Achieving incremental cost reduction via kaizen costing in the Nigerian construction industry

Nigerian small and medium scale construction firms are facing challenges of cost and time overruns which have led to project abandonment and liquidation of some of these firms. This is also as a result of large scale dissatisfaction of clients. This study focuses on how to improve the post-contract cost management in Nigerian construction firms by using kaizen costing. Kaizen presents a better solution to cost and time overruns, and client satisfactions. This method of managing post-contract cost had been proven to create more profit, quality, value and improved relations with the stakeholders involved in construction activities. Incremental cost reduction is the key element of kaizen. The most critical activities which can influence kaizen costing implementation in the Nigerian construction industry are addressed in the paper. This investigation identified eight crucial activities for continuous cost reduction from literature. Based on the existing literature, a Likert scale questionnaire was produced. Data was gathered from one hundred and thirty five (135) cost and project managers in Lagos, Nigeria. The Kendall’s coefficient of concordance was used to test the identified activities based on the agreement of the respondents. Important activities were ranked by respondents. The findings identified “overhead cost related to paying suppliers, sub-contractors and labourers can be reduced continually throughout the construction phase to keep the project cost within budget” as the most critical activity for continuous cost reduction during kaizen costing. Assessing the essential procedures carried out during construction creates an avenue to implement kaizen philosophy and kaizen costing in a developing economy such as Nigeria. Therefore, the benefits of kaizen are easily transferred for alleviating the challenges of cost and time overrun, effective post-contract cost controlling, profitability of small and medium scale construction firms and client satisfaction