CHAPTER ONE
INTRODUCTION
1.1       Background of the Study
Ever since the dawn of civilization, man has indulged in some form of construction activity. Even in ancient times, man created architectural Marvels which came to be regarded as wonders of the world including the pyramids of Egypt, the Great Wall of China, and the tower of Babel among others.
Estimates for engineering construction and building project are extremely important for the financier. The primary function of this process is to produce a forecast of the probable cost of a proposed project before the detailed design and contract particulars are prepared (Onwusonye, 2006; Pratt, 2011). Prospective clients require budget estimate at the early stage of the project to manage and forecast their intended financial commitment before extensive work on the design is done. A feasibility estimate is therefore an important document that helps the client in carrying out a detailed study on the viability of his proposed project with a view to determining whether the investment is worthwhile.
Estimating therefore describes the technical process of predicting the probable costs of the project based of specified information (Akintoye, 2000). The estimating process is broadly divided into two types namely: feasibility and tender estimating depending on mainly on the stage of the project and amount and quality of available information (Pott, 2008). However, the use of one approach precedes the other in the project development life cycle thereby making the context of predictive accuracy an important discourse in cost management literatures.
The feasibility estimating has gained more interest based on its level of important to the overall cost performance of the project. Feasibility estimating is there probable assessment of the probable cost of project at the early stage of the project when the design is not fully developed. However, lack of theories on construction price forecasting is a major factor that has restricted empirical progress in cost forecasting (Akintoye, 2000).
One of the major problems facing the Nigerian construction industry and in the global perspective is the fact that most projects are completed at sums higher than their initial contract sum (Achuenu, 1994; Gundiri, 1998). As a result, initial contract sum is rarely relied upon for decision making. The contract price obtained at the pre-contract stage of construction projects form the contract sum; and it is the amount established for the project. The expectations are that this sum should not be exceeded. Despite the veracity of this fact in practice and research, building construction projects are rarely completed within the estimated cost (Chindo, Okoli, Fadason and Gandu, 2012). Studies by Elinwa & Buba (1993) cited in Chindo, Okoli, Fadason and Gandu (2012) established cost variances between 8 to 133%; and an earlier study by Giwa (1988) pegged cost variability at 113% between the feasibility estimate and final cost of the project.
The research space has largely developed towards the study of variance between contract sum and final account. The trend has left a significant gap in determining the events in the procurement process between feasibility phase and contract sum. This study argues that, the contract sum is developed from a comprehensive design information than feasibility estimate; hence the need to evaluate the relationship between the later estimate and the former. This study therefore seeks to examine the effect of effect feasibility estimate of final account.