RIVERS STATE UNIVERSITY

Nkpolu - Oroworukwo P.M.B. 5080 Port Harcourt, Rivers State Nigeria

ASSIGNMENT

 Look for various statistical test, discuss at least 5 and how they can be applied to research
problems in the construction industry

 Pick one of those research problems and draft a questionnaire

 Do a critical literature review on your chosen topic and based on an empirical work on your
topic

 Prepare a reference list using the HAVAD reference system

PRESENTED BY

NAME: AKANI BRIGHT

COURSE: RESEARCH METHODOLOGY

DEPARTMENT: QUANTITY SURVEYING

MATRIC NUMBER: DE.2020/5703

17th April, 2024

A z-test is a statistical test used to determine whether two population means are different when the variances
are known and the sample size is large. In z-test mean of the population is compared. The parameters used are
population mean and population standard deviation. Z-test is used to validate a hypothesis that the sample
drawn belongs to the same population.

Ho: Sample mean is same as the population mean (Null hypothesis)

Ha: Sample mean is not same as the population mean (Alternate hypothesis)

z = (x — μ) / (σ / √n),

where, x=sample mean, u=population mean, σ / √n = population standard deviation.

If z value is less than critical value accepts null hypothesis else reject null hypothesis.

T-test

In t-test the mean of the two given samples are compared. A t-test is used when the population parameters
(mean and standard deviation) are not known.

Paired T-Test

Tests for the difference between two variables from the same population (pre-test and post-test score). For
example- In a training program performance score of the trainee before and after completion of the program.

Independent T-test

The independent t-test which is also called the two sample t-test or student’s t-test, is a statistical test that
determines whether there is a statistically significant difference between the means in two unrelated groups.
For example, comparing boys and girls in a population.

One sample t-test

The mean of a single group is compared with a given mean. For example-to check the increase and decrease in
sales if the average sales are given.

t = (x1 — x2) / (σ / √n1 + σ / √n2),

where x1 and x2 are mean of sample 1 and sample 2 respectively.

ANOVA Test

Analysis of variance (ANOVA) is a statistical technique that is used to check if the means of two or more groups
are significantly different from each other. ANOVA checks the impact of one or more factors by comparing the
means of different samples. If we use a t-test instead of ANOVA test it won’t be reliable as number of samples
are more than two and it will give error in the result.

The hypothesis being tested in ANOVA is

Ho: All pairs of samples are same i.e. all sample means are equal
Ha: At least one pair of samples is significantly different

In anova test we calculate F value and compare it with critical value

F= ((SSE1 — SSE2)/m)/ SSE2/n-k, where

SSE = residual sum of squares

m = number of restrictions

k = number of independent variables

Non parametric statistical test: Non parametric tests are used when data is not normally distributed. Non
parametric tests include chi-square test.

Chi-square test(χ2 test)

chi-square test is used to compare two categorical variables. Calculating the Chi-Square statistic value and
comparing it against a critical value from the Chi-Square distribution allows to assess whether the observed
frequency is significantly different from the expected frequency.

The hypothesis being tested for chi-square is;

Ho: Variable x and Variable y are independent

Ha: Variable x and Variable y are not independent.

Chi-square formula

where o= observed, e= expected.

The effect of effective communication among team members on the construction site

Thank you for taking the time to participate in this survey. Your insights are invaluable in identifying and
addressing issues on construction sites. Please answer the following questions to the best of your ability. All
responses will be kept confidential and used for research purposes only.

1. General Information

What is your role on the construction site?

Project Manager Site Supervisor Foreman

Construction Worker Engineer Other (please specify)

How long have you been working in the construction industry?

Less than 1 year 1-5 years

5-10 years More than 10 years

2. Safety Concerns

In your own opinion, what are the common safety hazards on construction sites?

_________________________________________________________________________________________

Have you ever witnessed or experienced a safety incident on the construction site? If yes, please briefly
describe.

_________________________________________________________________________________________
_________________________________________________________________________________________

3. Communication and Coordination

How effective is communication among team members on the construction site?

Very Effective Somewhat Effective Neutral Ineffective

Are there any challenges in coordinating tasks between different teams or departments? If yes, please specify.

_________________________________________________________________________________________

Material Management

Do you often face issues with the timely delivery of construction materials?

Yes No

Describe How delays in material delivery impact the progress of construction works?

