Engineering, Construction and Architectural Management

Analysis of delays in Tanzanian construction industry: transaction cost economics (TCE) and
structural equation modelling (SEM) approach
Murali Sambasivan T.J. Deepak Ali Nasoor Salim Venishri Ponniah
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To cite this document:
Murali Sambasivan T.J. Deepak Ali Nasoor Salim Venishri Ponniah , (2017)," Analysis of delays in Tanzanian construction industry:
transaction cost economics (TCE) and structural equation modelling (SEM) approach ", Engineering, Construction and Architectural
Management , Vol. 24 Iss 2 pp. -
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 Analysis of delays in Tanzanian construction industry: Transaction Cost Economics (TCE)

and Structural Equation Modelling (SEM) approach

Introduction

A time overrun of 10% to 30% on 70% of the construction projects is not uncommon (Assaf and

Al-Hejji, 2006). Delays in projects usually result in either extension or acceleration of the

project and these results in additional cost. According to Marzouk and El-Rasa (2014), delay is
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defined as “an act or event which extends required time to perform or complete work of the

contract and manifests itself as additional days of work.” (p. 49). Identifying the causes and

effects of delays in the construction industry in different parts of the world has been the passion

of researchers and practitioners. In fact, many researchers have addressed the issue of

identifying the causes and/or effects of delays in the construction industry in different countries

(For example, Assaf and Al-Hejji, 2006 (Saudi Arabia); Kasimu and Abubakar, 2012 (Nigeria);

Marzouk and El-Rasas, 2014 (Egypt); Alaghbari et al., 2007 and Sambasivan and Soon, 2007

(Malaysia)). Few researchers have analyzed the relationships between the causes and effects of

delays using simple correlation (for example, Sambasivan and Yoon, 2007) and regression (for

example, Aibinu and Jagboro, 2002; Parikh and Joshi, 2013). These simple approaches fall short

of revealing the complete relationships between the causes and effects of delays and inter-

relationships within the effects of delays. For example, among the effects of delays, time

overrun leads to cost overrun (Aibinu and Jagboro, 2002), cost and time overruns often lead to

disputes. Another significant problem in using correlations for understanding relationships is the

issues of collinearity and multi-collinearity between explanatory variables. According to Tu et

al. (2005), these issues can lead to wrong interpretation of results. It is essential for the project

managers to understand all the links between causes and effects of delays in order to make
 effective decisions to reduce delays in project completion. In this research, the use of a more

sophisticated tool, namely, SEM to analyze the complex relationships is demonstrated. The

possibility of handling complex dependencies is regarded as one of the main advantages of using

SEM (Quereshi and Kang, 2014). SEM is not new to research related to project management.

However, the current study is one of the initial studies that use SEM to study the relationships

between causes and effects of delays in the construction industry.

Earlier researchers have relied on the empirical results to understand the links between
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the causes and effects of delays (For example, Assaf and Al-Hejji, 2006; Kasimu and Abubakar,

2012; Sambasivan and Soon, 2007). These researchers have failed to establish the theoretical

underpinnings that can be used to establish the links. The theoretical foundations of a field

describe and inform the practice and provide the primary means to guide future developments

(Garrison, 2000). A few scholars have attempted to use TCE and Game Theory (GT) to

understand the relationships between different stakeholders in the construction industry

(Peckiene, Komarovska, and Ustinovicius, 2013; Walker and Wing, 2001; Winch, 1982). There

is a dearth of research in explaining the relationships through a theoretical lens between causes

and effects of delays and this is a significant gap that is addressed in this research.

The setting for the study is Tanzanian Construction Industry (TCI). TCI is said to be in

the fifth position among all sectors contributing 8% of the GDP and employing 10% of the

workforce in Tanzania. In recent years, Tanzanian government has set aside 13% of the budget

for infrastructure expenditure. A study by Kikwasi (2012) has identified the following causes

and effects of delays in TCI: (1) causes – design changes, delays in payments to contractors,

information delays, poor project management, funding problems and disagreements on the

amounts of work done and (2) effects – time overrun, cost overrun, disputes, and other negative
 impacts. The problem with this study is the small sample size of 40 respondents and there are no

other studies available. Kikwasi’s study has not considered the relationship between the cause

and effect factors. The current study considers 31 causes of delays whereas Kikwasi’s study

considered 21 causes. The huge volume and complexity of projects in TCI pose a great

challenge and provide a wealth of opportunities to various companies in the construction

industry. The current study is timely since TCI is poised for a spectacular growth.

The causes of delays considered in this research are: (1) client related, (2) contractor
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related, (3) consultant related, (4) material related, (5) labor and equipment related, (6) contract

and relationship related, and (7) external factors. The effects of delays considered in this

research are: (1) cost overrun, (2) dispute, (3) arbitration, (4) litigation, and (5) abandonment. A

few researchers have studied these factors (Aibinu and Jagboro, 2002; Kikwasi, 2013;

Sambasivan and Yoon, 2007). As indicated earlier, their analyses are too narrow. The basic

objectives of this research are: (1) to explain the relationship between causes and effects of

delays by applying TCE as a theoretical foundation, (2) to demonstrate the application of SEM in

uncovering the complex relationships between and causes and effects of delays.

Literature review

Previous studies – SEM and Project Management

One of the initial studies on the application of SEM in project management is by Molenaar,

Washington, and Diekman (2000). They have studied the fundamental factors that impact

contract disputes between clients and contractors. The authors argue that final set of structural

equations provides insight into the interaction of the variables that is not apparent with other

approaches like correlation and regression. Zulu (2007) has used SEM to study the relationship

between project management and project performance. Specifically, Zulu has studied the direct
 and indirect effects of project leadership, project team, project policy and strategy, project

communication, project processes on project performance.

Zhang and Zeng (2013) have developed an engineering project management evaluation

model. In order to identify the critical factors that can be used to evaluate the performance, the

authors have used SEM. Memon, Rahman, Aziz, and Abdullah (2012) have used SEM to reveal

the relationships between four resource-related factors and cost overrun in the construction

industry in Malaysia. The factors or latent constructs that have been considered in their paper
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are: (1) machinery related, (2) finance related, (3) manpower related and (4) material related.

