Chapter 6 CONCLUSIONS
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Chapter 6 CONCLUSIONS Conclusions Chapter 6 6.1 Achievements of aims and objectives One of the main objectives of this research is to identify the existing system of LD today in Sri Lanka. The study was carried out on existing systems of compensation for time delays of construction projects (Chapter 2). Different contract conditions and professional views were analyzed in this context. It was revealed that existing LD system is arbitrary and not reasonable which does not seem to be competent enough to compensate the actual loss of the client (Table 2.1) and (Appendix - C). Another objective of this dissertation was to suggest a fair system of LD based on actual loss to the client. The proposed system is based on the rent lost to the client; during the delayed period where delay is caused due to the fault of contractor (Chapter 3). In order to arrive at a solution to the problems of existing LD system, number of strategies were examined. To decide on the actual loss of the type of buildings under review, the market rent was selected the best criteria. Thus the rents were scheduled for analysis (Appendix - A). Similarly professional views were also considered a relevant factor in the decision of free market rent. Relevant information in this regard were collected via interviews with professionals who are closely engaged in the relevant field and compiled (Table 3.2). The average values of rentals for each selected area derived from Rent schedule (Appendix - A) have been summarized and scheduled (Table 3.3). The most reasonable rentals were derived in consideration of both criteria, and finally such rentals against each area concerned; have been summarized for easy reference (Table 3.4). These rentals have been placed in line with average distances from base area and scheduled accordingly (Table 3.5). Next step of this task is to convert the above finding into LD. In doing so LD curve was plotted using the rentals derived above (Fig 3.4). For better accuracy of the findings those rentals were capitalized and plotted (Fig. 3.5). This curve represents LD at different locations within the selected area. This approach was improved further by making more redress to the client for the additional losses incurred by him. (Chapter 3). This was the main outcome of the research. However fairness of 70 Conclusions Chapter 6 this approach was checked by applying valuation principles in terms of real estate values (Chapter 4). Two relevant dates for the valuation were the scheduled date of completion and the v actual date of completion' of the project. The best method of valuation for this purpose was selected the comparison method. The rentals already derived for each location were incorporated in these valuations. In this context it was considered very important to study the capital appreciation of the five projects under review which are located in five different locations. To facilitate this task a number of interviews were held with the professionals; and results were scheduled for reference (Table 4.2). This exercise revealed that there had been minus capital appreciation in Colombo Fort where project A is situated (Table 4.2). In contrast professional views revealed that other locations under review reflected a positive level of appreciation. Finally professional opinion and free market rents were analyzed and capital value of two relevant dates were derived. Hence this exercise was confined to project A because negative capital appreciated reflected only in Fort area. Loss of capital value so derived (Chapter 4), was compared with LD suggested in Chapter 3. The answer was that LD under Chapter 3 in still greater than the loss of capital value on that project. This was the criterion to assess the fairness of LD under Chapter 3. In comparison with the above answers of the above two exercises, which ever is high was accepted as the most reasonable LD to compensate the client. Therefore the LD based on loss of capital value is also an equally important finding as far as this dissertation is concerned. 6.2 Summary of Findings 6.2.1 New LD System As discussed above a system for LD was formulated in the most simple manner so that the client could use LD curve in the graphical diagram and find out the reasonable LD for the project concerned (Chapter 3). 71 Conclusions Chapter 6 6.2.2 LD in terms of real estate In this method loss of capital value due to delay was calculated and if the value is greater than the LD under Chapter 3; the accepted LD should be the loss of capital value of real estate. In other words this is being established as a check method to the approach under chapter 3, (Chapter 4). This can also be introduced as an alternative method and as one of the important findings in the dissertation. 6.2.3 Fairness of existing LD During investigation it was found out that the existing system of LD is not realistic and is arbitrary. Therefore it was revealed that the replacement of existing system has become an urgent need for the upliftment of the activities of the industry. 6.2.4 Necessity of further improvements of the proposed system Study of avenues for the extensions and improvements of the proposed LD system were identified as a fulfillment of this dissertation (Chapter 5). 6.3 Further developments to the research Main types of building in Sri Lanka are residential, commercial, industrial and offices. The first and foremost task of preparation of LD system is to identify what the loss to the client is. Therefore it is very important to decide the criteria to be adopted depending on the type and use of the building (Chapter 5). It is suggested to study the possibilities of compensating the client in an event where any loss due to any cost overrun on the part of contractor. Similarly impact of poor quality on the economic life of the building is considered vital in this respect. This has also undoubtedly become a loss to the client in real estate terms. Therefore Conclusions Chapter 6 identification of any loss due to cost overrun and poor quality is very important and looking for new methods of compensation in this context is a vital measure towards improvement of this research. Buildings can be divided into various types from many view points. One of the important criteria in this respect is the usage of buildings. In case of residential buildings what should be the basis of calculation of LD. Basically the loss of income may be the criteria in the determination of LD (Chapter 5). However this has to be decided subsequent to an in-depth study into the behavior of rental market and the related factors. In case of commercial buildings and industrial buildings one would argue that the actual loss from the business should be the appropriate criteria in deciding the LD. On the other hand a question arises whether mere rent is sufficient to compensate the delay? This position is subject to arguments and the best solution is proposed to be selected and adopted. Therefore cost overrun and non-achievement of expected quality may also be indirect losses to the client. Analysis of these aspects would be an extension of this dissertation. Further methods of calculation of the loss in relation to residential, commercial and industrial buildings will definitely be a fulfillment of the broad based aims and objectives of this dissertation. 6.4 Limitation and criticism of the proposed system of LD One of the main limitations to the proposed system will be the assumption of accuracy. Hence reliability of information such as rents, actual delay of completion of the construction project, identification of the change in economy play an important role in the accuracy of expected outcome. These limitations are uncontrollable but error can be minimized by applying various relevant techniques. The degree of mutual understanding also has become one of the limitations in this context. For instance when there is a long delay, there should be provisions in the contract document for a mutual termination that will be a benefit for both parties. In such a way delay can be curtailed; which restricts the LD under proposed system. 73 Conclusions Chapter 6 context. For instance when there is a long delay, there should be provisions in the contract document for a mutual termination that will be a benefit for both parties. In such a way delay can be curtailed; which restricts the LD under proposed system. On the other hand parties to the contract are not ready to accept the new system of LD because they have already adhered to the traditional system. However to overcome this limitation, proper measures should be introduced to educate the parties concerned and to popularize the new approach. Another limitation is the relevant date of calculation of LD. The most appropriate date of calculation of LD should be the date on which the actual delay caused. But it will be impracticable to decide on rentals at the end of the delay because at this stage client and contractor may not be in the same terms as they were at the commencement of the construction contract. Therefore the basis of rentals and method of calculation of LD (Chapter 3) should be clearly incorporated in the contract document. The efforts of this dissertation is to protect the client's interest in the event of delays caused by the contractor. But similar losses may be caused to the contractor due to the negligence on the part of client. This aspect should also be critically analyzed and such research is greatly appreciated to enable comparisons of losses to both parties to a contract.