Component ratios of new building costs in Nairobi: a contractors' perspective

Abstract

Purpose

The aim of this paper is to use the case study of Nairobi in Kenya in order to fill the gap of knowledge on the component ratios of new building costs that has been missing from international literature.

Design/methodology/approach

Using survey methodology that considered firms of contractors registered and operating in Nairobi Kenya, the paper compares its findings rendered in terms of percentage ratios: with theoretical propositions (e.g. Wood), with past studies (e.g. Knowles) and with practice guidelines in Kenya.

Findings

Overall it finds that there is no significant change in percentage component ratios considered from past studies and practice guidelines in Kenya leading to the conclusion that the building industry has not undergone any significant technical change during the periods under study, i.e. 1980‐2006.

Research limitations/implications

The study is limited by the fact that it only manages to capture the contractors' views of the component ratios. Contractors may be inclined to hide their profits which can be a sensitive issue in the Kenyan market, which as a developing economy, may be riddled with corrupt practices such as tax evasion and imperfect business competition. However, the issues raised here can be used as base information for further studies on the topic. Additionally an analysis of variance was performed on the data to ascertain its credibility. Second, the data used to argue the paper's case is partially dated but remains useful. The trend shows that there has been no significant change in the composition of component ratios hence the data remains relevant to date.

Practical implications

The paper's findings would be useful to international readers especially now that international contractors are bidding for work in Kenya. The data would give these contractors a glimpse into the structural composition of building cost components in Nairobi.

Originality/value

The paper's original contribution concerns the component ratios of building costs that has been neglected in the existing literature. In Kenya some work had been done by Knowles, but this was restricted to office block buildings only, while this paper considers all buildings as shown in Table V.

Citation

Masu, S., Gichunge, H. and K'Akumu, O.A. (2012), "Component ratios of new building costs in Nairobi: a contractors' perspective", Journal of Financial Management of Property and Construction, Vol. 17 No. 3, pp. 222-234. https://doi.org/10.1108/13664381211274344