They argue that SEM functionality is better than other multivariate techniques such as multiple

regression, path analysis and factor analysis in analyzing the cause–effect relations between

latent constructs.

Chen, Zhang, Liu, and Mo (2012) have studied the interrelationships between the critical

success factors of construction projects in Taiwan. They have argued that understanding the

interrelationships by the project managers is essential to ensure a project’s success. Cho, Hong,

and Hyun (2009) have analyzed the effects of project characteristics on project performance in

Korea using SEM. Qureshi and Kang (2014) have analyzed, using SEM, the organizational

factors of project complexity. Khalili-Damghani and Tavana (2014) have developed a

framework for sustainable project portfolio selection based on SEM. In the last few years, SEM

has been popular among project management researchers to analyze various issues related to

project management. In spite of promising increase in the application of SEM, there are many

more interesting issues such as, understanding the inter-relationships between and within causes

and effects of delays in construction project management that can be effectively addressed using

SEM. The current research addresses this gap.

 Previous studies – causes and effects of delays in the construction industry

In general, the literature is replete with research on causes and effects of delays in the

construction industry in different countries (For example, Alaghbari et al., 2007; Assaf and Al-

Hejji, 2006; Frimpong, Oluwoye, and Crawford, 2003; Alinaitwe, Apolot, and Tindiwensi,

2013). In fact, Ramanathan, Narayanan, and Idrus (2012) have identified 15 published research

papers on causes and/or effects of delays between 1997 and 2010. The current research

highlights few research papers from the extant literature. Chan and Kumaraswamy’s (1997)
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research on factors causing delays in the Hong Kong construction industry is considered to be

one of the early significant works. Aibinu and Jagboro (2002) defined delays in construction

industry as situation whereby the contractor and the project owner jointly or individually

contribute to the non-completion of the project within the original or the stipulated or agreed

contract period.

Assaf and Al-Hejji (2006) have defined delays as a time overrun either beyond

completion date specified in a contract or beyond the date that parties agreed upon for the

delivery of a project. Sambasivan and Soon (2007) have analyzed the delays in the Malaysian

construction industry and have identified 10 most important causes of delay from a list of 28

factors and six effects of delays. They have also established bi-variate relationships between the

causes and the effects.

A most recent survey concerning delays in Nigeria by Kasimu and Abubakar (2012)

reveal that out of 43 factors that cause delays, four important factors are: (1) lack of interest by

the stakeholder, (2) blacklist by authorities, (3) waste of money and time and (4) decline of

reputation. Kikwasi (2012) has studied the delays in TCI and has identified 21 causes and 14

effects of delays. Alinaitwe et al. (2013) have investigated the causes of delays and their effects
 on cost overruns in the Ugandan construction industry. The literature review vindicates the stand

of the authors that there is no dearth of studies related to causes and effects of delays in the

construction industry and the number of studies is continuously growing. What is lacking is the

theoretical foundation and comprehensive analysis using an appropriate tool. In this research,

we attempt to fill these gaps. Table 1 summarizes the relevant studies carried out between 1995

and the current study. The table clearly shows the span of work done in the analysis of delays in

construction industry.
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Insert Table 1 here

Some prefatory remarks on transaction cost economics (TCE)

The current research attempts to explain the link between the causes and effects of delays in the

construction industry based on TCE. The origin of transaction costs can be traced back to

Richard Coase’s seminal work on the nature of the firm. However, it was Williamson (1981)

who carried the work further to explain the economics of organizations. According to

Williamson (1989), TCE focuses on the organization of transactions that occur whenever a good

or service is transferred from a provider to a user. The transactions occurring inside the

organization can include costs such as managing and monitoring, procuring inputs and capital

equipment and the transactions occurring outside the organization can include costs such as

search and information cost, bargaining cost, and policing and enforcement costs. The

determinants of transaction costs are: frequency, specificity, uncertainty, limited (bounded)

rationality, and opportunistic behavior (Williamson, 1996). TCE uses a contractual approach to

the study of economic organizations. According to Williamson (1998: p. 548), TCE is “central

to the study of organizations through assessing how their governance structures serve to

economize on these transaction costs.” TCE has been subjected to severe criticisms because of
 its treatment of human behavior as ‘opportunistic’ and for being ad hoc. Klein and Shelanski

(1996) have refuted the criticisms and have provided empirical evidence to support the logic of

organization described by TCE. The authors have shown a range of applications of TCE

including vertical integration, complex contracts and hybrid modes of organizations, transfer

pricing, and multinational corporations. Construction project organizations owing to their

temporary structures can be classified as hybrid modes of organizations. TCE has been one of

the most influential theories in the study of organizations because of the empirical studies that it
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has engendered (Williamson, 2007). In this research, application of TCE is extended to

construction industry.

TCE and construction industry

According to Li, Arditi, and Wang (2014), researchers do agree that the concept of transaction

costs is not universally accepted by all participants in the construction industry. But at the same

time, researchers have argued that the parties involved in the construction project must

understand the existence and importance of transaction costs. A few researchers have attempted

to explain the process of project management and the relevant transaction costs in construction

industry using TCE. We discuss a few examples that are appropriate to this study. (1) Walker

and Wing (1999) have used TCE (in combination with project management theory) to explain

the structuring and management of project organizations. They have identified the transaction

costs incurred by the owner of the project from start to finish. They have listed down various

activities in a project that lead to transaction costs. The transaction costs listed are: cost of

establishing project organization structure, in-house client costs, cost of coordination between

the various stakeholders, cost of producing contract documentation and maintaining

relationships, costs of negotiations, cost of monitoring agreements and contracts, and costs
 related disputes, litigation, and arbitration; (2) Li et al. (2014) have discussed the transaction

costs incurred by construction owners. According to the authors, the transaction paradigm in

construction industry has been dealt by many researchers to address project organization and

governance, subcontracting, project delivery systems, construction contracts, and the

measurement of transaction costs. They break the transaction costs into two categories: pre-

contract and post-contract. According to them, pre-contract transaction costs are: cost of market

research, cost of exploring financing opportunities, cost of environmental impact assessment,

