THE IMPACT OF ABANDONED GOVERNMENT HOUSING … · 2017-07-10 · Non-Payment of Interim Certificate...
Transcript of THE IMPACT OF ABANDONED GOVERNMENT HOUSING … · 2017-07-10 · Non-Payment of Interim Certificate...
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
439
www.ijaert.org
THE IMPACT OF ABANDONED GOVERNMENT HOUSING PROJECTS
IN GHANA (SPECIFICALLY AFFORDABLE HOUSING PROJECTS)
KODWO AMOA-ABBAN, BSc. MSc.
Department of Building Technology, Accra Technical University
ABSTRACT
The presence of many abandoned construction projects scattered all over Accra presents an ugly image on the outset of
architectural performance in the city. Observing this from one point of view, one would attribute the failure to poverty,
but looking at it from a different perspective, one would see that, the luxurious and expensive architectural provision on
the abandoned buildings have a significant role to play in the frustrations of the project. It is common in Ghana especially
in the Accra metropolis to see projects which have taken off quite well only to be abandoned at the later stages. The main
objective of the research is to identify the causes of project abandonment with the aim of identifying the effects of these
abandoned projects and their possible cost implications.
Keywords: Affordable, Architectural, Cost, Housing, Project.
1.0 Introduction
There is no doubt that construction is a key activity within any economy; it influences, and is influenced by a nation’s
gross domestic product (GDP) (Cox et al, 1998, cited in Madi, 2003) [1]
. According to Navon, (2005) [2]
, the construction
industry is one of the largest industries and contributes about 10% to the gross national product (GNP) in industrialized
countries. In Ghana the construction industry, like that of many developing countries, plays an important role in the
national economy, through its contribution to gross national product and employment. Most capital cities in developing
countries are faced with the problem of providing housing to a vast majority of the populace. Huge financial budgets are
made to facilitate the accomplishment of these objectives. Governments at various stages usually seek external aid and
loans to undertake such projects. However, as a result of a number of constraints peculiar to those countries, many of such
projects usually end up being uncompleted, abandoned or unsustainable. Accra is a typical example of a capital city in a
developing nation with quite a number of such projects. Reasons for abandoning such projects have been found to be
many; some are the lack of funding, inappropriateness of the contract conditions, unilateral enactment of government
laws, inflationary trends, and contractors’ management technique. Others include inadequate source of funding, price
variation and corruption (Reiss, 1999) [3]
.
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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1.1 The Construction Process
According to (Harris and McCaffer, 2001) [4]
, the processes involved in construction can be summarized in the following
eight stages namely:
Inception
Preliminary
Scheme Design
Detailed Design Architects drawing,
Production Information Structural drawing
The tender documents
Contracts and Procurement
Commissioning, Final Operation and Maintenance
Figure 1: The Construction Process
1.2 Affordable Housing in Ghana
In Ghana, the shortage of housing continues to be one of the most critical socio-economic challenges facing the country
(Ghana National Development Plan, 2008) [5]
. The situation reflects estimates of 1.2 million house-units would be needed
to bridge the gap by the end of the decade (Home finance Company, 2001) [6]
. Ghana government committed substantial
resources to address the nation’s housing shortage with GH¢30 million (¢300 billion) for the construction of 3,500
affordable homes at Borteyman and 1,500 flats Kpone all in the Greater Accra Region. A conducive business environment
was created for the Ghanaian private sector to provide an average of 40,000 homes a year.
1.3 Parties Involved in the Building Project
The preconstruction phase also serves as the time to establish which team members are needed, their roles and
responsibilities. Among the team are:
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International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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www.ijaert.org
Architect
The Design Team Quantity Surveyor
Structural Engineer
Mechanical & Electrical Engineer
Clerk of works
Contractor
The Production Team Subcontractor
Suppliers
Figure 2: Parties Involved in the Building Project
1.4 Tendering Procedure
Tendering is the process of making an offer, bid, proposal or expressing interest in response to an invitation or request for
tender. Organisations will seek other businesses to respond to a particular need, such as the supply of goods and services
and will select an offer or tender that meets their needs and provides the best value for money. The tendering process is
generally utilised by government departments, offices and agencies, Private sector companies and businesses, overseas
markets and businesses. Some of the common tendering procedures used in the country are Open Competitive Tendering,
Selective Tendering and Negotiated/Restricted Tendering.
1.5 Abandoned Projects
“Abandoned Projects” are defined as projects that meet the following criteria: the project is not completed within or later
than the delivery date stated in contract agreement and no significant activity is noticed at the construction site for six (6)
continuous months (Ministry of Water Resource, Works and Housing) [7]
.