_________________________________________________________________________________________
5. Equipment and Machinery

Are there any common problems with equipment or machinery on the construction site? If yes, please describe.

_________________________________________________________________________________________

How frequent are equipment maintenance and inspections conducted in your company?

Regularly Occasionally Rarely

6. Environmental Concerns

Do you encounter environmental issues on the construction site, such as waste management or pollution?

Yes No

if any, what measures are taken to mitigate environmental impacts during construction activities in your
company?

_________________________________________________________________________________________

7. Project Scheduling

How often do construction projects face delays?

Frequently Occasionally Rarely

What are the primary causes of project delays in you’ve experienced?

_________________________________________________________________________________________

8. Worker Training and Skills

Are there any skill gaps or training needs among the construction workforce?

Yes No

What training programs or initiatives would you recommend to enhance worker skills and efficiency?

9. Suggestions for Improvement

Based on your experience, what improvements could be made to address the identified construction site
problems?

_________________________________________________________________________________________

Thank you for taking the time to complete this questionnaire. Your feedback is valuable for our research
STATISTICAL METHODS IN BUILDING INDUSTRY TO DETERMINE PRICES INDICES

Abstract. Tender price is often affected by the location of the construction, which is usually determined by the
investor, and it has an impact on the traffic in the particular location. Individual time of supply and the method
of realization play an important role as well. They both are determined by the investor along with the designer
of the particular construction. Contractors often complain about the lack of time needed for the preparation
of their tender prices. Therefore, it is necessary to look for the possibilities how to reliably speed up this process
at the same time taking into account all of the specific features of a structure. This article deals with the
application of two statistical methods. The Pareto analysis, which can be used during the design of the tender
price, and the extrapolation method, which can be used for the estimation of the price development, based on
the regression analysis of the time series. The results of the article particularly serve to contractors in the
building industry to better prepare their price offers in tenders. The findings of this document may also be
applicable in other countries which have a similar economic profile as Nigeria.

Keywords: building industry; Pareto analysis; prices indices; statistical methods

1 INTRODUCTION

Based on the needs of the construction practice, certain statistical methods are used more frequently. Their
aim is to analyze several problems within the investment process during the preparation and the realization
phase of the construction contract. For the contractor, the design of the tender price is one of the most difficult
problems.

This price represents the price for which he is willing to perform the contract. The tender price must take into
account all the specifics of the construction contract, which result from the individuality and the character of
the particular construction, such as the layout, the design, the architectural solution, as well as the operational
and ecological solutions of a structure.

The main role of a statistical method is typically to examine the mass phenomena and the variability
of their expression. The essential element is the design of a database by collecting all the necessary information,
define the set of statistical parameters, and finally to analyze all the examined phenomena. Methods of
statistical analysis provide a particular set of techniques for quantification of the basic statistical set of
regularities or the sample of files for the purpose of their use in the subsequent practical activities. The issue
of offers in the construction sector is the subject of interest of several scientific publications, not only in the
Nigeria but also in other African countries

such as Ghana, south Africa, Chad Republic and Mali. Current trend in building industry is to reduce the
workload in preparing the offering price of the commission. Traditional methods of determining the offering
price using the detailed budget are being replaced by innovative approaches for evaluating the building flow
already in the phase of construction preparation. One of these innovative approaches of determining the
offering price is a form of parametric budgeting. This method using parametric estimate of expenses and other
related mathematical statistical methods (regression function CER - Cost Estimating Relationships) is already
showing results in Czech Republic. Time factor is often being omitted in preparation of a bid, primarily for
reasons of competitiveness, which is not always the correct procedure because some time always passes
between the preparation of the bid and the final realization. The prices of building work and materials as well
as other commodities change their value over time; therefore, it is sensible to account for this development,
especially during times of greater value deviation, by adjusting the offering price by a reasonable amount. This
article explores this problem and its solution using the second degree multinomial.

1.1 Literature Research

Ernest, Theophilus, Amoah & Emmanuel conducted a quantitative survey in the form of a questionnaire
containing 23 economic indicators. The results of the study point to the most important economic indicators
to be taken into account in creating the offer in construction tenders. Those are as follows: the gross domestic
product of the country (GDP), interest rates, exchange rate (exchange rate risk), and consumer price index.

Samani, Gregory, Leal, Mendes, & Correia [18] in their analysis point out, that LCCA (Life Cycle Cost Analysis) is
a tool for assessing the costs associated with building life cycle phases in the building industry. The life-cycle
phases of a building are the following: preparation, implementation, operation and change of the purpose of
use, eventually liquidation.