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economic feasibility study, preliminary design, bidding/tender document preparation and

negotiation, and cost of day-to-day pre-contract management. The post-contract costs are: cost

of day-to-day contract administration, cost of administering claims and change orders, cost of

dispute resolution, and incentive payments. Li et al. (2014) have stated very clearly that during

the construction phase questionable decisions and actions can lead to disagreements, conflicts,

disputes, arbitration, change orders, and claims and these problems can lead to increase in

transaction costs; and (3) Rajeh, Tookey, and Rotimi (2015) have demonstrated the way to

estimate transaction costs in the construction procurement. They have stated that TCE offers a

mechanism to understand unseen costs associated with pre- and post-contract work. According

to them, pre-contract includes information gathering and procurement and post-contract includes

contract administration and enforcement. They have argued that transaction costs are highly

significant in the overall cost of construction. Based on the studies linking TCE and construction

industry, we argue that the factors that the causes of delay, discussed in this research, can lead to

increase in transaction costs. The increase in transaction costs, in turn, can lead to cost overrun,

disputes, litigation, arbitration, and abandonment.

 Research framework and hypothesis development

According to Dubois and Gadde (2002), construction is a project-based activity in which time,

quality, and budget are for an individual project and the relationships between the stakeholders

(clients, contractors, consultants, and suppliers) are established on a short-term basis. Winch

(1989) argues that the nature of construction projects gives rise to temporary coalitions of firms

(a firm can represent a client, a contractor, a consultant, or a supplier) with divergent economic
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and social interest. According to TCE, the nature of coalition often leads to transaction costs

incurred by the firms (Williamson, 1996). In the construction industry, search and information

costs may relate to costs associated in finding the appropriate contractors, consultants and

suppliers; bargaining costs are the costs associated with drawing up the required contractual

agreement between the parties that transact; policing and enforcement costs are the costs

associated with ensuring that each party adheres to the terms of contract. The next logical

question is: What are the important determinants of transaction costs in the construction

industry?

Pertaining to construction industry, three determinants play a crucial role in causing

delays and undesirable effects: uncertainty, limited rationality, and opportunistic behavior

(Winch, 1989). Uncertainties can stem from task, nature, organization, and contract. Because of

its unique nature, each project has distinctive set of problems related to tasks which leads to task

uncertainty. The weather and other acts of nature can introduce a new dimension of uncertainty

in construction projects. Each project requires a temporary organization (structure) to be set up

and this temporary structure can generate tensions that lead to uncertainty. Organizational

uncertainty increases with increase in project size. Typically, in a construction activity many
 firms are involved (client, contractor, consultant, and suppliers). Therefore, contractual

mechanisms have to be in place for effective governance of the projects. Two of the main

contents of contracts are estimation of time and cost. Unfortunately, the estimates are not exact

science and therefore, are subject to uncertainty (Pinto, 2013).

According to Williamson (1996), if the environment is complex and uncertain as in

construction business it is difficult to (1) foresee and specify all issues in the contract and (2)

take rational decisions (bounded rationality) because of asymmetric information available

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between firms. Therefore, the transaction costs tend to be high. Opportunistic behavior in the

construction industry can be due to limited duration of project, temporary coalition of firms with

specific economic and social interest, uncertainty and limited rationality. Collaboration

(temporary or otherwise) between firms such as in a construction project can fail because of

opportunistic hazards as each firm involved in the project tries to maximize its own interest

instead of collaborative interest (Park and Ungson, 2001). D’Alpaos, Moretto, Valbonesi, and

Vergalli (2013) highlight the case of opportunistic behavior of suppliers in public procurement

that eventually led to time overruns in public works and construction in Italy.

The causes of delays (constructs) highlighted in this research are: client related,

contractor related, consultant related, material related, labor and equipment related, contract

related, contract relationship related, and external. These factors are the result of uncertainty,

limited rationality, and opportunistic behavior (Winch, 1989). The causes of delays result in cost

overrun, disputes, arbitration, litigation, and complete abandonment (Sambasivan and Soon,

2007). A recent study by Lua, Zhang, and Pan (2014) has identified 13 hidden transaction costs

arising out of disputes. Disputes can arise because of time and/or cost overruns. Alinaitwe et al.

(2013) have identified the causes of delays that can lead to cost overruns because of the increase
 in transaction costs in the Ugandan construction industry. After assimilating the evidences based

on TCE, the current research concludes that the causes of delays impact the effects of delays

through increase in transaction costs. Figure 1 gives the initial framework used in this research.

Since this study is exploratory in nature, it is hypothesized as follows:

H1: Causes of delays in the construction industry have impact on the effects of delays.

Insert Figure 1 here

Methodology
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This study was conducted using the survey method. A questionnaire was developed to assess the

perceptions of clients, consultants, and contractors on the relative importance of causes and

effects of delay in TCI. Since one of the coauthors had links in TCI, the questionnaire was sent

to (Construction) Contractor Registration Board (CRB) in Tanzania to vet and verify the

relevance of causes and effects of delays in TCI. After the factors were agreed upon by the

researchers and CRB, 400 questionnaires were distributed to 50 clients, 200 consultants and 150

contractors. There were 6000 firms registered with CRB. The sampling frame was provided by

CRB. The questionnaire was divided into three parts: (1) background information of the

respondents, (2) causes of delays, and (3) effects of delays (Odeh and Battineh, 2002;

Sambasivan and Yoon, 2007).

