Financial and operational effects of cost estimation inaccuracy, material price volatility, and payment delays in Nigerian construction projects

Abstract

This study examined the impact of poor cost estimation, material price fluctuations, and payment delays on construction project performance and financial health in Nigeria. A quantitative approach was employed, collecting data via an online survey of 74 construction professionals, including quantity surveyors and contractors. Cost estimation errors, price variations, and payment delays were analysed using a five-point Likert scale and the Relative Importance Index (RII). Findings revealed that errors in the Bill of Quantities (BOQ) significantly damage professional reputation. Contractors’ chances of securing future projects were most affected (mean = 3.42), followed by quantity surveyors obtaining new commissions (mean = 3.40). Underestimating project costs created high risks, particularly project delays and funding shortages that could result in bankruptcy (mean = 3.78). Contractors faced the greatest financial loss due to reduced profit margins from underestimation (mean = 3.88). Material cost fluctuations were another key concern, with inflation in building materials ranked highest (mean = 4.92), followed by rising transportation costs (mean = 4.76). Payment delays further contributed to cost overruns and schedule disruptions. The main causes were poor availability of client funds (RII = 0.71) and disputes over work valuation (RII = 0.72). The study underscores the importance of accurate cost estimation to safeguard company finances and maintain project schedules. It recommends improving costing methodologies, strengthening stakeholder communication, and mitigating payment delays through enhanced contract management and financial controls. These findings provide practical strategies for reducing financial and operational risks associated with cost inaccuracies and delayed payments in construction projects.

Keywords

Cost estimation / Construction project management / Material price fluctuations / Payment delays / Financial impact

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