The authors, in the conclusions of their study in American cities, believe that the location of the building with
the impact of the rate of maintenance cost inflation (rising energy and safety costs) is also a factor that is not
negligible in creating price offers in tenders. Amuda Yusuf & Mohamed dealt with cost management and
economy-effectiveness of the costs of the entire life cycle of the building. The authors came to the conclusion
based on structured interviews and questionnaire surveys: adopting a pricing mechanism based on standards
(of the most advanced countries in the world) could increase the quality of prediction of tender’s price offers
in construction in all stages of the life cycle of a building. They also point to the use of mathematical statistical
methods in their creation.

The authors, point to the importance of statistical methods in pricing in tenders in the building sector, focusing
in particular on the life cycle of the building. The authors point to the use of the Pareto optimum method and
its boundary. The article highlights not only the benefits of using Pareto’s optimum but also the shortcomings.
In conclusion, the authors highlight the need for consultation and expert discussion using any statistical method
used to predict an offer in the construction sector. In the construction practice, those statistical methods may
also have a practical use, especially during the design of the tender price from the contractor’s point of view,
in his company’s pricing policy.

1.2 The Specific of the Researched Phenomena within the Price Policy of the Contractor

The pricing policy is considered to be developed as the weakest, but it is also an applied tool for the
marketing mix in the construction industry. Nevertheless, the price is an important factor of every construction
company’s success in the business.

Instead of the individual price policy, which responds to a specific part of a construction production,
for the preparation of the construction contract Slovak construction companies still use the tender prices,
which only indicate the approximate prices of all the construction works. These are annually published by
several companies, which deal with the price settings within the construction industry. The explanation for this
can be the fact that the Nigeria market is still not a well-functioning competitive market. At first it may seem
that the construction companies which are fighting for contracts must be involved in a competitive battle,
uncompromisingly forcing into the individual calculation of the tender price. However, the commonly
irresponsible approach of many public works authorities as well as many smaller developers to an agreement
on the construction’s price is negated by the amount of competition.
 The construction production commitment to the location of a structure partially lowers down the
competition pressure of the companies from farther locations. This is noticeable when they try to compete
with the individual construction works. This kind of market does not motivate the construction companies to
watch their own actual costs and neither to the creation of their own pricing database, which could take into
account the specific needs of each and every construction company, and not only in the cost, but also in the
profitable area.

This situation illustrates the common reaction of the construction companies to the question why they
do not own their own pricing database. They claim that they do not need one, since those indicative
approximate prices include sufficiently high percentage charges of the overheads and profits, which cover their
cost, and they provide the necessary prosperity as well.

However, this situation changes due to the entry of foreign investors, as well as foreign construction
companies. The foreign investors are used to the professionally performed offer control and to the supply
activities of companies and their invoices. The foreign construction competition enters the distant markets
only with their own management and technical capacity, hiring domestic subcontractors for the majority of the
construction works whereupon they will have to comply with the conditions of the general contractors.

Therefore, the problematic dealing with the pricing policy of construction companies is extremely
current. It requires the application of all available comprehensive approaches within the pricing itself, using all
the existing mathematical-statistical methods in order to design the tender price which will be competitive for
the contractor but also acceptable for the investor.

1.3 Pareto Analysis

During the design phase of the tender, every construction company should put into effect mainly their
own, individually calculated prices. The individuality of the calculation does not mean that a fully new
calculation of the price for every contract has to be made. However, this would definitely be the most precise
way in terms of labor intensity, it would be unrealistic to manage this enormous number of items that would
need to be calculated in certain time limit (of putting out the offer). Therefore, the company’s own pricing
database of construction works needs to be regularly updated. The other option would be to look for a way to
speed up the designing process of the tender price by creating the tender budget. The Pareto analysis presents
this kind of possibility.

The Pareto analysis is based upon the assumption that we own a database of statistical units which is
divided in the ratio of 80/20, according to the particular criteria by the Pareto rule (upon the cost level, when
dealing with the design of the tender price).

