performance in construction projects is a well- a study on 290 projects with a contract sum of 270,568 million
known element in resulting huge amount of cost overrun as Indian rupees faced a total of 200,024 million Indian rupees
faced by construction industry globally. The cost overrun is of cost overrun where an average each project faced 73%
very dominant in both developed and developing countries exceeding the estimated cost as cited by [5]. In Korea, Lee
[1]. It affects both physical and economic development for [6] examined 161 projects which included 138 road projects,
the country and thus, it is important to ensure construction 16 rail projects, 2 airport, and 5 port projects. His findings
projects are completed within the estimated cost. Numerous indicate that 95% of road projects faced 50% cost overrun; all
worldwide researches have been conducted to understand the rail projects also faced 50% cost overrun while 2 airports
cost performance of construction projects. Meng [2] also projects experienced 100% cost overrun and 5 port projects
investigated UK construction and found that 26 (25.2%) of experienced about 40% cost overrun. An investigation of 137
103 investigated projects faced overrun. Case study conducted construction projects in Nigeria found that 55% of projects
by Chang [3] on four projects in USA found that the entire faced cost overrun within the range of 5% to 808% of
projects facing cost overrun ranged from 12.3% to 51.3% with the projects cost [7]. Northern by-pass project in Kampala,
an average of 24.8% of the contract sum. Similarly, Žujo et al. Uganda, experienced cost overrun with more than 100%
[4] studied 92 traffic structures in Slovenia and found that the while, in other study, it was found that 53% of 30 construction
construction cost exceeded 51% of the budgeted cost. projects investigated faced cost overruns [8].
2 The Scientific World Journal

Likewise, Malaysian construction industry is also affected site mobilization, rigid attitude by consultants, extra work
by cost overrun burdens. Khamidi et al. [9] quoted from without approvals, frequent changes during execution, gold
the summary report of Malaysian Auditor General 2008 that plating, safety and health, and limited access to job sites.
electrification of double track rail project between Rawang Park and Papadopoulou [18] reported that most significant
and Ipoh has resulted in cost overrun of RM 1.43 billion. causes of cost overruns in infrastructure projects experienced
Endut et al. [10] in their study on 308 public and 51 private in Asia are contract awarded to the lowest bidder, inadequate
construction projects found that only 46.8% of the public site investigations, unforeseen site conditions, inadequate
projects and 37.2% of the private projects completed within pre-construction study, and inaccurate estimates.
the budget. Further, a survey conducted in the southern
region of Peninsular Malaysia highlighted that 89% of 140
respondents mentioned that most their projects faced cost 3. Conceptual Model
overrun [11].
In assessing the effect of inhibiting factors using PLS-SEM, a
Thus, cost overrun is a pertinent issue in the construction conceptual model is required. This model is explained in the
industry which needs serious attention in improving project’s relations between latent variables and their relative manifest
cost performance as the overrun is an additional burden variables. In this study, the conceptual model is developed
to all parties involved in the project. It is important to based on 35 inhibiting factors (also known as manifest
identify causative factors to cost overrun in order to manage variables) which are grouped into 7 categories (known as
the cost performance of the projects effectively. Hence, exogenous latent variables) named as Contractor’s Site Man-
this study focused on uncovering the inhibiting factors to agement Related Factors (CSM), Design and Documentation
cost performance of large construction projects in Malaysia. Related Factors (DDF), Financial Management Related Fac-
An advanced multivariate analysis method of Structural tors (FIN), Information and Communication Related Factors
Equation Modelling (SEM) which is a graphical equivalent (ICT), Human Resource (Workforce) Related Factors (LAB),
of a mathematical representation [12] was adopted for this Nonhuman Resource Related Factors (MMF), and Project
analysis as it is a very effective approach in analysing cause- Management and Contract Administration Related Factors
effect relations between factors [13]. (PMCA). Conceptual model showing relation between LV
and manifest variables is shown in Figure 1 where LVs are
drawn with oval shape while rectangular shaped elements
2. Inhibiting Factors to Cost Performance represent manifest variables. In PLS-SEM, generally the
Occurrences of poor cost performance in construction model is described by two components referred to as (1)
projects are due to various factors. These inhibiting factors measurement model or construct which relates manifest vari-
are referred to as cost overrun factors by many researchers. ables with relative LV and (2) structural model which shows
Literature reviewed on Kaming et al. [14] work indicates the relationship between various LVs [19]. The description of
that major factors affecting project cost in high-rise building each manifest variable is presented in path diagrams for each
projects are materials cost increased by inflation, inaccurate construct shown in Figures 2(a)–2(g).
quantity take-off, labour cost increased due to environment
restriction, lack of experience on project location, lack of 4. Data Collection and Sampling
experience of project type, unpredictable weather conditions,
and lack of experience of local regulation. In Chang [3] study, Method of data collection is governed by the conceptual
two reasons for cost increase in engineering design projects model that was developed earlier. For this study, the data was
are owner request of changes in scope and additional works. gathered using structured questionnaire survey. The survey
While in Koushki et al. [15] study on private residential was conducted amongst clients and consultants involved in
projects, the main contributors’ factors are contractor-related handling large construction projects in Malaysia. A total
problems, material-related problems, and owners’ financial of 300 questionnaire forms (150 among client firms and
constraints, Enshassi et al. [16] studied construction projects 150 among consultant firms) were distributed in 11 states of
specifying that main factors are increment of materials prices, Peninsular Malaysia. As a response, 156 completed question-
delay in construction, supply of raw materials and equipment naire sets were received, of which 12 questionnaire sets were
by contractors, fluctuations in the cost of building materials, incomplete and considered inappropriate. The analysis used
unsettlement of local currency, project materials monopoly 144 completed questionnaire sets which are sufficient based
by some suppliers, resources constraint(funds and associated on Hair et al. [13] rule of thumb for sample size required
auxiliaries, not ready), lack of cost planning/monitoring dur- in PLS-SEM. Based on the completed questionnaire sets,
ing pre- and postcontract stages, improvements to standard demography of the respondents is presented in Table 1.
drawings during the construction stage, design changes, and Table 3 shows that the participation of the consultant is
inaccurate quantity take-off. very high with 92 of 100 and only 52 are clients in the survey.
Nawaz et al. [17] conducted a survey among construc- Majority of the respondents (68%) had working experience
tions professionals, contractors, architects, design designers, for more than 10 years in handling construction projects.
suppliers, and subcontractors in Pakistan and identified 10 Also, 76% of respondents have attained engineering degree.
main factors which affect cost performance: corruption and Majority of respondents are handling directorate, managerial,
bribery, political interests, poor site management, delay in and engineering positions in their respective organizations.
The Scientific World Journal 3

