The Impact of Effective Contract Planning on Contractors’ Profit (a Case Study of Julius Berger Nigeria Plc, Uyo)
Chapter One
RESEARCH OBJECTIVES
- To explore contract planning practices applied by Julius Berger at various project levels.
- To assess awareness and usage of formal and informal contract planning practices by Julius Berger, Uyo office.
- To examine the success or failure of the contract planning approach used by Julius Berger Contractors on Eket-Ona dual road project.
- To evaluate the impact of the applied contract planning approach to the attainment of project profits.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
In this chapter, the researcher will review existing literature generally on contract planning and narrow it down to the effects it has on time, cost and the general performance of an organization.Various concepts of contract planning, contract management and organizational performance are discussed, and previous and recent researches on contract planning and its effect on cost and time are well outlined and stated.
THEORITICAL FRAMEWORK
The contours of contract theory as a field are difficult to define. Many would argue that contract theory is a subset of Game Theory which is defined by the notion that one party to the game (typically called the principal) is given all of the bargaining power and so can make a take-it-or-leave-it offer to the other party or parties (i.e., the agent(s)). In fact, the techniques for screening contracts were largely developed by pure game theorists to study allocation mechanisms and game design. But then again, carefully defined, everything is a subset of game theory.
Others would argue that contract theory is an extension of price theory in the following sense. Price theory studies how actors interact where the actors are allowed to choose prices,wages, quantities, etc. and studies partial or general equilibrium outcomes. Contract theory extends the choice spaces of the actors to include richer strategies (i.e. contracts) rather than simple one-dimensional choice variables. Hence, a firm can offer a nonlinear price menu to its customers (i.e., a screening contract) rather than a simple uniform price and an employer can offer its employee a wage schedule for differing levels of stochastic performance(i.e., an incentives contract) rather than a simple wage.
Finally, one could group contract theory together by the substantive questions it asks.How should contracts be developed between principals and their agents to provide correct incentives for communication of information and actions. Thus, contract theory seeks to understand organizations, institutions, and relationships between productive individuals when there are differences in personal objectives (e.g., effort, information revelation, etc.).
It is this later classification that probably best defines contract theory as a field, although many interesting questions such as the optimal design of auctions and resource allocation do not fit this description very well but comprise an important part of contract theory nonetheless.
THE BASIC THEORY
The Model We now turn to the consideration of moral hazard. The workhorse of this literature is a simple model with one principal who makes a take-it-or-leave-it offer to a single agent with outside reservation utility of U under conditions of symmetric information. If the contract is accepted, the agent then chooses an action, a 2 A, which will have an effect
(usual stochastic) on an outcome, x 2 X, of which the principal cares about and is typically“informative” about the agent’s action. The principal may observe some additional signal,s 2 S, which may also be informative about the agent’s action. The simplest version of this model casts x as monetary profits and s = ;; we will focus on this simple model for now ignoring information besides x.
We will assume that x is observable and verifiable. This latter term is used to indicate that enforceable contracts can be written on the variable, x. The nature of the principal’s contract offer will be a wage schedule, w(x), according to which the agent is rewarded.
We will also assume for now that the principal has full commitment and will not alter the contract w(x) later – even if it is Pareto improving.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This chapter describes the research design, population, sampling techniques, method of data collection as well as the method of data analysis used in this research.
Research Design
In designing the research, a plan was set to guide the researcher on data collection and analysis phases of the research project, however the research design is descriptive method and percentage representation. The number of respondent that answer each question will be determined. This will allow for easier comparison of responses of all the respondent in other to research logical and constructive conclusion also, the researcher adopted survey as one of the research methods which is meant to investigate, budgeting as an effective tool for planning control and increasing productivity as an instrument of development in private sector as the researcher center of focus.
Area of the Study
The Northern Cable Processing Manufacturing Company Kaduna (NOCACO) is the geographical location which the researcher selected for the study. The organization head office is situated at 44 Ahmadu Bello Way i.e. the state precisely Kaduna North Local Government.
Population of the Study
The research population of this study of 100 staff of NOCACO Nigeria Plc.
Sample Size and Sampling Technique
The sample sized for this total population in the case of large number of population under study, the researcher has decided to take proportion of the population and study. The sample size used for this study is forty (40) out of the total population of hundred (100).
