CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Until relatively recently, the discipline of development appraisal has remained the provenance of surveyors and developers. It largely been ignored by other participants in the development process, particularly planners, architects and construction specialists. This is now changing. Close attention is now paid to the feasibility and viability (and profitability) of development proposals as government and other stakeholders seek to extract developer and/or landowner contributions to affordable housing, public services and infrastructure. Consequently the theory, application and outputs from development appraisal are under intense scrutiny from a wide range of users. Since Circular 05/05 proposed the submission of financial information‟ to provide a basis for negotiations between developers and local planning authorities about viable levels of affordable housing, tests of the financial viability of development projects have become an integral part of the planning process, both at the forward planning and development control stages. At the large-scale, macro-level Strategic Housing Land Availability Assessments require proposed plans to be achievable. However, the timeframe for development can be decades rather than years and, as a result, generating detailed and reliable cost and revenue projections can be impractical. At the other end of the scale, viability appraisals are carried out to inform negotiations about affordable housing levels for a scheme about which there may be a high level of information on permitted development and expected costs over a relatively short timeframe.
In terms of critical evaluation from the real estate academic community, development appraisal has remained something of a backwater. In contrast, often linked to market traumas, over the last four decades methods of appraising standing investment properties have been the subject of widespread academic and professional debate. Whilst the RICS monitors variance and accuracy of investment valuations, there is no comparative institutional evaluation of the performance of development appraisals. Nevertheless, conventional development viability models have been subject to some criticism, particularly their simplified composition, failure to mirror reality and theoretical weaknesses.
1.2 PROBLEM STATEMENT
The general low usage of formal feasibility and viability appraisal techniques by contractors and developers globally often culminates into project failures, incessant claims for variations, huge financial losses and sometimes brings discomfort for people who came to enjoy themselves at these recreational centres. (Allan et al, 2007). This situation is more prevalent in redevelopment projects due to the inevitable problems of unexpected additional work, excessive requirements and scope management issues, project funding not aligned with project plans, delay, structural failure, cost overrun, etc (Naaranoja and Uden, 2007). These problems or uncertainties, among others, increase the project risk and make their management crucial if success is desired.
Some construction projects in Owerri Urban have been abandoned due to poor or no feasibility and viability appraisal on them, while some recreational developments Owerri Golf Club, Silver Bird Cinema etc have stood the test of time, due to proper planning and forecasting. This huge expenditure and apparent failure in the primary objectives of the project led to complaints, probe panels and subsequent abandonment of the project.
Research has shown that financial, political and physical risks are the most significant to Nigerian Contractors (Dada, 2010). However, of the different levels of risk (country, market or project), there is shortage of research as to how Contractors approach project planning at organisational level.