The cause of delays were: (1) client-related (4 observed variables) – this indicates the

problems caused by clients/owners due to financial and payment difficulties, interference, slow

decision making, and imposition of unrealistic contract duration; (2) contractor-related (6

observed variables) – this indicates the problems caused by contractors and sub-contractors due

to poor site management, improper construction methods, improper planning, construction

errors, and inadequate experience; (3) consultant-related (4 observed variables) – this indicates
 problems caused by consultants due to contracts, preparation of approval of drawings, quality

assurance, and test and inspection; (4) material-related (4 observed variables) – this indicates

problems due to poor quality and shortage of material; (5) labor and equipment-related (4

observed variables) – this indicates problems due to shortage in labor supply, poor labor

productivity, shortage in equipment availability, and equipment failure; (6) contract and

relationship-related (5 observed variables) – this includes problems caused by contractual

relationship due to change orders and mistakes or discrepancies in contract document, major
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disputes and negotiations, inappropriate structure, and lack of communication between parties;

and (7) external-related (4 observed variables) – this includes problems caused by external

factors such as weather condition, regulatory changes, community, and unforeseen site condition

(Sambasivan and Yoon, 2007: p. 520). A 4-point Likert scale ranging from 1 (strongly disagree)

to 4 (strongly agree) was used to capture the significance of causes of delays.

The third part of the questionnaire had the effects of delays. They were: (1) cost overrun,

(2) disputes, (3) litigation, (4) arbitration, and (5) abandonment. A 5-point Likert scale ranging

from 1 (never) to 5 (always) was used to capture the significance of ‘effect’ factors of delay.

Each factor had only one observed variable.

Relative importance index (RII) developed by Kometa, Olomolaiye, and Harris (1994)

has been used to determine the relative importance of causes and effects of delays. RII has been

calculated based on the responses from three stakeholders: clients, contractors, and consultants.

The four point scale (1—strongly disagree, 2—disagree, 3—agree, and 4—strongly agree) was

used to compute RII for each cause of delay and a five point scale (1—never, 2—rarely, 3—

sometimes, 4—mostly, and 5—always). RII was calculated as follows:

RII = (∑W)/(A X N),

 where W is the weighting given to each factor by the respondents (1 to 4 for causes of delays and

1 to 5 for effects of delays), A is the highest weight (4 for cause and 5 for effect) and N is the

total number of respondents. The ranking of different factors was done based on RII. An overall

ranking was developed by combining the responses of all the respondents (Sambasivan and

Soon, 2007). A similar ranking procedure was adopted for the effects of delays.

Choice of SEM

SEM is a multi-variate statistical technique that is used for analyzing the relationships between
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latent constructs (or variables) and manifest (observed) variables in a model. Latent constructs

are the variables of interest and which cannot be measured directly. Manifest variables are the

variables that are observed and measured directly by the researcher. These manifest variables

are used to measure latent constructs (Qureshi and Kang, 2014). Many multi-variate techniques

such as multiple regression and linear models allow only a single relationship between

independent and dependent constructs. SEM allows (1) multiple dependent constructs, (2)

relationships between independent and dependent constructs, and (3) inter-relationships within

independent constructs and dependent constructs. In essence, SEM solves multiple regression

equations simultaneously. The possibility of modelling complex dependencies make SEM the

sought after technique by the researchers (Qureshi and Kang, 2014).

Measures

A questionnaire was constructed with three sections. Section I captured the demographic

information. Section II contained the causes of delays (construct and observed variables) and

Section III the effects of delays. As indicated earlier, causes of delays were captured using a 4-

point Likert scale and effects of delays were captured using a 5-point Likert scale. A high score

on causes indicates that the factor plays a stronger role in causing delays. A high score on the
 effects indicates that the consequence of the factor is significant. The items under each factors

were adapted from Odeh and Battineh (2002) and Sambasivan and Soon (2007). Table 2 gives

the cause of delays and the items under each construct.

Insert Table 2 here

Results

Descriptive Statistics

Out of 400 questionnaires that were distributed, 308 were returned (21 from clients, 157 from
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consultants and 130 from contractors). Since one of the coauthors had links in TCI, the response

rate was high (77.5%). The characteristics of the respondents were: (1) 24% were from

government, 72% were from private, and 4% were from regulatory firms; (2) 68% were project

manager/director/managing director of firms; and (3) 46% had more than 10 years of experience

and 71% had more than 6 years of experience in the construction industry.

Causes and effects of delays in TCI

The relative importance index, RII, was computed for each cause and was used to rank the

causes. The ranking was then used to identify the most significant factors of delay in TCI.

Based on the ranking, major problems plaguing TCI are: (1) inability of the clients to make

payments on time to contractors, consultants, and suppliers – the inability to pay sets a chain

reaction and subsequently leads to a host of other problems such as disputes, arbitration, and

litigation; (2) inability of contractors to plan effectively – this inability demonstrates the lack of

experience and skills of contractors; (3) inability to get the material delivered on time – this

problem may be linked to the inability to pay by the clients and/or the suppliers may have

inadequate resources to supply on time. TCI imports most of the important materials such as

steel and cement because of the poor quality of material from the local manufacturers; (4)
 unforeseen site conditions may be due to natural causes such as floods. Another reason for this

condition is the quality of manpower/professionals not being available in adequate numbers; and

(5) inability on the part of contractors to manage the site – this problem may be due to

inadequate experience of contractors to execute construction projects on time. There have been

cases where some contractors have refused to appoint experienced project managers. Table 2

gives the RII for all causes of delays. The results of this study (with 31 causes) are more

comprehensive compared to the results obtained by the study by Kikwasi (2012) (with 21
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causes). To recap, the study by Kikwasi has identified the following important cause factors

from 40 respondents: design changes, delays in payments to contractors, information delays,

poor project management, funding problems and disagreements on the amounts of work done.

The calculation of RII for the effects of delays in TCI were done as explained in the

previous section. The ranking of effects was done using the RII scores and the information is

given in Table 3. Based on the ranking, the effects were in the following order in TCI: (1) Cost

overrun, (2) Disputes, (3) arbitration, (4) litigation, (5) total abandonment. The correlations

between all constructs are given in Table 4.