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
Introduction
In this Chapter, all the data collected through the questionnaire administered were presented, analyzed and interpreted using likert rating scale. Out of the 6 questionnaires administered, only 40 were returned representing 63% of the total and this is considered to be adequate.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
SUMMARY
In this study, our focus was to to examine the impact of effective contract planning on contractors profit using Julius Berger Nigeria PLC (Uyo Branch), Akwa Ibom State as a case study. The study specifically was aimed at exploring contract planning practices applied by Julius Berger at various project levels, assess awareness and usage of formal and informal contract planning practices by Julius Berger, Uyo office, examine the success or failure of the contract planning approach used by Julius Berger Contractors on Eket-Ona dual road project, and evaluate the impact of the applied contract planning approach to the attainment of project profits
The study adopted the survey research design and randomly enrolled participants in the study. A total of 151 responses were validated from the enrolled participants where all respondent are active workers in Julius Berger Nigeria PLC (Uyo Branch), Akwa Ibom State.
CONCLUSION
The findings revealed that:
Contract planning does affect contractor’s profit.
The ways in which contract planning can improve contractor’s profitincludes:
- It reduces waste on construction site
- It reduces expenditures and cost
- It reduces time spent on construction projects
- It saves material consumption and so results in saving money
- It reduces excessive spending on labour, material, and plant
The factors that affect contract planning practicesincludes:
- Type of client
- Type of the project
- Time availability
- Procurement method
- Project Budget
- Size of the project
- There is significant relationship between effective planning and contractor’s profi
RECOMMENDATION
Based on the responses obtained, the researcher recommend that
- proper awareness should becarried out to sensitized professionals in the construction industry about the different contract planning techniques available and their suitability for each construction project.
- The researcher is of the opinion that long range planning of the company should be maintained and pursued fully reached. This is because the company has benefited from it, ranging from creation of economic and minimization e.g. its expenditure.
However, in the area of its operational planning, the company should devise a good specialization policy so that each department within the company should perform specific operation of function.
This will help the company to achieve efficiency and effectiveness in the area of its short term tactical planning and budgeting. This is because for operational performance or goals to be achieved, such operation has to be planned which will go a long way in controlling the productivity of the organization.
- The company should employ competent and intelligent staff which a lot of experience to facilitate the planning which will go a long way in controlling in productivity in the organization.
- contractplans and control should be reviewed on an operated effective and efficiently as to facilitate the realization of the goal which is the productivity increase in an organization.
- The company corporate planning should have the total support and involvement of top management. It is not a process to be left to technical specialist then assistance and advice can be extremely useful but management involvements is essential.
- The company should avoid excessive detail in contract I recommend that the contractplanning should provide a curse gained strategic structure for long term future.
BIBLOGRAPHY
- Alces, Peter, and Michael Greenfield. 2010. “They Can Do What!? Limitations on the Use of Change-of-Terms Clauses.” Georgia State University Law Review 26(4):1099-145.
- Atiyah, Patrick S. 1979. The Rise and Fall of Freedom of Contract: Oxford University Press.
- Ayres, Ian, and Gregory Klass. 2005. Insincere Promises: The Law of Misrepresented Intent. New Haven: Yale University Press.
- Bakos, Yannis, Marotta-Wurgler, Florencia and David R. Trossen. 2009. “”Does Anyone Read the Fine Print? Testing a Law and Economics Approach to Standard Form Contracts.”.” NYU Law and Economics Research Paper No. 09-40.
- Bal, P. Matthijs, Annet H. De LAnge, Paul G.W. Jansen, and Mandy E.G. VAn Der Velde. 2008. “Psychological Contract Breach and Job Attitudes: A Meta-analysis of Age as a Moderator.” Journal of Vocational Behavior 72(1):143-58.
- Barthélemy, Jérôme, and Bertrand V. Quelin. 2006. “Complexity of Outsourcing Contracts and Ex Post Transaction Costs: An Empirical Investigation.” Journal of Management Studies43(8):1775-97.
- Bebchuk, Lucian A., and Richard A. Posner. 2006. “One-Sided Contracts in Competitive Consumer Markets.” Michigan Law Review 104(5):828-36.
- Becher, Shmuel I. 2009a. “A ‘Fair Contracts’ Approval Mechanism: Reconciling Consumer Contracts and Conventional Contract Law.” University of Michigan Journal of LawReform 42:747-804.
