Recommendations for mitigating the financial risks of construction industry operators in Malta

Abstract

The local construction industry remains one of the most important sectors for the country’s economy. It is also common for local construction projects to incur cost overruns, which could lead to project delay. The aim behind this research is to investigate the processes which deal with the avoidance of cost overruns within the local construction projects. This study serves as a preliminary exploration into how Value Management could be introduced more widely in the local construction industry. The research was conducted through a self-completing questionnaire. The first section of the questionnaire dealt with specific factors which are present in the local construction industry and which could lead to cost overruns. The second part of the questionnaire tackled the implementation of Value Management within the local construction industry. The mixed methods approach was selected for this study, such that the qualitative aspect could be explored through the vantage of the quantitative characteristic. The responses of the closed ended questions lead to having measurable variables, whilst the Likert Scales served as a ranking system for the various factors. Furthermore, the ranking of these factors was executed through the Friedman test and the Relative Importance Index. Throughout this study, it was found that communication between the different entities is viewed as the most important factor within the local construction industry. Value Engineering exercises and locally sourcing raw materials are implemented in order to tackle the leading cause of cost overruns, which are linked to the ongoing changes to scope of project and design. The results also showed that although Value Management is not widespread in Malta, local construction industry operators do apply the strategy in order to avoid cost overruns. Due to the lack of Value Management guidelines available locally, the most important Critical Success Factor within a project was considered to be the ease of use of system, whilst the time taken for project completion was viewed as the most important Key Performance Indicator of a project. Furthermore, it was also evident that professional transparency and a set of recognised guidelines are essential for the local implementation of Value Management to be more prevalent.