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Major Factors of Cost Escalation in Construction Projects in Saudi Arabia
EM 599 Research Proposal
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Major Factors of Cost Escalation in Construction Projects in Saudi Arabia
Abstract:
Cost escalation on construction projects, whether public or private, has a long history in almost all global projects. These escalations lead to an overrun of the initial budgets and a delay in the completion date. Many studies and researches have recognized factors that lead to increased project cost. After deep investigation of the previous literature review, we highlight major causes of this overrun. Twenty factors, which affect the cost of any project, have been identified. Engineers and researchers who identified these factors believed that we could improve the cost estimates for any projects by mitigating the influence of these factors.
Introduction:
Definition
By definition, cost escalation is a change in the initial budget of various goods or services of a given economy in a certain period. In construction projects, it refers to the additional amount of money required to execute and construct a project over the primary budget. Cost escalation occurs if the actual costs exceed the previous estimates. Escalation and inflation are almost similar except that escalation is for a particular item or a group of items in a project. For a long period, escalation will seem to be more-or-less equal to inflation since there is an up and down shift of the market supply and demand, unless efficient changes occur or there is an emergence of sustained technology in the market.
Examining the cost variation is usually calculated through price index measures (PIM), Wholesale Price Index (WPI), or Consumer Price Index (CPI). Unfortunately, the indices can be hard to establish since escalation can emerge in a micro-market and become difficult to quantify with surveys, unlike inflation.
In the context of project management and cost engineering, escalation is considered as risk funds, which should be part of any project estimates. When escalation is minimal, it can be controlled easily. On the other hand, it is not the best practice to execute, especially when escalation is significant.
Finishing projects on time within the initial cost is an indicator of efficiency. Unfortunately, the construction process is subject to many predicted and unpredicted factors.
1. Objectives of the study:
The main objective of this study is to identify the cost escalation factors in construction in the Eastern Province of Saudi Arabia.
2. Literature Review:
The History of Cost Escalation:
Cost escalation is a global problem almost in every area of the world especially on government highway projects. In India, most of the escalations on government projects come from the delay between the planning stage and the implementation stage. The last statistics show that around 77% of the highway projects in the United States experience cost escalation. For example, the construction of the Holland Tunnel in 1927, which is the longest underwater tunnel ever constructed. Its initial cost estimate done by renowned civil engineer George Washington is $12 million, and the execution will be done in three years. Another chief engineer takes care of the execution of the project, and when doing his analysis found that:
The proposed width is very narrow to accommodate all vehicles.
The concert will not hold the entire load.
The construction method, which is suggested by Gather, is not trivial.
The estimated cost and duration are very low.
These factors lead to the proposal of another scope of work and increased the cost to $28,669,000, and the execution will be done in 3.5 years. In addition, the schedule has also been changed. The inflation in materials and labor led to an increase in the cost of the project by $6 million. Fourteen (14) million has been added to the contract because of the scope creep. The ventilation system has been changed and affected the cost by $4,422,000 because of the change in the scope. These factors and others, such as unforeseen conditions and events, and challenges in controlling cost caused the final cost to be $48.8 million, and the execution will be done in 7 years. Moreover, Zambia faced the same problem over the past years, which spent huge resources on road construction projects. For example, in 2005, 2006 and 2007, the Zambia government spent around US$ 118.7, US$ 227, and US$197 million respectively. Overall Rail projects have the worst project underestimation record of accomplishment with an average cost escalation of 44.7% (Table 1)
Most of the time, estimated project costs increased multiple times during the years of construction. Usually, projects with a long lead-time and high budgets experience this problem more often than smaller projects with a low budget. If we revisit the Holland Tunnel example, we will notice that the cost has escalated eight times during execution. This is due to the scope creep, schedule delay, inflation, cost of labor and materials, unforeseen conditions, change in controlling costs, change in chief engineer’s position and a leak in the work force. In addition, when steel prices rose drastically in 2004, the cost of projects around the world also increased by almost double, from $300/TN to $600/TN.
Current Problem:
Managing execution of any project needs a lot of coordination between the employees and the organizations, and the technical issues need to be resolved in a timely manner. Furthermore, natural resources and materials need to be purchased and coordinated in an efficient way. Unfortunately, construct complex projects are dominated by social, economic, and political challenges. In Saudi Arabia, the construction industry is estimated to grow from the $80.2 billion of contract awards in 2011 to $86.1 billion by 2013 with the majority of the investments coming from the government. For example, the ministry of transportation executes roads projects of a length of more than nineteen (19) kilometers at a cost of forty two (42) billion SR. With this large number of projects, the government faces a major challenge in controlling the cost within a limited time because the many factors can interfere with the effect of the final cost. High demand in housing construction includes Saudi citizens, government public works projects, and housing projects. A shortage in resources such as cement, steel and other construction materials, lack of trained labor, and export of construction materials out of the kingdom lead to cost escalation. Large companies in Saudi Arabia, such as Saudi ARAMCO, SABIC, and Ma’and face this problem because of the gap between the design and the execution time. Another government sector facing the same problem is the education sector. Last statistics show that 700 (around 2.8%) school projects were put on hold due to securing logistics and cost of the land. Since 2003, the Kingdom spent over SR 6 ($1.6) billion to secure the land only.