LAB1 LAB2 LAB3 LAB4 LAB5 DDF1 DDF2 DDF3 DDF4 DDF5

LAB DDF

CSM1
CSM2
FIN1
CSM3
FIN2
Cost CSM4
FIN3 FIN performance CSM
CSM5
FIN4 CSM6
FIN5 CSM7
FIN6
CSM8
MMF
ICT PMCA

MMF1 MMF2 MMF3 MMF4 ICT1 ICT2 ICT3 PMCA PMCA PMCA PMCA
1 2 3 4

Figure 1: Conceptual model of cost overrun factors.

Table 1: Characteristics of the respondents. performance. PLS simulation of the model is carried out by
calculating and assessing various parameters which include
Cumulative
Characteristic Frequency Percentage item loading, reliability, and validity tests. It involves a 2-step
percentage
process as suggested by Henseler et al. [21] which involve
Experience calculating PLS model parameters separately by solving out
0–5 Years 23 16 16 the blocks of the measurement model and then estimating
6–10 Years 23 16 32 the path coefficients of a structural model [22]. Finally, overall
11–15 Years 30 20.8 52.8 model is validated power analysis test.
16–20 Years 15 10.4 63.2
>20 Years 53 36.8 100
Education Level 5.1. Measurement Model Evaluation. Measurement model
BE 110 76.4 76.4 evaluation is aimed to evaluate the consistency and valid-
BSc 8 5.6 81.9 ity of the manifest variables. Consistency evaluations are
Diploma 3 2.1 84.0 through individual manifest and construct reliability tests.
MBA 1 0.7 84.7 While validity of the variables is tested based on convergent
ME 3 2.1 86.8 and discriminant validity [23], individual manifest reliability
MSc 17 11.8 98.6 explains the variance of individual manifest relative to latent
PhD 2 1.4 100 variable by calculating standardised outer loadings of the
Working Position manifest variables [24]. Manifest variables with outer loading
Executives (directors) 50 34.72 34.72 0.7 or higher are considered highly satisfactory [21, 24]. While
Managerial personnel 35 24.31 59.03 loading value of 0.5 is regarded as acceptable, the manifest
Engineering staff 54 37.50 96.53 variables with loading value of less than 0.5 should be
Quantity surveying dropped [25, 26]. Hulland [27] argued that 0.4 should be the
5 3.47 100
personnel acceptable loading value where Henseler et al. [21] suggested
that manifest variable with loading values between 0.4 and 0.7
should be reviewed before elimination. If elimination of these
This indicates that the participants in the survey are compe- indicators increases the composite reliability then discard or
tent and hence the collected data is considered valid. otherwise maintain the factors. Even though for this study
the cut-off value taken for outer loading is 0.5, an iterative
5. PLS-SEM Evaluation/Analysis process is adopted for elimination of the manifest variables
by considering Henseler et al. [21] suggestion.
The developed conceptual model was drawn in SmartPLS Second parameter for consistency evaluations is con-
software [20] for simulation work in assessing the effect of structed reliability where it is evaluated by two measures,
manifest variables (inhibiting factors) on construction cost that is, Cronbach’s alpha and Composite Reliability (CR).
4 The Scientific World Journal