Insert Table 3 here

Insert Table 4 here

SEM results

Measurement model results

In order to test the measurement model, the procedure based on Confirmatory Factor Analysis

(CFA) as suggested by Hair et al. (2010) was used. Specifically, the following were tested: (1) if

the factor loading of items (observed variables) on each construct was greater than 0.5. While

running CFA, we treated the five effects of delays under one construct since each effect had only
 one observed variable; (2) if the composite reliability of each construct was greater than 0.7; and

(3) if the Average Variance Extracted (AVE) of each construct was greater than 0.5. The results

are given in Table 5. The results indicate that all the three conditions are met. This table also

provides the correlation between the constructs. The fit statistics of measurement model are: chi-

square/degrees of freedom = 2.034 (threshold < 3.0), Root mean square error of approximation

(RMSEA) = 0.058 (threshold < 0.08), Normed Fit Index (NFI) = 0.990, Comparative fit index

(CFI) = 0.995, Goodness of fit index (GFI) = 0.959 (threshold for all fit indices > 0.9), and Root
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mean error residual (RMR) = 0.039 (threshold < 0.08).

Insert Table 5 here

Structural model results

The hypothesis was tested by running the structural model using Lisrel 9.1. The structural model

was built as follows based on the literature and correlation table: (1) all the causes of delays were

allowed to link with all the effects of delays and (2) effects of delays were allowed to be inter-

related. In the final run of the model, we included only the relationships that were significant.

The fit statistics of the model are: chi-square/degrees of freedom = 2.068 (threshold < 3.0), Root

mean square error of approximation (RMSEA) = 0.059 (threshold < 0.08), Normed Fit Index

(NFI) = 0.994, Comparative fit index (CFI) = 0.997, Goodness of fit index (GFI) = 0.974

(threshold for all fit indices > 0.9), and Root mean error residual (RMR) = 0.0125 (threshold <

0.08). The final framework with significant positive relationships (significant level = 0.05) are

given in Figure 2. The interesting relationships between various factors are given in the

following paragraphs.

Insert Figure 2 here

 Causes versus effects of delays

The following are the significant relationships: (1) Client-related cause with litigation (β = 0.279,

p-value = 0.007); (2) Contractor-related cause with cost overrun (β = -0.689, p-value = 0.030);

(3) Consultant-related cause with cost overrun (β = 0.619, p-value = 0.016), arbitration (β =

0.432, p-value = 0.009), and abandonment (β = 0.445, p-value = 0.020); (4) Material-related

cause with cost overrun (β = 0.477, p-value = 0.024); (5) Labor and equipment-related cause

with disputes (β = -0.223, p-value = 0.000) and litigation (β = -0.332, p-value = 0.001); (6)
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Contract and relationship-related cause with cost overrun (β = -0.726, p-value = 0.000),

arbitration (β = -0.585, p-value = 0.000), and abandonment (β = -0.829, p-value = 0.001); and (7)

external-related cause with abandonment (β = 0.497, p-value = 0.000). There are a few negative

coefficients that require explanation. For example, the cost overrun has significant positive

coefficients with consultant-related and material-related causes whereas contractor-related and

contract and relationship-related have significant negative coefficients. Based on these, we can

conclude that in TCI the consultant-related and material-related causes more often lead to cost

overrun but the contractor-related and contract and relationship-related seldom lead to cost

overrun. In summary, out of seven causes considered in this study only four causes (client-

related, consultant-related, material-related, and external related) have been found to have impact

on cost overrun, disputes, litigation, arbitration, and abandonment factors in TCI.

Within effects of delays

The following are the significant relationships: (1) Cost overrun with disputes (β = 0.590, p-

value = 0.000) and arbitration (β = 0.130, p-value = 0.013); (3) Disputes with litigation (β =

0.227, p-value = 0.000), arbitration (β = 0.541, p-value = 0.000), and abandonment (β = 0.179, p-
 value = 0.004); (4) Arbitration with litigation (β = 0.599, p-value = 0.000) and abandonment (β =

0.283, p-value = 0.001); and (5) Litigation with abandonment (β = 0.283, p-value = 0.000).

Discussions

In this research, a theoretical foundation using TCE to explain the link between the causes and

effects of delays in the construction industry has been developed. Earlier studies have argued the

relevance of TCE in the construction industry but have not explained how TCE can be used to

understand the impact of causes on effects of delays. This gap has been filled by recognizing the
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role of transaction costs in providing the required explanation. Specifically, it is argued that

nature of coalition between the firms (clients, contractors, consultants, and suppliers) lead to

uncertainty, bounded rationality, and opportunistic behavior (Williamson, 1996). These lead to

the effects such as cost overrun, disputes, arbitration, litigation, and abandonment through

increase in the transaction costs incurred by the firms.

The current research has studied TCI and identified 31 different causes of delays

(observed variables) that are grouped under seven constructs and six effects of delays. Based on

RII, the ten most important causes of delays are: (1) client-related factor – lack of finance and

payment of completed works (Rank 1); (2) contractor-related factors – improper planning (Rank

2) and site management (Rank 5); (3) material-related factor – on-time delivery of material

(Rank 3); (4) external-related factor – unforeseen site condition (Rank 4); (5) consultant-related

factors – waiting for approval of tests and inspection (Rank 6) and preparation and approval of

drawings (Rank 8); (6) contract and relationship-related factor – lack of communication between

parties (Rank 7); and (7) labor and equipment-related factor – lack of appropriate skills (Rank 9)

and equipment availability (Rank 10). The five important effects of delays, based on RII, are:
 cost overrun (Rank 1), (2) disputes (Rank 2), (3) arbitration (Rank 3), (4) litigation (Rank 4), and

(5) abandonment (Rank 5).

The current research has also studied the ‘complete’ set of relationships between causes

and effects of delays at the construct level in TCI. The SEM has been used to study the complex

set of relationships between the various constructs. The hypothesis is supported and the

interesting findings on the effects of delays are: (1) incidence of cost overrun can be explained

by consultant-related and material-related causes (R2 = 0.164); (2) cost overrun factors are
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important to explaining the disputes (R2 = 0.475); (3) consultant-related factors, cost overrun and

disputes are significant to explaining arbitration (R2 = 0.541); (4) client-related, disputes, and

arbitration factors are keys to explaining litigation (R2 = 0.653); and (5) incidence of

abandonment can be explained by consultant-related, external-related, disputes, arbitration, and

litigation factors (R2 = 0.472).