First, upon the specified report and assessment of the contracting authority, the contractor will design
a cost budget using only approximate prices. As a next step, the final price of a structure will be adjusted from
the approximate valuation, and it will be recalculated according to the individual conditions by adjusting part
of the budget items into individual prices. For this purpose, the Pareto analysis will be applied. Items form the
report and assessments, which represent 80% of the total price of a structure, will be taken out. According to
the rule mentioned earlier, this should represent approximately 20% of all the items of the report and
assessment. The remaining 80% of the total amount of items (with the share price of 20%) stays unchanged,
without any changes of the unit price.

The procedure steps of the Pareto analysis are the following: 1) The set of statistical units must be
specified by the report and assessment items (it consists of numerous measurement units of works); 2) The
amount of measurement units has to be priced by the approximate unit prices; 3) All the individual items
according to the total price must be sorted in a descending order; 4) Corresponding cumulated sums of prices
have to be calculated according to the order and the 80% border line of the total approximate price must be
determined; 5) The limit of the amount of the items must be determined from the total amount of items which
will be analyzed primarily (they will be individually calculated by company’s rates); 6) Specific items and their
unit prices have to be recalculated by the company’s overhead and profit rates.

Thanks to this procedure, the numerical data dealing with the share of individual items on the total
offer price will be available. Currently, there are several pricing programs in Nigeria, which allow the users to
simulate the development of costs in the individual calculation within the price making process of a company.

For the contractor, the Pareto analysis output represents the information about the kinds of items and
their serial numbers within the budget that can be considered bearing, and whose overall costs represent 80%
of the total tender price of the contract. Another output of the Pareto analysis is the information about the
percentage of the mentioned bearing items, which are present within the total amount of priced items in the
budget. However, the comprehensive comparison based on the analysis of total prices, profit, and individual
cost items, which enter the price (such as material, salaries, machines, overheads, etc.), provides better
information specified in the following levels:

• the calculation based on the indicative unit prices

• the calculation based on the individually of calculated bearing items according to the company`s overhead
rates and the required profit of the contractor,

• the calculation based on the individually of calculated bearing items according to the company`s overhead
rates and the required profit of the contractor including the possibility of discount on specific type of material.
The recalculation of bearing items by the company`s overhead rates and profits will create a difference
between the total price of the budget with the approximate prices and the individually calculated tender price
of the contractor. This means that the contractor has applied the strategy of company’s prices within the
bearing items (individual calculation of unit prices according to the company’s rates from the inner
bookkeeping). This way, the contractor will be able to offer works along with the price taking into consideration
the needs of the company; maybe even with lower prices than the presented offer, only based on the
approximate prices, i.e., pricing the report and assessment by approximate unit prices of the existing database.
Contractor`s application of the Pareto analysis in practice, using the “bearing items” function of the existing
pricing software, provides the creation of the tender price with less work involved. In case the company is
provided with the well- prepared inner bookkeeping, the price offer should be even more accurate in regard
to the planned economical effectiveness of the contract (ratability of costs, sales and profits).

1.4 The Method of the Price Development Forecast Based on the Analysis of the Time Series with the
Seasonal Component

During the design of the tender price, due to the competitiveness, the time factor is often neglected.
However, this is not the right approach, because there is always some time passed from the beginning of the
design of the tender price until the end of the realization of a contract. The prices of construction work and
materials, as well as other commodities, change their values in time. This trend is followed up by the Statistical
Office of the Slovak Republic, which processes the index of development of prices. They are published monthly
and quarterly on their website. During the design of the tender, it is very smart to take into consideration the
development of prices, especially during the price fluctuations. Therefore, this risk of price change shall be
calculated into the offer price using a reasonably acceptable amount [8]; especially, if the developer
constructor (investor) insists on the agreement on the tender price without any possibility of its adjustment
(fixed price).

The expected trend in the construction price development for the period of the next three years or for
the estimated time of the construction can be created using individual features of MS Excel program. In our
study mentioned below, with the time horizon since 2020, we have used this trend estimation, using the exact
methods of prediction, such as the extrapolation method, which is based on the regression analysis of the time
series with the seasonal component.