2.1 Methodology:
Many researches and thorough studies have been conducted in order to find out the major factors leading to cost escalation. These factors were classified based on their nature as internals (controllable) and externals (uncontrollable). Internal factors are those that come from the organization itself and can be controlled under its authority. On the other hand, external factors refer to the factors that are out of the organization’s hands, and there is need to contact another organization such as the government or an act of God.
A SWOT Analysis of the Status Quo of Developing and Positioning Ma Wan as a Solar Panel Island
A SWOT Analysis of the Status Quo of Developing and Positioning Ma Wan as a Solar Panel Island
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Word Count: 1127
Introduction
The focus of the paper is on Ma Wan Island in relation to its branding as a solar panel destination. Ma Wan Island is a small island encircled by a residential complex complete with recreational spaces, big bridges, museums, and beaches and home to a lot of tourist attractions. Additionally, there is a Solar Tower scheduled to be a major boost to the local tourism sector as Ma Wan brands itself as a sustainable tourism destination. Ma Wan is a museum devoted to the history of Chinese astronomy, replete with a public solar telescope. The aim of this paper is to conduct an analysis of the strengths, weaknesses, opportunities, and threats of the status quo of developing and positioning Ma Wan as a solar panel island. The paper presents the strengths, weaknesses, opportunities, and threats and then provides recommendations.
Strengths
The richness of tourist attractions in Ma Wan is further complemented by developing and positioning Ma Wan as a solar panel island. Following recent global events such as the COVID-19 pandemic, mass tourism can no longer be depended on. For tourist destinations and countries that wish to tourism tourism in a responsible manner, more must be done. Force, Manuel-Navarrete, and Benessaiah (2018) advocate for a change of tact turning major destinations into green and eco-friendly destinations. For major tourist locations such as Hong Kong, a new approach to tourism, such as alternative tourism, is thus necessary, as is the case with other emerging markets. Ma Wan has what it takes to achieve this, especially when the island is packaged and positioned as an eco-tourism destination.
Ma Wan’s solar tower and its perception as a green destination is a major strength as it will attract more people while operating on an eco-friendly platform. It promises not just ecotourism, and a unique form of alternative tourism in the global tourism industry. Gould (2017) expresses that these types of tourism are more likely to be conservationist, nature-oriented, or environmentally sensitive. Therefore, the perception of a green destination is an advantage for Ma Wan.
Weaknesses
The status quo of developing and positioning Ma Wan as a solar panel island will limit what the island is able to do in terms of expansion or incorporating new ideas. Despite the popularity of green tourism and alternative tourist activities, Cheng et al. (2018) assert that such activities may limit expansive measures that will be necessary in the later stages of the destination. For example, further activities to build larger establishments such as hotels and resorts to support tourism activities in the island will be hampered by the status quo of the solar panel island. Therefore, the status quo may reduce the growth of the island.
A major weakness of the status quo is that it may taint the image of the entire island if the perception does not meet the expectations of tourists and travellers. It is likely that the status quo of Ma Wan is a fake. Gould (2017) found that creating false perception of a tourist destination will affect the perception of all related products. For Ma Wan, the status quo may be damaging in the long term if the perception fails to meet expectations.
Opportunities
The status quo of developing and positioning Ma Wan as a solar panel island will likely open up opportunities to grow the entire island into an eco-friendly destination that incorporates elements of green tourism with full sustainability. Lenzen et al. (2018) found a growing demand for sustainable tourist destinations as more people aim to protect the natural environment. therefore, a deeper sense of sustainability and more actions to preserve the natural environment is an opportunity that can be explored in the future.
A transformative change in the tourism sector in Hon Kong is an opportunity that Ma Wan can use to grow in the future. Change in dynamic systems, such as tourism, depends on the cultural adaptation of the many individuals who participate (Zimmerman, 2018). It is essential for Ma Wan that it be able to adapt, which requires an evaluation of core values and how they are expressed in social structures, processes, and human actions. Therefore, the change is an opportunity for Ma Wan to grow and adapt.