1.6 Causes of Project Abandonment [8]
1. Delay in payment of interim certificate.
2. Non-payment of interim certificate
3. Unsettled Claims
1.7 Problems Relating To Abandoned Project [9]
1.7.1 Socio-Economic impact
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International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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www.ijaert.org
Declining Property Values
Community and Neighborhood Aesthetics
Wasted resources and tax loss
Increase poverty levels
Decline in property values
Unemployment
1.7.2 Environmental impact [10]
Impact on Public Health and Safety
Landscape modification
Erosion
1.7.3 Social Effect [11]
Promotion of Illegal Activity
Hideout for criminals
The Encouragement of further Abandonment
2.0 The Study
The research made use of investigative and descriptive study design with particular reference to the causes and effect of
abandoned housing projects in Ghana. The study involved representative samples from the Client (Ministry of water
Resources, Works and Housing), Consultants, Contractors of the affordable housing projects and the general public. The
sample size of 74 was arrived at using the Kish formula with a gross total response of 73 representing an overall response
rate of 99%.
3.0 Findings
3.1 The Causes of Abandoned Affordable Housing Projects
Table 1: Relative importance index (RII) and rank of the causes of the abandoned housing project according Clients,
Contractors, Consultants and the General Public.
Causes Of Project Abandonment Clients Contractors Consultants General Public
RII Rank RII Rank RII Rank RII Rank
Delay in Payment of Interim Certificate 0.800 1 0.820 2 0.840 1 0.800 1
Non-Payment of Interim Certificate 0.725 2 0.868 1 0.840 2 0.800 2
Unsettled Claims 0.575 4 0.724 4 0.560 3 0.600 3
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
443
www.ijaert.org
Table 2: A Summary of the relative importance index (RII) and rank of the causes of the abandoned housing project
according to all the respondents.
Causes of Project Abandonment All Respondents
RII Rank
Delay in Payment of Interim Certificate 0.815 1
Non-Payment of Interim Certificate 0.808 2
Unsettled Claims 0.615 3
Figure 3
Delay in payment of interim certificate was first with a RII of 0.815. Clients, consultants, contractors and the general
public agreed that the delay in payment of interim certificate was the main cause of the project’s abandonment. The Non-
payment of interim certificate took the second position with an RII of 0.808. This justified the assertion by some
contractors during the interview that, they were no longer credit worthy to their suppliers because, their accumulated debts
portfolio was as a result of non-payment of interim certificate by the client. Most contractors had gone out of business due
to delay in payment. Unsettled claims were next with a RII of 0.615. It was identified that claims in building contracts
could sometimes double the contract sum thereby making it very difficult to be settled by clients. Therefore, if a
contractor does not receive payment for such claims due him, he abandons the project till his case is addressed. This has
led to most building projects abandoned in the country today.
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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3.2 Impact of Abandoned Housing Projects
Table 3: Relative importance index (RII) and rank of the impacts of abandoned affordable housing projects according to
Clients, Contractors, Consultants and the General Public.
Socio-Economic
Clients Contractors Consultants General Public
RII Rank RII Rank RII Rank RII Rank
Unemployment 0.925 1 0.868 2 0.840 4 0.920 2
Wasted Resources 0.875 3 0.788 5 0.880 3 0.800 4
Loss of Tax Revenue 0.825 5 0.848 4 0.900 2 0.800 4
Decline Property Values 0.550 8 0.588 8 0.540 9 0.680 5
Increase Poverty Level 0.825 5 0.556 110 0.660 6 0.880 3
Effects on Community & Neighborhood Aesthetics 0.825 5 0.788 5 0.780 5 0.800 4
Environmental Impact
Impact on Health of the People 0.850 4 0.868 2 0.900 2 0.880 3
Impact on the Safety of the People 0.875 3 0.772 6 0.920 1 0.920 2
Landscape Modification
Changes in the Landscape 0.550 8 0.532 11 0.360 11 0.480 7
Erosion
Gullies formed in Yards 0.625 6 0.600 7 0.580 8 0.800 4
Social Impact
Promotion of Illegal Activities 0.925 1 0.884 1 0.880 3 0.960 1
Hideout for Criminals 0.900 2 0.864 3 0.900 2 0.920 2
Encouragement of further Abandonment 0.575 7 0.572 9 0.400 10 0.600 6
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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Table 4: A summary of relative importance index (RII) and rank of the impacts of the abandoned affordable housing
project from all the respondents.
