Factors Governing Factors Governing Housing Construction Housing Construction Costs in Saudi Arabia Costs in Saudi Arabia

Abdelrahman Al-GwaizAbdelrahman Al-GwaizKamal Al DihanKamal Al DihanFaisal Al AnkaryFaisal Al Ankary

PurposePurpose

To To identifyidentify the most influential the most influential cost factors affecting housing cost factors affecting housing construction in Saudi Arabia and construction in Saudi Arabia and to make to make recommendationsrecommendations based based on these factors.on these factors.

OutlineOutline

IntroductionIntroduction Literature ReviewLiterature Review Research MethodologyResearch Methodology Results & AnalysisResults & Analysis ConclusionConclusion RecommendationsRecommendations

IntroductionIntroduction

Importance of housing sectorImportance of housing sector– Basic human needsBasic human needs– Social implicationsSocial implications– Largest single expenditure Largest single expenditure – Socioeconomic development Socioeconomic development

ChallengesChallenges

Population growthPopulation growth Saudi life styleSaudi life style Affordable housingAffordable housing

Literature ReviewLiterature Review

Identify common cost factorsIdentify common cost factors Use these factors in the studyUse these factors in the study Factor Categories:Factor Categories:

1.1. EnvironmentalEnvironmental2.2. OperationalOperational3.3. ContractualContractual4.4. EstimationEstimation5.5. FinancialFinancial

Environmental FactorsEnvironmental Factors

Weather EffectsWeather Effects Construction DemandConstruction Demand Culture ShockCulture Shock Site Location & ConditionsSite Location & Conditions Local CompetitionLocal Competition Local EconomyLocal Economy Local Skills (Education/Training)Local Skills (Education/Training) Foreign Firm DominationForeign Firm Domination Local Laws & RegulationsLocal Laws & Regulations Labor NationalityLabor Nationality

Operational FactorsOperational Factors

Project Planning & SchedulingProject Planning & Scheduling Project CoordinationProject Coordination Construction DesignConstruction Design Materials & WorkmanshipMaterials & Workmanship On-Site ControlOn-Site Control Work ExperienceWork Experience On-Site DisputesOn-Site Disputes

Contractual FactorsContractual Factors

Management of ContractManagement of Contract Type of Contract UsedType of Contract Used Overtime/Expedition StipulationsOvertime/Expedition Stipulations Design ChangesDesign Changes Duration of ContractDuration of Contract Qualified Labor AvailabilityQualified Labor Availability

Estimation FactorsEstimation Factors

Material Cost EstimationMaterial Cost Estimation Labor Cost EstimationLabor Cost Estimation Equipment Cost EstimationEquipment Cost Estimation Equipment Maintenance EstimationEquipment Maintenance Estimation Interest Rate EstimationInterest Rate Estimation Productivity ExpectationsProductivity Expectations Supplier ExpectationsSupplier Expectations Historical Data AvailabilityHistorical Data Availability

Financial FactorsFinancial Factors

FinancingFinancing InflationInflation Currency Exchange RatesCurrency Exchange Rates

Research MethodologyResearch Methodology

Opinion of Saudi professionalsOpinion of Saudi professionals Qualifications:Qualifications:

– Consultants, contractors, or developersConsultants, contractors, or developers– 10 years experience10 years experience

Opinions gathered via Opinions gathered via questionnairequestionnaire Responses are indexed for analysisResponses are indexed for analysis Index formula:Index formula:

Index=[(A*5)+(B*4)+(C*3)+(D*2)+Index=[(A*5)+(B*4)+(C*3)+(D*2)+(E*1)]/N(E*1)]/N

Results & AnalysisResults & Analysis

35 Respondents:35 Respondents:– 16 Contractors 16 Contractors – 14 Consultants 14 Consultants – 5 Developers5 Developers

Consolidated RatingsConsolidated Ratings

Consolodated Rating for Cost Factors

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Labo

r Ava

Mat

/Wrk

shp

Design

Design

Ch

Site C

trl

Coord

inatio

n

Cont D

urat

ion

Mat

Cos

t

Disput

es

Exper

ience

Compe

tition

Laws &

Reg

Plannin

g

Labo

r Cos

t

Financ

ing

Labo

r Nat

Overti

me

Econo

my

Equip

Cost

Inte

rest

Suppli

er

Wea

ther

Infla

tion

Skills

Cont T

ype

Loc/C

ond

Equip

Main

t

Cont M

gt

Deman

d

Cultur

e

Produ

ctivit

yDat

a

Curre

ncy

Foreig

n Firm

s

Consolidated RankingConsolidated Ranking

RankRank Cost FactorCost Factor

11 Qualified Labor Qualified Labor AvailabilityAvailability

22 Materials & WorkmanshipMaterials & Workmanship

33 Construction DesignConstruction Design

Segregated RankingsSegregated Rankings

RanRankk

ConsultantsConsultants ContractorsContractors DevelopersDevelopers

11 Design Design ChangesChanges

Laws & Laws & RegulationsRegulations

On-Site On-Site DisputesDisputes

22 Duration of Duration of ContractContract

Planning & Planning & SchedulingScheduling

Work Work ExperienceExperience

33Qualified Qualified

Labor Labor AvailabilityAvailability

Construction Construction DesignDesign

Project Project CoordinationCoordination

CorrelationCorrelation

ConsultanConsultantsts

ContractoContractorsrs

DeveloperDeveloperss

ConsultanConsultantsts

100%100% 22%22% 26%26%

ContractoContractorsrs

22%22% 100%100% 49%49%

DeveloperDeveloperss

26%26% 49%49% 100%100%

Environmental FactorsEnvironmental Factors

Environmental Cost Factors

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Weather Demand Culture Loc/Cond Competition Economy Skills ForeignFirms

Laws & Reg Labor Nat

Consultants

Contractors

Developers

Operational FactorsOperational Factors

Operational Cost Factors

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Project Planning& Scheduling

ProjectCoordination

Design Materials &Workmanship

On-Site Control Work Experience On-Site Disputes

Consultants

Contractors

Developers

Contractual FactorsContractual Factors

Contractual Cost Factors

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Management ofContract

Type of ContractUsed

Overtime/ExpeditionStipulations

Changes in Design Duration of Contract Qualified LaborAvailability

Consultants

Contractors

Developers

Estimation FactorsEstimation Factors

Estimation Cost Factors

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Material CostEstimation

Labor CostEstimation

EquipmentCost

Estimation

EquipmentMaintenanceEstimation

Interest RateEstimation

ProductivityExpectation

SupplierExpectations

Historical CostData Avail.

Consultants

Contractors

Developers

Financial FactorsFinancial Factors

Financial Cost Factors

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Financing Inflation Currency Exchange Rates

Consultants

Contractors

Developers

Study LimitationsStudy Limitations

Survey TargetSurvey Target Respondent PoolRespondent Pool Divergent ResponsesDivergent Responses Subjectivity of RespondentsSubjectivity of Respondents Type of ProjectsType of Projects Geographical ScopeGeographical Scope

ConclusionConclusion

SummarySummary By Respondent:By Respondent:

– ConsultantsConsultants1.1. Design ChangesDesign Changes2.2. Contract DurationContract Duration

– ContractorsContractors1.1. Laws & RegulationsLaws & Regulations2.2. Planning & SchedulingPlanning & Scheduling

– DevelopersDevelopers1.1. On-Site DisputesOn-Site Disputes2.2. Work ExperienceWork Experience

Conclusion (Cont.)Conclusion (Cont.)

By Factor:By Factor:– EnvironmentalEnvironmental

1.1. Laws & RegulationsLaws & Regulations2.2. Competition (Cost Saving)Competition (Cost Saving)

– OperationalOperational1.1. On-Site DisputesOn-Site Disputes2.2. Planning & SchedulingPlanning & Scheduling

– ContractualContractual1.1. Overtime/ExpeditionOvertime/Expedition2.2. Overtime/ExpeditionOvertime/Expedition

– EstimationEstimation1.1. Equipment CostsEquipment Costs2.2. Interest RatesInterest Rates

– FinancialFinancial1.1. InflationInflation2.2. FinancingFinancing

RecommendationsRecommendations

Contractors center stageContractors center stage Laws & Regulations:Laws & Regulations:

– Authorities: PublicizeAuthorities: Publicize– Contractors: ChallengeContractors: Challenge

Planning & SchedulingPlanning & Scheduling– Reconsider/relax plans & schedulesReconsider/relax plans & schedules– Empower planners & schedulersEmpower planners & schedulers