INFLUENCE OF PRICE INSTABILITY ON COST ESTIMATIONS IN THE CONSTRUCTION INDUSTRY IN EDO STATE
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Abstract
This study examines the influence of price instability on cost estimation practices in the construction industry in Edo State, Nigeria. The study aims to identify the key drivers of price fluctuations and evaluate their impact on the accuracy and reliability of construction cost estimates. A descriptive survey research design was adopted, and data were collected through structured questionnaires administered to construction professionals, including quantity surveyors, architects, engineers, and builders. The collected data were analyzed using descriptive statistics, including mean item scores and standard deviation.
The findings reveal that inflation (mean = 4.42), material price fluctuations (mean = 4.34), and high interest rates (mean = 4.17) are the most significant factors contributing to price instability in the construction industry. Other notable factors include poor weather conditions, inadequate planning, and unstable government policies. The study further shows that key building elements such as reinforced concrete works, roofing materials, electrical systems, and finishing components are the most affected by these fluctuations. The results also indicate that price instability significantly reduces the accuracy of cost estimation, leading to frequent revisions of estimates, cost overruns, unreliable budgeting, and financial strain on both contractors and clients. In response to these challenges, the study identifies several effective mitigation strategies, including the use of price adjustment clauses, contingency allowances, early procurement, local sourcing of materials, and continuous market price monitoring. The study concludes that price instability remains a major threat to effective cost planning in the construction industry in Edo State. It recommends the adoption of proactive risk management strategies and improved forecasting techniques to enhance the reliability of cost estimation. This research contributes to existing knowledge by providing localized empirical evidence and practical solutions for managing cost uncertainty in a volatile economic environment.
The findings reveal that inflation (mean = 4.42), material price fluctuations (mean = 4.34), and high interest rates (mean = 4.17) are the most significant factors contributing to price instability in the construction industry. Other notable factors include poor weather conditions, inadequate planning, and unstable government policies. The study further shows that key building elements such as reinforced concrete works, roofing materials, electrical systems, and finishing components are the most affected by these fluctuations. The results also indicate that price instability significantly reduces the accuracy of cost estimation, leading to frequent revisions of estimates, cost overruns, unreliable budgeting, and financial strain on both contractors and clients. In response to these challenges, the study identifies several effective mitigation strategies, including the use of price adjustment clauses, contingency allowances, early procurement, local sourcing of materials, and continuous market price monitoring. The study concludes that price instability remains a major threat to effective cost planning in the construction industry in Edo State. It recommends the adoption of proactive risk management strategies and improved forecasting techniques to enhance the reliability of cost estimation. This research contributes to existing knowledge by providing localized empirical evidence and practical solutions for managing cost uncertainty in a volatile economic environment.
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