Threats
The success of the status quo of developing and positioning Ma Wan as a solar panel island may be its own enemy and threat. Success will mean overcrowding and overtourism. For example, Milano, Novelli, and Cheer (2019) report how Asian top destinations in the Philippines and Thailand have lost their appeal due to visitors exceeding the ability of the local areas to cope. Therefore, success, albeit being what the Ma Wan management desires, may be a major threat to the long-term success of the destination.
Pollution and climate change are going to be the biggest threats to the status quo of developing and positioning Ma Wan as a solar panel island as rules and regulations being implemented will significantly reduce participation. Environmental degradation is at an alarming level (Hultberg, 2018). As more pollution and adverse effects of climate change are experienced, it is likely that more people will reduce global travel. Therefore, pollution is a threat to the branding and positioning of the destination as a solar panel island.
Recommendations
In line with the above analysis, it is recommended that Ma Wan pursues the image and status quo of developing and positioning itself as a solar panel island. The strengths and opportunities are too significant to ignore. The strengths of this approach will help the destination to explore the opportunities mentioned. However, the weaknesses must be addressed in order to enable Ma Wan to remain ready to meet the threats. The opportunities mentioned must be seized in order to create a wider portfolio for Ma Wan. As green tourism and alternative tourism expands, Ma Wan must position itself as a pioneer in the sector.
Conclusion
Branding Ma Wan as a solar panel island is in line with ecotourism and sustainable tourism. Ecotourism is the intentional and responsible travel to areas in the natural environment in a manner that safeguards the environment, supports the well-being of indigenous people, and incorporates interpretation and education. Such practices seek to educate the entire tourism stakeholders about environmental issues. The study faced a limitation and challenge of inadequate literature on Ma Wan’s approach. The research implication is that more research is needed in the field of destination branding for Hong Kong and Ma Wan. Specifically, data collection approaches will need to consider the analysis made, especially on the issue of the success of the project being a threat to its wellbeing. Implications of the discussion suggest their importance to policy and subsequent research. The implication on policy is that it will force Ma Wan to rethink attitudes towards sustainable tourism.
References
Cheng, J. C. H., Chiang, A. H., Yuan, Y., & Huang, M. Y. (2018). Exploring antecedents of green tourism behaviors: A case study in suburban areas of Taipei, Taiwan. Sustainability, 10(6), 1928.
Force, A., Manuel-Navarrete, D., & Benessaiah, K. (2018). Tourism and transitions toward sustainability: developing tourists’ pro-sustainability agency. Sustainability Science, 13(2), 431-445.
Gould, K. A. (2017). Ecotourism under pressure: The political economy of oil extraction and cruise ship tourism threats to sustainable development in Belize. Environmental Sociology, 3(3), 237-247.
Hultberg, P. (2018). Trade openness, economic growth, and environmental degradation in Asian developing countries. Journal of Applied Business and Economics, 20(5), 61.
Lenzen, M., Sun, Y. Y., Faturay, F., Ting, Y. P., Geschke, A., & Malik, A. (2018). The carbon footprint of global tourism. Nature Climate Change, 8(6), 522-528.
Milano, C., Novelli, M., & Cheer, J. M. (2019). Overtourism and tourismphobia: A journey through four decades of tourism development, planning and local concerns. Tourism Planning & Development, 16(4), 353-357.
Zimmermann, F. M. (2018). Does sustainability (still) matter in tourism (geography). Tourism Geographies, 20(2), 333-336.
Bottled Water Business
Bottled Water Business
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Bottled Water Business
Discovering a market gap is key to entrepreneurs as it is them a basis to capitalize on the opportunity. Planning is essential in every business aspect. It’s important to have a comprehensive plan that highlights your mission, vision, key objectives, and market state, which will help analyze your opportunity to maximize and futuristic threats that may affect your operations as well as strength and weaknesses. When planning is complete, it is important to create a beguiling company profile that differentiates you from other businesses. One should also have required business licenses from national and various local government stakeholders. It will allow the business to run and also maintain hygiene. Create a business account as it is expensive to have separate ones. A business account gives your company legalities and creates trust among your customers.
Sources for bottled water can be amassed from both localized sources such as taps and natural ones such as springs and streams. So it’s best to determine the location of your business and the proximity of the raw material. Once the water has been collected from its source, it needs to undergo various purification processes from filtration to UV-lighting treatment to become purified. With your company logo and graphics, look for art that will be identified by your customers on your bottle. Choose a company bottle to print the bottle to your specifications ranging from size and color. With water packed in bottles digitally, the next key step is to know the product gets to your customers. It’s important to get reliable and cost-efficient means. It’s also an enormous advantage of having our business online as it creates a wider market reach to customers globally.
After getting the product to the customers, it is important to establish ways to keep the environment green by recycling the plastic water bottles. Waste management is critically important as it reduces the amounts of materials ending up in the fields as the adverse effects are vital not only to humans but also to other organisms in the ecosystem.