CSM1: poor site management and supervision

CSM2: incompetent subcontractors

CSM3: schedule delay

CSM4: inadequate planning and scheduling


CSM
CSM5: lack of experience

CSM5: inaccurate time and cost estimates

CSM6: mistakes during construction

CSM7: inadequate monitoring and control

(a)
FIN1: cash flow and financial difficulties
faced by contractors
FIN2: poor financial control on site
DDF1: frequent design changes
FIN3: financial difficulties of owner
DDF2: mistakes and errors in design FIN
FIN4: delay in progress payment by owner
DDF3: incomplete design at the time of tender
DDF FIN5: delay payment to supplier/subcontractor
DDF4: poor design and delays in design
FIN6: contractual claims, such as extension of
DDF5: delay preparation and approval of drawings time with cost claims
(b) (c)
LAB1: labour productivity

LAB2: shortage of site workers

ICT1: lack of coordination between parties LAB3: shortage of technical personnel


LAB
ICT ICT2: slow information flow between parties LAB4: high cost of labour

ICT3: lack of communication between parties LAB5: labour absenteeism

(d) (e)
MMF1: fluctuation of prices of materials PMCA1: poor project management
MMF2: shortages of materials PMCA2: change in the scope of the project
MMF PMCA
MMF3: late delivery of materials and equipment PMCA3: delays in decisions making
MMF4: equipment availability and failure PMCA4: inaccurate quantity take-off

(f) (g)

Figure 2: Path diagrams showing the descriptions of manifest variables.

Cronbach’s alpha and CR indicate how well a set of manifest to measurement errors. Barclay et al. [30] and Hair et al.
variables appraises a single latent construct. However, com- [13] argued that a minimum 50% of the variance from
pared to Cronbach alpha, composite reliability is considered manifest variable should be captured by latent variables. This
a better measure of internal consistency because it employs implies that AVE value of the construct should be greater
the standardized loadings of the manifest variables [28]. than 0.5. Discriminant validity is carried out to confirm
Nonetheless, the interpretation of composite reliability score that the manifest variable in any construct is relevant to the
and Cronbach’s Alpha is the similar. Litwin [29] suggested designated latent variable where its cross-loading value in LV
that value of cronbach alpha should be higher than 0.7 and for is higher than that in any other constructs [25].
composite reliability, the value of 0.7 is suggested as “modest” Based on the above criteria, measurement model is
[13]. evaluated by iterative process to discard the weak manifest
For the validity of the variable, the variables are tested on variables from the developed model. Hence, a total of 3
convergent and discriminant validities. Convergent validity iterations were involved in this study where each of the
is carried out by Average Variance Extracted (AVE) test on iterations was assessed based on the criteria and resulted in
variables [28]. It determines the amount of variance captured discarding 6 manifest variables. Table 2 summarizes the first
by latent variable from its relative manifest variables due and final iterations only.
The Scientific World Journal 5

Table 2: Results of measurement model evaluation.


First iteration Final iteration
Loading AVE CR Alpha Loading AVE CR Alpha
CSM01 0.639 0.462 0.870 0.879 0.635 0.537 0.872 0.835
CSM02 0.560 Omitted
CSM03 0.515 Omitted
CSM04 0.844 0.844
CSM05 0.815 0.826
CSM06 0.641 0.651
CSM07 0.758 0.769
CSM08 0.585 0.637
DDF01 0.772 0.467 0.795 0.874 0.806 0.640 0.873 0.852
DDF02 0.401 0.553
DDF03 0.873 0.921
DDF04 0.331 Omitted
DDF05 0.839 0.870
FIN01 0.596 0.459 0.832 0.815 0.571 0.533 0.816 0.754
FIN02 0.624 0.633
FIN03 0.604 Omitted
FIN04 0.518 Omitted
FIN05 0.813 0.807
FIN06 0.846 0.867
ICT01 0.867 0.786 0.917 0.880 0.867 0.786 0.917 0.880
ICT02 0.912 0.912
ICT03 0.881 0.881
LAB01 0.861 0.577 0.871 0.828 0.861 0.577 0.871 0.828
LAB02 0.793 0.793
LAB03 0.778 0.778
LAB04 0.726 0.726
LAB05 0.617 0.617
MMF01 0.795 0.625 0.866 0.821 0.795 0.625 0.866 0.821
MMF02 0.909 0.909
MMF03 0.575 0.575
MMF04 0.842 0.842
PMCA01 0.539 0.444 0.757 0.702 Omitted 0.515 0.757 0.737
PMCA02 0.626 0.590
PMCA03 0.812 0.848
PMCA04 0.658 0.692

