The effect of cost estimation accuracy on project management: A case study of Julius Berger Nigeria Plc
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Background of the Study
Cost estimation is a critical component in the management of construction projects. Accurate cost estimation enables project managers to allocate resources effectively, mitigate financial risks, and ensure that projects are completed within budget. In the construction industry, especially in Nigeria, where economic conditions such as inflation and currency depreciation fluctuate, accurate cost estimation becomes even more crucial. Julius Berger Nigeria Plc, one of the foremost construction companies in Nigeria, provides an ideal setting for examining the role of cost estimation in project management. The company’s extensive portfolio of large-scale infrastructure projects, ranging from roads to buildings and bridges, requires precise cost forecasting to meet deadlines and client expectations (Adeyemi & Oduwole, 2023).
The effectiveness of project management is closely linked to the accuracy of cost estimations. A project with an underestimation of costs can face delays, scope changes, and financial losses, while overestimation can result in inefficient resource use and lost opportunities for profitability (Abubakar, 2024). In Nigeria, Julius Berger has faced numerous challenges in cost estimation, including fluctuations in construction material prices, exchange rate volatility, and regulatory changes. These factors contribute to the complexity of making accurate cost projections (Akinwunmi, 2025). Previous studies have highlighted the importance of cost estimation for project success, but specific research focused on the Nigerian construction sector, particularly concerning companies like Julius Berger, remains sparse.
As a prominent player in the construction industry, Julius Berger’s practices in cost estimation have significant implications for project outcomes in Nigeria. By evaluating the impact of cost estimation accuracy on project management, this study aims to provide insights into the broader implications of effective cost forecasting on project performance. Understanding how accurate cost estimation influences the efficiency, timeliness, and profitability of projects will contribute to better practices in the Nigerian construction sector, potentially enhancing the competitiveness and sustainability of firms like Julius Berger.
Statement of the Problem
The Nigerian construction industry faces challenges related to cost estimation due to unpredictable economic conditions, fluctuating material prices, and regulatory changes. Julius Berger Nigeria Plc, while a leader in the construction sector, must contend with these factors to ensure that its projects are completed within budget and on schedule. Inaccurate cost estimation can lead to project delays, cost overruns, and reduced profitability, making it imperative to understand the impact of cost estimation accuracy on project management. Despite its significance, there is limited research on how cost estimation affects project performance specifically in the Nigerian context, especially concerning large construction firms such as Julius Berger.
The lack of accurate cost estimation can also affect project scope, result in unforeseen financial strains, and potentially harm relationships with clients and stakeholders. Thus, this research seeks to assess the effect of cost estimation accuracy on the efficiency and effectiveness of project management at Julius Berger Nigeria Plc, with a focus on understanding how this accuracy can influence project delivery, profitability, and resource utilization.
Objectives of the Study
- To assess the accuracy of cost estimation in project management at Julius Berger Nigeria Plc.
- To evaluate the impact of cost estimation accuracy on project delivery and performance at Julius Berger.
- To identify the challenges Julius Berger Nigeria Plc faces in ensuring accurate cost estimation for its projects.
Research Questions
- How accurate is cost estimation in project management at Julius Berger Nigeria Plc?
- What is the impact of cost estimation accuracy on project delivery and performance at Julius Berger Nigeria Plc?
- What challenges does Julius Berger Nigeria Plc face in ensuring accurate cost estimation for its construction projects?
Research Hypotheses
- H₀: There is no significant relationship between cost estimation accuracy and project delivery at Julius Berger Nigeria Plc.
- H₀: Cost estimation accuracy does not significantly affect project performance at Julius Berger Nigeria Plc.
- H₀: Julius Berger Nigeria Plc does not face significant challenges in ensuring accurate cost estimation.
Scope and Limitations of the Study
This study will focus on Julius Berger Nigeria Plc and evaluate the company’s cost estimation practices across its various construction projects. The research will primarily analyze data from completed projects, including financial records, project reports, and interviews with project managers. Limitations include access to proprietary cost estimation data, potential biases in stakeholder responses, and the challenge of isolating the impact of cost estimation accuracy from other factors influencing project success.
Definitions of Terms
- Cost Estimation: The process of forecasting the financial resources required to complete a project based on various factors, such as labor, materials, and overhead.
- Project Management: The process of planning, organizing, and executing a project to meet specified objectives, including time, cost, and quality standards.
- Construction Industry: The sector responsible for the building of infrastructure, including roads, bridges, and buildings.
- Accuracy of Cost Estimation: The degree to which the estimated cost of a project aligns with the actual cost incurred during its execution.
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