Managing the impact of economic crisis to construction project

Abstract

The development of a country is closely associated with performance and growth of the country. Economic growth will bring new sources of demand for construction in line with the increasing expansion of business, number of workers, and also need for accommodation to support business activity. The construction products provide the necessary public infrastructure and private physical structures for many productive activities such as services, commerce, utilities and other industries. The Construction industry is closely related to the Gross Domestic Product (GDP) of a country. The activities of construction industry can influence GDP and vice versa. Hence the 2008 economic crisis has impacted the construction industry. This study aims to examine the impact of economic crisis to construction projects and identify how contractor manage the impact of economic crisis on construction projects. The study was based on 5 construction projects undertaken during the economic crisis. This project included Mediterania Garden Residences – 2, Kelapa Gading Square, Royal Mediterania Garden Residences, Off Take Metering Station Package – 3, and Main Building of Mabes Polri, which were used as the case studies. Data were collected using semi-structured interview technique. The respondents were Project Managers and/or Deputy Project Managers of the respective case studies. Data obtained from the respondents were analyzed by qualitative analysis. The impact of economic crisis on the construction projects were categorized in to 10 aspects: money, material, manpower, machinery, subcontractor, supplier, time, cost, quality, and contract. Overall, the economic crisis has impact all the above aspects except manpower, machinery, and quality. Among strategies undertaken by the contractors in handling the impact included: tightening in logistics for example: materials needed shall be in accordance with the needs and minimizing waste material, conduct value engineering, appoint the most competitive subcontractors and suppliers with strong financial situation, negotiate with subcontractors and suppliers for easy payment, negotiate with employers for price adjustment / escalation, negotiate with employers for prompt payment, establish priority for project completion, speed reduction of project (slow down), and stopped the project when the employer has been unable to finance the project.