Influence of In-sourcing and Outsourcing of Consultants on Construction Project Performance in Nigeria

Abstract

Research studies have discovered that outsourcing has several benefits and the practice is fast replacing in-sourcing especially with regard to construction consultants. In the attempt to examine the benefits of the two approaches on project outcome, this study investigates the influence of the use of in-sourced and outsourced consultants on project performance in Nigeria. The objectives are to determine the use of in-sourcing and outsourcing for selected consultants, compare the use of the two approaches in project delivery and their influence on project performance and compare the performance of projects in which in-sourced and outsourced selected consultants were engaged. To achieve these objectives, a questionnaire design approach was adopted. A field survey involving a sample of 164 projects were selected by stratified random sampling. Data were collected using structured questionnaires and analysed using percentage, mean, Spearman and t-tests. The results of the study reveal that clients engage both in-sourced and outsourced consultants in project development and that the practice has significant influence on project performance. It also discovered that the use of the two approaches has differing benefits on project delivery time and cost. The study concludes that in-sourcing and outsourcing are common practices in project development and that clients are facing a challenge in deciding which approach to adopt. The study also discovers that both approaches has benefits associated with project outcome and suggests that clients should consider these benefits in their decision to in-source or outsource consultants.

Full text

Influence of In-sourcing and Outsourcing of
Consultants on Construction Project Performance
in Nigeria
Godwin Iroroakpo Idoro, (University of Lagos, Nigeria)
Abstract
Research studies have discovered that outsourcing has several benefits and the practice is fast
replacing in-sourcing especially with regard to construction consultants. In the attempt to
examine the benefits of the two approaches on project outcome, this study investigates the
influence of the use of in-sourced and outsourced consultants on project performance in
Nigeria. The objectives are to determine the use of in-sourcing and outsourcing for selected
consultants, compare the use of the two approaches in project delivery and their influence on
project performance and compare the performance of projects in which in-sourced and
outsourced selected consultants were engaged. To achieve these objectives, a questionnaire
design approach was adopted. A field survey involving a sample of 164 projects were selected
by stratified random sampling. Data were collected using structured questionnaires and
analysed using percentage, mean, Spearman and t-tests. The results of the study reveal that
clients engage both in-sourced and outsourced consultants in project development and that the
practice has significant influence on project performance. It also discovered that the use of the
two approaches has differing benefits on project delivery time and cost. The study concludes
that in-sourcing and outsourcing are common practices in project development and that clients
are facing a challenge in deciding which approach to adopt. The study also discovers that both
approaches has benefits associated with project outcome and suggests that clients should
consider these benefits in their decision to in-source or outsource consultants.
Keywords: Construction projects, In-sourced consultants, Nigeria, Outsourced consultants and Project
performance
Introduction
The importance of consultants in construction project delivery cannot be over-emphasised.
Consultants as Havemann (2007) put it are accountable for the technical risks in a conventional
project. They are responsible for developing the requirements of project clients, setting targets,
deadlines and establishing standards for meeting these requirements, preparing project
documents that describe the targets, deadlines and standards set and sometimes monitoring
the activities of contractors that execute a project to ensure that the targets, deadlines and
standards are achieved. It suffices to say that a project cannot be successfully executed without
the services of consultants.
These consultants are engaged from two sources namely: in-house or external. In-house
consultants can otherwise be described as internal service providers or in-sourced consultants.
These refer to professionals on permanent employment of the client who are engaged to
perform the services of consultants in the procurement of a project. Outsourced consultants can
otherwise be described as external or outsourced service providers. These refer to
professionals who operate consultancy outfits that are engaged by a client to provide
specialised services in the course of procuring a project. Traditionally, organisations used to
engage professionals on permanent employment to perform the services of consultants.