A summary of factors that impact effects of delays is given in Table 6. At this juncture, it

is useful to recall the warning given by Tu et al. (2005) regarding the problems posed by

collinearity and multi-collinearity of explanatory variables in a correlation and regression model.

They have argued that lack of consideration can lead to misinterpretation and erroneous results.

The correlations given in Table 3 indicate that there is a strong evidence of multi-collinearity

effects due to strong correlation between explanatory variables (causes of delays). Besides, our

analysis shows that effects of delays are correlated. Therefore, our contention is that modelling

complex dependencies between and within causes and effects of delays are significant to

understand the relationships. Related to TCI, the findings from the current research are more

comprehensive than the findings by Kikwasi (2012). The major points of departure in the

current research are: (1) a sample size of 308 respondents compared to 40 used by Kikwasi
 (2012) and (2) in-depth statistical analyses of relationships using SEM compared to descriptive

statistics by Kikwasi (2012). The analyses used in the current research provide findings that can

help in reducing the effects of delays by controlling the appropriate causes of delays.

What are the important messages conveyed by this research? First, TCE can be used as a

theoretical lens to explain the links between and within causes and effects of delays. Earlier

researchers have depended on the empirical results to understand the links between the factors

(Assaf and Al-Hejji, 2006; Kasimu and Abubakar, 2012; Sambasivan and Soon, 2007). Second,
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use of multi-variate tools such as SEM (covariance-based or partial least squares-based) are

needed to understand the complex relationships between various factors. Interpretations based

on such analysis are more accurate. Earlier researchers have used simple tools like correlation

and regression that can be subjected to inaccurate results because of collinearity and multi-

collinearity effects (Assaf and Al-Hejji, 2006; Kasimu and Abubakar, 2012; Sambasivan and

Soon, 2007). The empirical results of the current study are based on the data obtained from TCI.

It is believed that the procedure used in this research can be used to study the construction

industry in any country. The recommended actions can then be based on such ‘complete’

analysis. Third, the specific recommendations to TCI are: (1) consultant-related and material-

related causes are critical to explaining the incidence of cost overrun in a project. The results

indicate that waiting for approval of tests and inspection and preparation and approval and

drawings (consultant-related), on-time delivery of material (material-related) are important

factors of delay. These factors can lead to increase in transaction costs and therefore, cost

overrun. It is the duty of consultants to ensure that all the approvals are obtained on time and the

project managers must make sure that materials (from international and/or local suppliers) arrive

on time to avoid escalation of costs; (2) cost overrun is critical to explaining the incidence of
 disputes. Disputes between the parties (clients, contractors, consultants, and suppliers) escalate

if there is increase in costs of the project; (3) client-related factor, disputes, and arbitration lead

to litigation. The results also suggest that problems of finance and payments on time coupled

with other effects of delays lead to litigation; and (5) consultant-related and external-related

causes, disputes, litigation, and arbitration result in abandonment of projects. The analysis of

problems related to TCI reveal that client-related, consultant-related, material-related, and

external causes are the main problems in causing delays.

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How can the results of this study be generalized? (1) The establishment of TCE as a

theoretical foundation can enable researchers in any country to link the causes and effects of

delays. (2) The use of a tool such as SEM can enable the researchers and practitioners to see the

complete landscape of relationships between and within causes and effects of delays. (3) The

effects of delays and their rankings are consistent with studies conducted in other countries

(Aibinu and Odeyinka, 2006; Kalibu et al., 2009; Kikwasi, 2012; Sambasivan and Soon, 2007).

It is proposed that such a similar study in any country can use the effect factors considered in this

study. The inter-relationships between the effects of delays can be different in different

countries. According to the current study, (ii) cost overrun results in disputes and arbitration, (ii)

disputes result in litigation, arbitration, and abandonment, (iii) arbitration results in litigation and

abandonment, and (iv) litigation results in abandonment. (4) The causes of delays can be

country-dependent. This study has identified 31 causes and the findings from other studies

indicate that many of these causes are observed in other countries. For example, the top-ranked

factors that are common across studies are: difficulty in making payments, improper planning,

poor project management, site conditions and management, and material related problems.

Insert Table 6
 Conclusions

The current study has argued the role of TCE in the construction-industry literature in explaining

the impact of causes on effects of delays. Specifically, it has been shown that increase in

transaction costs due to uncertainty, limited rationality, and opportunistic behavior play a crucial

role in explaining the impact. The application of SEM in analyzing the complex relationships

between causes and effects of delays has been demonstrated. Analyzing and understanding the

relationships can help stakeholders reduce the incidences of delays in the construction industry.
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These two new developments are the important contributions of this study to the body of

knowledge on construction industry.

The important findings of this study related to the effects of delays are: (1) cost overrun

can be explained by consultant-related, material-related and time overrun factors (R2 = 0.164);

(3) disputes can be explained by cost overrun (R2 = 0.475); (4) arbitration can be explained by

consultant-related, cost overrun, and dispute factors (R2 = 0.541); (5) litigation can be explained

by client-related, disputes, and arbitration factors (R2 = 0.653); and (6) abandonment can be

explained by consultant-related, external-related, disputes, arbitration, and litigation factors (R2 =

0.472).

Recommendations and limitations

Practical suggestions to the firms (clients, contractors, consultants, and suppliers)

involved in TCI have been provided. Specific recommendations made to different project

players to avoid delays and related problems in projects are: (1) clients must release payments on

time; (2) project managers must ensure that (i) staff with right skills are employed in the project,

(ii) suppliers provide the input materials (including equipment) on time, and (iii) the project is

well governed through regular communication between the stakeholders; (3) consultants must
 ensure that preparation and approval of drawings, tests, and inspection procedures are obtained

on time; and (4) contractors must manage the day-to-day operations in the project sites

efficiently. The researchers and practitioners in other parts of the world can use the approach

outlined in this study to better understand and deal with delays in the construction industry. This

research is not without limitations. First, the number of respondents from clients is very low

compared to the number from consultants and contractors. Second, this study is a cross-sectional

study. As such, the relationship between causes and effects of delays must be treated with
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caution.