In the first iteration of Table 2, three constructs ICT, 5.2. Structural Model Assessment. Structural model assesses
LAB, and MMF have parametric measurement above the cut- relationship between exogenous and endogenous latent vari-
off values. While the other 4 constructs (CSM, DDF, FIN, ables through evaluating R2 value, that is, coefficient of deter-
and PMCA) have achieved satisfactory measurement values mination [23] and also 𝛽 value, that is, path coefficients of
except AVE which is below 0.5. Following iterations has dis- the model [25]. R2 corresponds to the degree of explained
carded 6 weak manifest variables in 4 of the constructs which variance of endogenous latent variables [31] while 𝛽 indicates
are CSM02, CSM03, DDF04, FIN03, FIN04, and PMCA01.
the strength of an effect from variables to endogenous latent
Once the iteration process completed, the final model
variables [32]. According to Cohen et al. [33, 34] for a
is checked for discriminant validity based on cross loading
values generated from the final iteration as shown in Table 3. good model, the value of R2 of endogenous latent variable
Cross loading of all the manifest variables has higher values should be more than 0.26. Since R2 value for the developed
on their relative latent variable as compared with other model is 0.422 which is higher than the suggested value, the
constructs as in the Table 3. This verifies that the manifest model is considered to have substantial degree of explained
variables in each construct represent the assigned latent variance of cost performance by inhibiting factors. Next step
variable testifying the discriminant validity of the model. is assessing the path coefficient of all latent variables (paths)
6 The Scientific World Journal

Table 3: Results of cross loading.

CSM DDF FIN ICT LAB MMFM PMCA


CSM01 0.635 0.389 0.165 0.479 0.396 0.176 0.460
CSM04 0.844 0.383 0.384 0.414 0.305 0.368 0.510
CSM05 0.826 0.465 0.430 0.456 0.323 0.208 0.480
CSM06 0.651 0.191 0.365 0.460 0.407 0.480 0.465
CSM07 0.769 0.402 0.313 0.280 0.246 0.172 0.433
CSM08 0.637 0.472 0.569 0.520 0.454 0.456 0.629
DDF01 0.304 0.806 0.228 0.346 0.255 −0.032 0.519
DDF02 0.351 0.553 0.388 0.284 0.194 0.175 0.432
DDF03 0.477 0.921 0.366 0.505 0.443 0.305 0.715
DDF05 0.459 0.870 0.273 0.443 0.462 0.321 0.578
FIN01 0.286 0.081 0.571 0.191 0.440 0.293 0.219
FIN02 0.115 0.011 0.633 0.040 0.382 0.194 0.250
FIN05 0.401 0.397 0.807 0.298 0.474 0.171 0.452
FIN06 0.346 0.235 0.867 0.272 0.561 0.551 0.393
ICT01 0.548 0.394 0.285 0.867 0.537 0.511 0.553
ICT02 0.472 0.512 0.292 0.912 0.518 0.407 0.587
ICT03 0.514 0.404 0.295 0.881 0.498 0.471 0.646
LAB01 0.289 0.323 0.515 0.479 0.861 0.423 0.496
LAB02 0.541 0.387 0.574 0.468 0.793 0.503 0.497
LAB03 0.357 0.408 0.433 0.481 0.778 0.411 0.400
LAB04 0.450 0.473 0.520 0.487 0.726 0.561 0.536
LAB05 0.246 0.318 0.498 0.238 0.617 0.267 0.276
MMF01 0.250 0.135 0.354 0.280 0.357 0.795 0.218
MMF02 0.314 0.256 0.397 0.466 0.501 0.909 0.401
MMF03 0.470 0.280 0.390 0.503 0.490 0.575 0.405
MMF04 0.389 0.293 0.408 0.512 0.506 0.842 0.401
PMCA02 0.244 0.577 0.321 0.362 0.245 0.015 0.590
PMCA03 0.591 0.547 0.348 0.571 0.439 0.322 0.848
PMCA04 0.456 0.412 0.405 0.528 0.558 0.552 0.692

Table 4: Path coefficient with 𝑡-values for the structural model.


