Analyzing contributing factors to construction claims on water projects in Uganda using multivariate regression modelling

Abstract

Globally organizations continue to grapple with construction claims, which have contributed to the cost escalation on projects estimated at 28%. Construction claims on water projects in Uganda account for an average of 14.56% of the initial contract sum where in extreme cases the cost overrun due to these claims can exceed 40% of the contract amount. This phenomenon has affected the implementation of the core projects of the National Development Plan (NDPIII) in terms of their financial performance where large sums of money have been re-directed to settlement of claims. In earlier studies, 78% of engineering construction companies believed that project risks were increasing. This created a need to model and understand the behavior of claims. There is need to analyze the underlying factors leading to the construction claims, identify the contributing factors and thereafter develop a model to predict their impact on the overall claim amount. A total of eight claim areas were identified as based on FIDIC red book which was consistent with most of the construction contracts executed on water projects in Uganda and from literature. A questionnaire survey was conducted involving professionals from National Water and Sewerage Corporation, contracting firms and consultancy firms where feedback from 88 respondents on frequency and impact of the contributing factors was rated using a five-point Likert scale. Complete data were gathered on 16 completed water projects in Uganda and the contributing factors ranked basing on importance index (II). The five highest ranked contributing factors were identified and a regression model for predicting the claim amount was developed using MS excel. The five factors ranked basing on their significance on the claim amount in the model were; variations, right of access to site, unforeseen physical conditions, extension of time for completion and delays by authorities. The data revealed that the five major contributing factors to claims accounted for 13.99% cost overrun due to claims and 96.08% of the entire claim amounts raised. Variations had the biggest impact on claim amount with 32.97% on average whereas delays by authorities had the least impact with 7.55% on average. The predictive model for construction claims on water projects was developed with a coefficient of determination (R-square) of 0.996 where 99.6% of the claim amount could be predicted by the model. It was concluded that lack of clarity on contract clauses and poorly designed scope as well as scope alterations led to variations which was the leading contributing factor to claims. Clear contract clauses on claims and prevention of scope creep will limit the development of claims.