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Source/Place Cause factors Effect Techniques/tools

of study factors used
Assaf, Al- Financier, materials, Time and cost Descriptive
Khalil, and Al- plant/equipment, overruns statistics and rank
Hazmi (1995) labor/manpower, correlation
environment, contractual
 Saudi Arabia relationships, changes,
scheduling and controlling,
and government relations
Chan and Project-related, Time overrun Correlation /
Kumaraswamy owner/client, contractor, regression
(1997) design, materials,
plant/equipment,
Hong Kong labor/manpower, and
external
Odeh and Client, contractor, None Descriptive
Battaineh consultant, material, statistics
(2002) labor/equipment, contract,
contractual relationships,
Jordan and external
Frimpong, monthly payment Cost and time Descriptive
Oluwoye, and difficulties from overruns statistics
Crawford agencies, poor contractor
(2003) management,
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material procurement, poor

Ghana technical performances,
and escalation of material
prices
Nguyen et al. Financier, project attributes, Time and cost Exploratory factor
(2004) owner/client, contractor, overruns analysis and rank
consultant, coordination, correlation
Vietnam and environment
Assaf and Al- Owner, contractor, client, Time and cost Descriptive
Hejji (2006) design, labor, consultant, overruns statistics and rank
material, external, project, correlation
Saudi Arabia and equipment
Aibinu and Labor shortage, Time overrun, Descriptive
Odeyinka contractor’s financial cost overrun, statistics and one
(2006) difficulties, mistakes and dispute, sample ‘t’ test
defective workmanships, arbitration,
Nigeria coordination problem, litigation, and
material shortage, and poor abandonment
site management
Sambasivan Client, contractor, Time overrun, Descriptive
and Soon consultant, material, cost overrun, statistics and
(2007) labor/equipment, contract, dispute, correlation
contractual relationships, arbitration,
Malaysia and external litigation, and
abandonment
Abd El-Razek, Financing, manpower, Project delay Descriptive
Bassioni, and changes, contractual statistics and rank
Mobarak relationships, environment, correlation
(2008) equipment, approval
processes, materials, and
Egypt site management

Swies et al. Labor/equipment, Delays Descriptive

(2008) materials, contractor, statistics and
owner, consultant, and ANOVA
Jordan external
Kaliba, Muya, Delayed payments, Time overrun, Descriptive
and Mumba financial processes, cost overrun, statistics
(2009) contract modification, disputes,
economic problems, litigation, and
Zambia materials procurement, abandonment
changes in drawings,
labor/equipment
unavailability, site
 management
Yang, Yang, Design change, law and Delays in Descriptive
and Kao (2010) regulation change, Build- statistics and SEM
administrative procedures, Operate-
Taiwan project debt collateral, Transfer
transfer mechanism, schedule (one
negotiations, plan change, factor)
design changes, political
stability
Kasimu and Improper planning, lack of Lack of Descriptive
Abubakar communication, design interest by the statistics
(2012) errors, material shortage, stakeholder,
financial problems, poor blacklist by
Nigeria management, authorities,
labor/equipment problem waste of
and up to 43 factors money and
time and
decline of
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reputation.
Kikwasi (2012) Design changes, delays in Time overrun, Descriptive
payment to contractors, cost overrun, statistics
Tanzania information delays, funding disputes, and
problems, poor project other negative
management, compensation impacts
issues and disagreement on
the valuation of work done
Memon et al. Machinery, material, Cost overrun SEM
(2013) finance, manpower
Malaysia
Alinaitwe, Delayed Payments, Cost and time Descriptive
Apolot, and material, labor/equipment, overruns statistics and rank
Tindiwensi Scope changes, project correlation
(2013) management, external,
contractor, client, contract,
Uganda and contractual
relationships
Current study Client, contractor, Time overrun, Descriptive
consultant, material, cost overrun, statistics and SEM
Tanzania labor/equipment, contract, dispute,
contractual relationships, arbitration,
and external litigation, and
abandonment
Table 1. Summary of literature review
 S/N HYPOTHESIZED CAUSES PERCENTAGE OF RESPONDENTS SCORING RANKING OF CAUSES
1 C lient R e lat ed C ause s 4 3 2 1 R II RANK

1 finance and payment of co mpleted wo rks 54.5 35.5 8.7 1.3 0.861 1
2 o wner interference 12.3 53.2 26.1 8.4 0.669 28

3 slow decision making 26.8 53.9 17.7 1.6 0.758 10

4 unrealistic co ntract duratio n imposed 27.1 41.3 25.2 6.5 0.717 18

2 C o ntra ct o r R elat ed C a us es

1 sub-contracto rs 18.1 52.3 21 8.7 0.692 25

2 site management 32.9 51.9 12.9 2.6 0.782 5

3 co nstruction method 25.5 42.6 26.1 5.8 0.715 20

4 improper planning 45.8 41.3 10.3 2.6 0.82 2

5 M istakes during co nstruction stage 18.4 52.6 26.5 2.6 0.71 23

6 inadequate contracto r experience 29 37.4 24.5 9 0.709 24

3 C o nsult ant R elat ed C a us es

1 co ntractor management 22.3 52.3 21.6 3.9 0.729 15

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2 preparatio n and approval o f drawings 33.2 46.8 16.8 3.2 0.769 8

