ASSESSMENT OF PROJECT COST MANAGEMENT PRACTICES: THE CASE OF SELECTED REAL ESTATE COMPANIES IN ADDIS ABABA

Abstract

The objective of the study was to assess the project cost management practices of real estate development companies in Addis Ababa. Existing cost management practices related with resource planning, cost estimating, budgeting and cost controlling were assessed in view of identifying shortcomings and limitations associated with each function. A mixed research approach and descriptive survey design was used. A questionnaire was used to gather quantitative data while semi-structured interview was employed to collect qualitative data. The study mainly targets four real estate companies in Addis Ababa currently undertaking various real estate development projects. These are: Sunshine Real Estate, Noah Real Estate, Pluto Real Estate and Jambo Real Estate. The study covered a census of 88 project team members of the four sample projects who were working in four construction projects in Addis Ababa. The data collected was analyzed with the aid of descriptive statistical techniques such as frequencies, percentages and mean score. Based on the analysis, this study identified the major gaps in the actual cost management practice of the project. The study found that despite the fact that all sample real estate companies were undertakes the resource planning, cost estimating and cost budgeting task as part preparing the overall project management plan, there were gaps in terms of using all the required inputs during the resource planning, cost estimating and budgeting. Most of sample projects did not establish cost control plan and did not timely measuring and reporting of the cost variances from the baseline. There was also limitation in terms of using more advanced project resource planning, cost estimating, cost budgeting and cost controlling techniques and tools and the traditional method of intuitive judgment is still very much in evidence. The study also found the application of the traditional or standard estimating method for cost estimating is dominant. The results further revealed that the cost control system fails to indicate/identify activities or operations which are being carried out uneconomically together with the underlying reasons. Moreover, it is not carried out in a way which provides feedback to the estimating process. The study also concluded that that there was deviation between estimation and actual costs in this project. Finally, recommendations forwarded such as prepare cost control plan, improving and expanding the scope of company’s cost controlling system, integration of the estimating formats and techniques with those used for budgeting and cost controlling purposes and embed cost management practice in daily project activities using appropriate tools and techniques