Impact
Classification of
Impact
All Respondents
RII Rank
Promotion of Illegal Activities Social 0.912 1
Hideout for Criminals Social 0.896 2
Unemployment Socio-economic 0.888 3
Impact on Health of the People Environmental 0.875 4
Impact on the Safety of the People Environmental 0.872 5
Loss of Tax Revenue Socio-economic 0.843 6
Wasted Resources Socio-economic 0.836 7
Effects on Community & Neighborhood Aesthetics Socio-economic 0.798 8
Increase Poverty Level Socio-economic 0.730 9
Gullies formed in Yards Environmental 0.651 10
Decline Property Values Socio-economic 0.590 11
Encouragement of further Abandonment Social 0.537 12
Changes in the Landscape Environmental 0.481 13
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
446
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Figure 4
The promotion of illegal activities with a RII of 0.912 was the highest impact on abandonment of the affordable housing
project in Ghana. During the time of construction, workers from distant homes occupied places on the site as temporary
squatters. After the construction had stalled and the site abandoned by the contractor, these workers, with no means of
transport back to their homes allow other squatters to join them thereby engaging in drugs, thievery, prostitution and
human trafficking. Abandoned housing projects’ serving as hideouts for criminals was next with a RII of 0.896. These
criminals engage in diverse activities in these abandoned houses. Due to the dark nature of these hideouts especially at
night, these criminals rob residents living within and outside the vicinity and later come back to hide and rest after their
criminal operations. These areas are sometimes marked as “no-go” areas by some security agencies. Unemployment was
next with a RII of 0.888. Where vibrant on-going housing projects suddenly grind to a halt, the employees of these
housing projects will join the unemployment group. This eventually affects the livelihood of all the dependants of these
unemployed workers. Impact on health and safety of the people was next. Health and safety of the people is a key to the
total development of the individual as well the community as a whole. Most abandoned project sites serve as refuse
dumping sites, places of convenience for people living around and breeding grounds for parasites and rodents. Buildings
under construction before being abandoned may have some scaffolds left standing or hanging for months or even years
and these may cause severe injury to the passers-by and other inhabitants around if left unattended to. Furthermore, some
abandoned structures may house certain industrial and/or domestic chemicals (paints, solvents, cleaning materials, fuel
and lubricants) that have not been properly disposed off. Finally, they may serve as fire safety hazards where faulty wiring
and debris encourage rapid ignition. Abandoned housing projects have dire consequences on revenue generation and tax
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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loss to the nation. This is important because more tax revenue will be lost from the sale or rental of these affordable
houses and will impair on further project development for the nation. Abandoned housing projects may also lead to further
abandonment due to the deteriorating economic and social conditions within blighted neighborhoods. Abandoned
buildings make no positive aesthetic contribution to a neighborhood. At worst, abandoned buildings are aesthetically
unpleasant. Their grounds become unkempt and overgrown, while the buildings themselves become dilapidated through
lack of maintenance. In any event, they bring no aesthetic pleasure to the residents of neighborhoods in which they are
located. Economic losses, both private and public, are not confined to abandoned structures themselves but rather affects
other properties within a neighborhood by lowering property values thus, a decline in the value of rents and property
selling prices.
3.3 Cost Implication of Abandoned Housing Projects
Table 5: Relative importance index (RII) and rank of the cost implications of abandoned affordable housing projects
according to Clients, Contractors, Consultants and the General Public.
Social-Economic
To The Client
Clients Contractors Consultants General Public
RII Rank RII Rank RII Rank RII Rank
Capital lock-up 0.950 1 0.884 4 0.880 2 0.960 1
Loss of interest on capital if saved in the bank 0.900 3 0.852 7 0.840 4 0.800 5
Money will be needed in future to complete the project 0.925 2 0.916 3 0.860 3 0.880 3
Loss of revenue 0.850 5 0.932 2 0.880 2 0.840 4
To The Contractor
Loss of revenue 0.825 6 0.960 1 0.600 9 0.560 8
Unable to pay creditors 0.675 7 0.840 8 0.760 6 0.720 6
Accumulated interest on loans 0.925 2 0.788 9 0.800 5 0.800 5
Unable to pay workers 0.875 4 0.860 6 0.800 5 0.880 3
Collaterals will be used to defray loans 0.550 8 0.836 6 0.680 7 0.640 7
To The Consultant
Loss of revenue 0.875 4 0.868 5 0.660 8 0.440 9
Unable to pay workers 0.825 6 0.868 5 0.920 1 0.920 2
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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Table 6: Depicts the relative importance index (RII) and rank of the cost implications of abandoned affordable housing
projects according to all Respondents
Cost Implications
Sector
All Respondents
RII Rank
Capital lock-up Client 0.919 1
Money will be needed in future to complete the project Client 0.895 2
Unable to pay workers Consultant 0.883 3
Loss of revenue Client 0.876 4
Unable to pay workers Contractor 0.854 5
Loss of interest on capital if saved in the bank Client 0.848 6
Accumulated interest on loans Contractor 0.828 7
Unable to pay creditors Contractor 0.749 8
Loss of revenue Contractor 0.736 9
Loss of revenue Consultant 0.711 10
Collaterals will be used to defray loans Contractor 0.677 11
Figure 5
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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Capital lock-up to the client was the most important effect with a RII of 0.919. Ghana, a developing country prioritises its
developmental projects and seeks funds to execute them. If the secured funds do not accomplished its aim for end user but
rather the project ends up abandoned, the whole nation suffers because that capital could have been used for some other
developmental project that could support one community or the other. What could follow naturally will be that, more
money will be needed at a later date to complete the project. The process of repackaging the contract, assessing the
uncompleted works, revising the old or preparing a new tender document, inflation and its effect on labour, plant and
material prices for completion of the project will ultimately increase the original project cost. When contractors abandon
project sites, the services of consultants on the project become defunct and clients do not pay consultants for non-
performance. Ultimately, the consultants find it difficult to pay his staff and are made redundant till a decision is taken by
the client to recall the consultant to work. Other cost implications of abandoning housing project sites to the contractor
include his inability to pay his workers and creditors, accumulated interest on all loans taken from the bank to finance the
project and the use of valuables as collaterals to defray these loans.