Path coefficient (𝛽) 𝑡-value
CSM Contractor’s Site Management Related Factors −0.718 49.43∗
DDF Design and Documentation Related Factors 0.194 11.59∗
FIN Financial Management Related Factors 0.193 14.80∗
ICT Information and Communication Related Factors 0.145 9.43∗
LAB Human Resource (Workforce) Related Factors 0.298 21.82∗
MMFM Nonhuman Resource Related Factors 0.043 4.01∗
PMCA Project Management and Contract Administration Related Factors 0.102 3.55∗

𝑃 < 0.01.

by comparing 𝛽 values among all the paths. The highest 𝛽 Results from Table 4 demonstrate that all the paths
value symbolizes the strongest effect of predictor (exogenous) attained t-value are higher than the cut-off point for a signif-
latent variable towards the dependent (endogenous) latent icance level of 1 percent, that is, 2.58. This implies that all the
variable [35]. However, 𝛽 value has to be tested for its paths in the model have a strong effect on cost performance.
significance level through t-value test. The test is achieved by The highest 𝛽 value is 0.718 for contractor’s site management
performing nonparametric bootstrapping technique [25, 36, related factors. This most significant construct (group of
37]. Bootstrapping technique computes t-value by creating factors) influences critically in affecting cost performance of
prespecified number of samples. Hair et al. [13] suggested that construction projects.
acceptable t-values for a two-tailed test are 1.65 (significance
level = 10 percent), 1.96 (significance level = 5 percent), 5.3. Model Validation. The developed model is validated to
and 2.58 (significance level = 1 percent). In this study, check its usefulness. The validation is carried out by checking
bootstrapping generated 5000 samples and these samples are the stability of the model through calculating adequacy of
used to compute t-values as presented in Table 4. sample size with power analysis test. Power analysis (1 − 𝛽)
The Scientific World Journal 7

t tests-linear multiple regression: fixed model, single regression coefficient


Tail(s) = two, number of predictors = 7, 𝛼 error probability = 0.01, and effect size f2 = 0.73

1
0.9850.9940.9980.999 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 11
0.959
0.898
0.8
0.761
Power (1 − 𝛽 err prob)

0.6

0.486
0.4

0.2

0.079

20 40 60 80 100 120 140


Total sample size

Figure 3: Generated power analysis.

test is to check the stability of the model’s parameters with the explained variance of cost performance by inhibiting
sample size used for the analysis [25]. It is to confirm whether factors.
the sample size used is sufficient for generating a stable (iii) The sample size of 144 involved in the study was
model. The test is conducted by calculating the power of adequate and validated through power analysis test.
the model through G∗ Power 3.1.2 software package [38, 39].
Input parameters required for the software are at significance (iv) Most significant category of inhibiting factors affect-
level (𝛼) of the test, sample size (N) of the study and effect size ing cost performance in the construction industry is
(ES) of the population. Effect size is calculated using Cohen Contractor’s site management.
et al. [34] equation as below: In contractor site management group there are 7 fac-
2 tors which are significant for the contractors to give more
𝑅
Effect Size = , (1) emphasis for achieving successful completion of the projects
1 − 𝑅2 undertaken by them.
where R2 is the coefficient of determination.
Input parameters for this study are significance level as Conflict of Interests
0.01 (i.e., 99% of confidence level), sample size (N) as 144, and
effect size (ES) as 0.73. The generated values of power analysis The authors declare that there is no conflict of interests
for various sample sizes are shown in Figure 3. Figure 3 regarding the publication of this paper.
indicates that the power of the overall model increases as the
number of samples size increases. It achieved 100% power at Acknowledgment
sample size of 50 since this study used 144 samples and it
is obvious that it is more adequate for achieving substantial The authors would like to thank Centre of Research and
power. Innovations, Universiti Tun Hussein Onn Malaysia, for
encouragement and support in carrying out this research
6. Conclusion work. The authors also pay especially thanks to respondents
participating in the survey, without whose cooperation and
This study highlighted the cost performance in the construc- precious time the completion of this work was not possible.
tion project affected by various inhibiting factors. These fac- A. H. Memon is thankful to Quaid-e-Awam University of
tors are grouped and modelled into 7 categories in SmartPLS Engineering, Science and Technology also for granting per-
software where it was analyzed for assessing the effect on cost mission to carryout research work at Universiti Tun Hussein
performance. Major conclusions drawn from this study are as Onn Malaysia.
follows.
(i) 29 inhibiting factors have a strong effect on cost References
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