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
46
However, in the past decade, outsourcing has become a prevalent practice in most countries.
Sattineni and University (2008) opined that in developing countries, white collar jobs that were
hitherto considered to be stable are now being outsourced.
The main concern about consultants that prompts this study is that most of the major clients in
particular the public and organised private sector clients have departments where professionals
are employed. These professionals are often responsible for most pre-design services and they
are fully involved in both design and construction activities. In organisations where project
delivery is fully internalised, in-sourced consultants perform all the activities relating to design
and construction of a project. Idoro (2006) described the in-house project delivery process as
direct labour approach. In other projects, clients use in-sourced consultants for some services
while engaging external consultants for others. In projects where outsourced consultants are
involved, client’s professional staff serve as intermediaries between the external consultants
and the client who often seek their advice on every matter relating to a project. Boes and Doree
(2009) opined that the preparatory activities in traditional contract are either carried out in-house
or outsourced to consulting engineering firms and that outsourcing to consulting engineering
firms requires in-house control measures. They maintained that reducing staff by outsourcing
tasks to engineering consultants creates new issues of quality control, risks and staffing. The
main questions raised by this practice are: what is the preference of construction clients on in-
house and outsourced consultants in project delivery? What is the effect of in-house and
outsourced consultants on project performance? The problem of the study therefore is to
determine the influence of in-sourced and outsourced consultants on project performance. The
objectives are to compare the extent of use of in-sourced and outsourced project consultants in
project delivery and the effect of their use on project performance. The achievement of these
objectives will assist stakeholders in the industry in their decision on whether to engage in-
sourced or outsourced consultants in project development.
Hypotheses of the Study
In the attempt to achieve the objectives of the study, three hypotheses were postulated. The first
hypothesis states that the extent of use of in-sourced and outsourced consultants in project
development is not significantly different. This hypothesis is tested to establish the preference of
clients on the two types of consultants. The second hypothesis states that the extent of use of
in-sourced and outsourced consultants has no significant relationship with project performance.
The test of this hypothesis is expected to assist clients to know the influence of the use of in-
sourced and outsourced consultants on project performance. The third hypothesis states that
the outcome of projects in which in-sourced consultants were engaged is not significantly
different from the outcome of projects in which outsourced consultants were engaged. The
results of the hypothesis are expected to assist clients to know the effect of engaging the two
types of consultants and which consultants to source in-house or outside
Conceptual Framework of the Study
Three categories of variables namely: project consultant, consultant source and project
performance were used in the study. Six project consultants namely: project manager, architect,
quantity surveyor, structural, electrical and mechanical engineers were used. Consultant source
was classified into in-source and outsource while twelve variables namely: respondents’
assessment of project cost, duration, quality, variations, fluctuation, risks, conflicts between
client and contractors, conflicts between client and consultants, conflicts between consultants
and contractors, compliance with contract obligations, time-overrun and cost-overrun were used
as parameters of project performance. The last two parameters of project performance were
used as parameters of project outcome because the effects of the other ten parameters are
expected to manifest in them. Project success which is reflected in project performance is the

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
47
purpose of engaging consultants. Hence, the relationship between the two types of consultants
and project performance and the difference in the outcome of projects in which in-sourced and
outsourced consultants were engaged were used to determine the benefits in project
performance of the two types of consultants. This relationship is expressed in Fig.1.
Figure 1 Framework for evaluating the relationship
between the use of in-sourced and outsourced
consultants and project performance
Previous Studies
The construction industry is one of the most important economic sectors in Nigeria. The industry
is known to account for a major proportion of the Gross Domestic Product (GDP) of Nigeria
(Federal Government of Nigeria, 1986; Idoro, 2004). The industry is also a major contributor to
employment generation by providing employment to millions of people in diverse professions
and skills as well as serving as a vocational training ground. There are several parties that are
involved in the delivery of construction projects. Idoro (2009a) stated that project teams consist
of many parties who have several responsibilities to perform in order to ensure the success of a
project. He identified the notable parties as clients, consultants, contractors, suppliers and
manufacturers. Clients in the Nigerian construction industry are classified into two categories
namely: public clients made up of the federal, state and local governments and their respective
parastatals and private clients made up of individuals and corporate organisations. Idoro and
Okun (2011) opined that in Nigeria, government is the main promoter of construction projects
and that the private sector depends to a considerable on government expenditure. Nigerian
contractors are often categorised as either indigenous that is construction firms that are fully
owned and managed by Nigerians or expatriates that is those firms that are jointly owned by
Nigerians and foreigners but solely managed by expatriates (Idoro, 2009b). Olateju (1991)
reported that indigenous contractors were responsible for only 7% of the total value of contracts
awarded from 1974 to 1994 while their expatriate counterparts were responsible for the
remaining 93%. In a study that investigated the reasons for the poor participation of indigenous
contractors in contracts’ execution, Idoro (2010) discovered that Nigerian clients perceive the
quality performance of expatriate contractors to be better than that of indigenous contractors
and confirmed that clients indeed give preference to expatriate contractors in the award of
contracts.
There are many professionals that are involved in the design and construction of projects in
Nigeria that are regarded as consultants. In a study of quantity surveying practice in Nigeria,
Odusami (1999) stated that in Nigeria as in Britain, the quantity surveyor is one of the key
professionals involved in the design and execution of construction projects. Others include
architects and structural, electrical and mechanical engineers. These consultants can either be
Consultant
source
1. In-source
2. Outsource
Project performance
Consultants’ assessment of
1. Project time
2. Project cost
3. Project quality
4. Variations
5. Fluctuation
6. Project risks
7. Conflict between client & contractors
8. Conflict between client & consultants
9. Conflict between consultants & contractors
10. Compliance with contract obligations
Project outcome
11. Time-overrun
12. Cost-overrun
Project consultant
1. Project manager
2. Architect
3. Structural engineer
4. Quantity surveyor
5. Electrical engineer
6. Mechanical
engineer