3 quality assurance 16.5 56.5 24.2 2.9 0.713 21

4 waiting for approval o f tests and inspection 40.3 33.2 22.9 3.5 0.773 6

4 M a te rial R e lat ed C ause s

1 availability o f material 28.7 38.1 25.5 7.7 0.715 19

2 availability o f quality materials 26.1 46.8 20.3 6.8 0.725 17

3 sho rtage in material 20.3 45.8 25.8 8.1 0.69 26

4 o n time delivery 43.9 38.1 12.6 5.5 0.797 3

5 Labo ur and E quipm ent R e late d C ause s

1 low labour productivity 35.5 40 22.3 4.2 0.752 13

2 lack of appro priate skills 33.9 41.9 21.6 2.6 0.764 9

3 equipment availability 31.3 46.1 19 3.5 0.758 10

4 inadequate equipment 35.5 38.7 21.6 4.2 0.758 10

6 C o ntra ct R e la te d C ause s

1 change o rders 29.4 43.2 18.7 8.7 0.728 16

2 mistakes and discrepancies in co ntract document 30.3 42.9 23.2 3.5 0.746 14

3 co ntract relationship related causes

4 majo r disputes and negotiatio n 17.7 45.8 29 7.4 0.683 27

5 inappro priate o verall organizatio nal structure linking 20.3 50.3 26.5 2.9 0.713 21

6 lack of communication between the parties 37.7 40.6 18.1 3.5 0.77 7

8 External Related Causes

1 weather co ndition 22.6 28.7 22.9 25.2 0.614 29
2 regulatory changes 6.5 28.4 44.8 19.7 0.548 31

3 pro blem with neighbors 10.6 35.5 36.1 16.5 0.595 30

4 unfo reseen site conditio n 38.7 45.5 1 4.8 0.796 4

Table 2. Causes of delays and the RII scores

 RII Rank

EFFECTS Rarely Sometimes Mostly Always

2 3 4 5
Cost overrun 5.200 17.70 41.60 33.50 0.794 1
Dispute 16.50 38.10 31.60 11.90 0.667 2
Arbitration 26.50 44.50 20.30 6.500 0.601 3
Litigation 33.50 37.50 19.70 4.500 0.563 4

Total
34.80 21.90 14.80 4.500 0.477 5
abandonment
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CO DI AR LI TA

Cost overrun
1.00
(CO)
Dispute (DI) 0.653 1.00

Arbitratio
0.555 0.702 1.00
n (AR)
Litigatio
0.516 0.670 0.784 1.00
n (LI)
Total
Abandonmen 0.388 0.520 0.611 0.595 1.00
t (TA)

Table 3. RII scores, ranking of ‘effect’ factors, and correlation between effect factors
 1 2 3 4 5 6 7 8 9 10 11 12

1 1.00

2 0.979 1.00

3 0.962 0.973 1.00

4 0.959 0.957 0.959 1.00

5 0.944 0.958 0.973 0.950 1.00

6 0.969 0.983 0.971 0.963 0.966 1.00

7 0.940 0.951 0.951 0.945 0.946 0.955 1.00

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8 -0.309 -0.344 -0.299 -0.288 -0.282 -0.343 -0.346 1.00

9 -0.383 -0.417 -0.378 -0.383 -0.389 -0.409 -0.441 0.653 1.00

10 -0.393 -0.418 -0.379 -0.406 -0.407 -0.431 -0.421 0.555 0.702 1.00

11 -0.357 -0.395 -0.361 -0.384 -0.401 -0.406 -0.416 0.516 0.670 0.784 1.00

12 -0.185 -0.222 -0.165 -0.201 -0.201 -0.233 -0.188 0.388 0.520 0.611 0.595 1.00

Legend: 1 – client-related, 2 – contractor-related, 3 – consultant-related, 4 – material-related, 5 – labor-related, 6 –

contract and relationship-related, 7 – external-related, 8 -- cost overrun, 9 – dispute, 10 – arbitration, 11 – litigation,
12 – abandonment

Table 4. Bi-variate correlation of all constructs

 Construct Factor Composite Average Correlation
loading Reliability Variance
(Min – (CR)* Extracted Client Contr Consul Matl Labor Cont Ext Effect
Max)* (AVE)*

Client- 0.833 – 0.946 0.814 1.00

related (4 0.976
items)

Contractor- 0.864 – 0.972 0.851 0.979 1.00

related (5 0.990
items)
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Consultant- 0.860 – 0.952 0.831 0.962 0.973 1.00

related (4 0.955
items)

Material- 0.888 – 0.970 0.888 0.959 0.957 0.959 1.00

related (4 0.974
items)

Labor& 0.954 – 0.979 0.919 0.944 0.958 0.973 0.950 1.00

Equipment- 0.987
related (4
items)

Contract- 0.903 – 0.970 0.865 0.969 0.983 0.971 0.963 0.966 1.00
related (5 0.949
items)

External- 0.886 – 0.960 0.859 0.940 0.951 0.951 0.945 0.946 0.955 1.00
related (4 0.964
items)

Overall 0.628 – 0.885 0.566 - - - - - - - 1.00

Effect (5 0.907 0.393 0.437 0.389 0.405 0.401 0.443 0.448
items – one
for each
effect)

All correlations are significant at 0.05 significance level

*Values obtained from confirmatory factor analysis (CFA)
Table 5. Factor loading, CR, AVE scores, and correlations of each construct
 Effect factor of interest Causes of delays that can Effects of delays that can
explain explain
Cost overrun Consultant-related, material- -
related, contractor-related
(negative), contract-related
(negative)
Disputes labor-related (negative) Cost overrun
Arbitration Consultant-related, contract Cost overrun, disputes
and relationship-related
(negative)
Litigation Client-related Disputes, arbitration
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Abandonment Consultant-related, external- Disputes, litigation, arbitration

related

Table 6. Summary of relationships on effects of delays

 Causes of delays

Client-related

Contractor- related

Consultant- related Effects of delays

Material-related
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-Labor and equipment- Cost overrun

related
Disputes
-Contract and relationship-
related Litigation

External-related Arbitration

Complete abandonment

Arrows within the boxes indicate inter-relationships

Figure 1. Initial framework

 Client
Consultant Material External

0.619

0.497

0.2790.432 0.445
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R2=0.475 R2=0.643
Litigation
Disputes 0.236

0.477 0.590 0.179 0.599 0.283

Cost overrun R2=0.164 Abandonment

0.541Arbitration0.283

0.151 R2=0.541 R2=0.475

Figure 2. Final framework with significant positive relationships