In the forecast of the development of prices, the price index of the construction works, materials and products
used within the construction, will be representing the input data during the time of the realization of a contract,
and they will be quarterly published by the Statistical Office of the Slovak Republic. The overview of the past
price development can be gained based on the mentioned statistical indices. They form the ultimate
information for their next forecasts. If no significant changes are anticipated within the price levels of the
construction and mounting works, the appropriate method to use would be the method of extrapolation of
trends. The purpose of this method is to analyze the time series of the examined statistical indices; to
determine the trend line and to extend the trends into the future. By extending the trend, the estimated value
of the index in the future quarters can be achieved. The feature of the trend must be registered by a formalized
relationship, i.e. by a particular mathematical formula, so that the calculation of predicted values is ensured.
In order to find a particular trend line, it is necessary to know their individual types and regression equations.
The trend lines, which are used the most during the design of the extrapolation forecasts (prognosis), contain
two or three parameters. Based on the significance of the estimation of the parameters of the trend line, a
second-degree polynomial has been chosen.

1.5 Results

The time series of quarterly indices of prices in the construction industry since the first quarter of 2003
until the fourth quarter of 2019 for single-apartment buildings (family house type of buildings- according to
ŠKS 1110 section of JKSO 803 – residential buildings) will be analyzed and compared to the already known fact
(first and fourth quarter of 2019), in the presented example (case study).

Table 1 The time series of the indices for buildings KS no. 111 (section no. 803 – Residential buildings)

1 2 3 4 5 6
I Year QUARTER Sum
I II III IV
1 2003 1.013 1.010 1.013 1.009 4.04500
2 2004 1.025 1.019 1.021 1.009 4.07400
3 2005 1.013 1.008 1.009 1.008 4.03800
4 2006 1.013 1.010 1.009 1.009 4.04100
5 2007 1.017 1.009 1.011 1.011 4.04800
6 2008 1.021 1.018 1.013 1.007 4.05900
7 2009 1.008 1.009 1.995 1.000 4.01200
8 2010 1.000 0.997 1.002 1.001 4.00900
9 2011 1.003 1.001 1.003 1.000 4.00700
10 2012 1.998 1.003 1.002 0.998 4.00000
11 2013 1.999 1.001 1.005 1.005 4.01000
12 2014 1.002 1.003 1.003 1.001 4.00900
 13 2015 1.006 1.004 1.006 1.003 4.01900
14 2016 1.001 1.004 1.004 0.999 4.00800
15 2017 1.014 1.016 1.004 1.003 4.03700
16 2018 1.013 1.008 1.008 1.007 4.03600
17 2019 1.017 1.007 1.009 1.004 4.03700
Sum 17,163 17,127 17,117 17,074 68,481
In Tab.1 the term i = 1, 2, 3, ..., 9, where i = 1 corresponds to 2003.

Using the MS Excel program, it is possible to create the trend line and its formula (regression equation), which
helps to determine the estimated development of index prices for the next period.

CONCLUSION

The findings of this paper may also be applicable in other Visegrad group countries (V4 - Hungary, Poland, Czech
Republic, Slovak Republic), but also in countries with economic characteristics similar to Nigeria. The authors
are aware of the application of simpler statistical methods on the data sample of Nigeria. However, they
consider that their practical applicability is of importance in bidding since it takes into account the estimated
contractual price developments in construction.

REFERENCES

[1] Abraham, B. & Ledolter, J. (1983). Statistical Methods for Forecasting. A John Wiley & Sons, Inc., New York.

https://doi.org/10.1002/9780470316610

[2] Amuda Yusuf, G. & Mohamed, S. F. (2014). Perceived benefits of adopting standard - based pricing
mechanism for mechanical and electrical services installations. Australasian Journal of Construction Economics
and Building, 14(2), 104-119.

https://doi.org/10.5130/AJCEB.v14i2.3864

[3] Bajaj, S., Garg, R., & Sethi, M. (2018). Total quantity management: a critical literature review using Pareto
Helena Ellingerová et al.: Statistical Methods in Building Industry to Determine Prices Indices

https://doi.org/10.1108/IJPPM-07-2016-0146

[4] Boddy, R. & Smith, G. (2009). Statistical Methods in Practice: for Scientists and Technologists. John Wiley &
Sons, Ltd.

https://doi.org/10.1002/9780470749296

[6] Ernest, K., Theophilus, A., Amoah, P., & Emmanuel, B. B. (2019). Identifying key economic indicators
influencing tender price index prediction in the building industry: A case study of Ghana. International Journal
of Construction Management, 19(2), 106-112.

https://doi.org/10.1080/15623599.2017.1389641

[8] Hyari, K. H., Tarawneh, Z. S., & Katkhuda, H. N. (2016). Detection Model for Unbalanced Pricing in
Construction Projects: A Risk-Based Approach. Journal of Construction Engineering and Management, 142(12).