4.0 Conclusion
The construction industry presents the most effective and elaborate attempt employed by the client to provide the much
needed infrastructure base of the country. The impact of abandoned housing projects and their cost implications are
summarized below:
4.1 Cash Flow Problems
The main causes of abandoned housing project in Ghana are the delay in payment and non-payments of interim
certificates by clients to the contractors. These affect the cash flow of contractors which ultimately affects their
performance to the contract and eventually abandon the site.
4.2 Social Effects
Socially, abandoned projects helps promote illegal activities such as drug peddling, prostitution, robbery, hideout for
criminals and human trafficking.
4.3 Economic Effects
Project abandonment causes financial loss to the state, increase in poverty levels of the employees and their dependants,
unemployment due to redundancy, revenue to the state is lost and taxes to be accrued from rent and sale of these houses
cannot be realized which affects the nation in its developmental program. Abandonment affects other properties within a
neighborhood by lowering property values.
4.4 Environmental Impact
Project abandonment imparts negatively on the health of the people because of poor sanitation within these areas. The
safety of the people around is affected because there is inadequate house-keeping in and around these structures. These
abandoned structures could have store rooms that keep hazardous or flammable lubricants and chemicals. Finally, the
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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presence of debris around naked/faulty wires would encourage rapid ignition in these abandoned structures. Abandoned
buildings make no positive aesthetic contribution to a neighborhood.
4.5 Capital Lock-Up
Funds to complete the project was not forth coming because capital which could have been used for other developmental
projects have been locked up in these abandoned buildings. More money will be needed at a later date to complete the
project. Time and inflation would affect the cost of plant, material and labour needed to successfully complete the
projects. These were found to be additional cost implications to the client. Consultants on the project became affected and
are unable to pay their staff. Contractors on the other hand had to use their valuables as collaterals to defray loans taken
from banks to finance these projects.
5.0 Recommendation
In view of the challenges identified, it can be argued that there is the need to put in place appropriate measures to avoid
project abandonment and enhance the effective execution of housing project in Ghana. In this regard, structures and
strategies for improving project execution in Ghana are suggested:
1) Housing Development Fund
Government should set up a housing development fund and levy every Ghanaian worker about 5% of his/her basic salary,
which will be paid into the fund for a period of about 10 to 15years, after which the contributor qualifies for an affordable
house. This will provide enough and regular funds for the provision of the housing needs of the nation.
2) Prompt payment of Certificates
The government should negotiate with some financial institutions like the Ghana Commercial Bank, to honor payment to
contractors for certified work done, after which the government will later pay this financial institution so that there would
be continuity of work to completion.
3) Completion of Abandoned Projects
Government should endeavour to secure funds from development partners to complete these abandoned projects as their
continuous exposure to the ravages of the weather will eventually require more excessive funds to complete them.
4) Line of Credit
Contractors should make use of the credit facility from their bankers who granted them line of credit to pre-finance the
projects to completion and pass on the interest that will accrue on this facility to the client.
5) Security
Since the projects have not been contractually handed over to the client, the contractors are to provide security to the
semi-completed buildings to deter squatters from taking over them.
International Journal of Advanced Engineering Research and Technology (IJAERT)
Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190
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5.1 Photo Gallery Of Abandoned Affordable Housing Projects From Borteyman And Kpone Greater Accra
Region
International Journal of Advanced Engineering Research and Technology (IJAERT)
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