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
48
outsourced through direct employment by client, nomination by architect/project manager,
nomination by other consultants or competitive bidding from professionals operating
consultancy outfits outside the client organisation or in-sourced from professionals that are
within the client organisation (Odusami, 1999).
In the attempt to examine the application of outsourcing in different areas of organisations’
activities, researchers describe it in various ways: the significant contribution by external
vendors in the physical and human resources associated with the entire or specific components
of the IT infrastructure in the user organisation (Loh and Venkatraman, 1992); the extent of
components and finished products supplied to a firm by independent suppliers (Kotabe, 1992);
the reliance on external sources for the manufacturing of components and other value-adding
activities (Lei and Hitt,1995). Grover et al. (1996) described outsourcing as the practice of
turning over part or all of an organisation’s internal functions to external service providers. Gilley
and Rasheed (2000) felt that the term outsourcing is so wide that it covers virtually any good or
service that an organisation procures from outside firms. Referring to another way outsourcing
is practised in many organisations, Domberger (1998) believed that outsourcing is synonymous
with contracting and therefore described it as the process of searching for and appointing
contractors for the provision of goods and services and the execution of the contractual relations
needed to support such activities. In another view, Ender and Mooney (1994) described
outsourcing as a form of privatisation that refers to an organisation’s (University) decision to
contract with an external organisation to provide a traditional organisation function or service to
the organisation.
All these descriptions (supply, externalisation, contracting and privatisation) show that
outsourcing is practised in various ways in different organisations. While all of them can be said
to convey the same meaning or practice, two of them mentioned another point to ponder about
in outsourcing. Grover et al., (1996) called it ‘internal functions’ while Ender and Mooney (1994)
regarded it as ‘traditional functions’. The point in these definitions is that the products or
services to be outsourced should be the ones that the organisation is or can currently produce
or render. This view is supported by Gilley and Rasheed (2000) who argued that outsourcing
may arise in two ways namely: 1) substitution of external purchases for internal activities that is
discontinuation of goods or services and an initiation of procurement from outside suppliers and
2) abstention that is purchases of goods or services from outside organisations even when
those goods or services have not been produced in-house in the past. The duo regarded
outsourcing as a decision to reject internalisation that is in-house production of goods or
services outsourced and opined that outsourcing occurs when the internalisation of the good or
service outsourced is within the acquiring firm’s managerial and/or financial capabilities. They
suggested that organisations that have no choice but to acquire a particular good or service
from external source because of lack of capital or expertise are not outsourcing because the
internalisation of the activity in question is not an option. This view tends to indicate that
outsourcing applies when the option of in-sourcing is available and that organisations are
always faced with the decision on whether to adopt in-sourcing or outsourcing for their products
or services.
This problem which clients have to confront when embarking on project development is the
thrust of this study. Kanji and Wong (1998) maintained that the construction industry comprised
of a multitude of occupations, professions and organisations that are involved in different
phases of a construction project and consultants in collaboration with clients, contractors and
sub-contractors all have a role to play in delivering a quality project. Renier and Volker (2009)
maintained that every project is usually assigned a new team, precisely from a client’s own
network in which context social aspects play an important part. If a firm cannot draw from its

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
49
own organisation structural engineers, building consultants, climate advisors, other external
professionals have to be involved in the process as soon as possible. Meiling and Johnson
(2009) opined that during design, manufacturing and erection, the building is thoroughly defined,
manufactured and erected. Most of the activities remain in-house while some are performed by
external consultants. The duo maintained further that in industrialised buildings in Sweden,
drafting of the building envelope is handled by companies themselves while HVAC drafting,
structural design, electrical drafting and life-cycle costing are done by external consultants.
Although Sattineni and University (2008) regarded pre-construction, conception, design and
tendering services as areas that suite outsourcing, however if contracting and privatisation are
forms of outsourcing, it all means that construction activities are equally being outsourced in
project delivery. The point in the above studies is that outsourcing whether full or partial is
inevitable in the development of most construction projects.
The question that arises from the above review is ‘if outsourcing is a feature of construction
project development, what are the benefits derived from it? Research studies have discovered
that organisations derive numerous benefits when they engage external service providers. It
was discovered that by outsourcing, firms often achieve cost advantages relative to vertically
integrated firms (Quinn 1992; Bettis, et al., 1992; D’Aveni and Ravenscraft, 1994; Lei and Hitt,
1995); manufacturing costs decline and investment in plant and equipment can be reduced
(Bettis et al., 1992); reduced fixed costs that leads to a lower break-even point (Gilley and
Rasheed, 2000); firms have opportunities for flexibility in technology (Harrigan, 1985);
economies of scale by increasing net value and reducing costs, process expertise, access to
capital and expensive technology, greater capacity for flexibility (Carlson, 1989; Harrison, 1994);
enhanced competitiveness (Gilley and Rasheed, 2000); quick response to environmental
changes (Dess et al., 1995); increased management attention and resource allocation to those
tasks that an organisation does best and reliance on management teams in other organisations
to oversee tasks in which the outsourcing firm is at relative advantage (Quinn et al., 1990);
emerging technology without significant investment in the technology (Gilley and Rasheed,
2000); focus on core competencies (Kotabe and Murray, 1990; Quinn, 1992; Dess et al., 1995;
Sang, 2010). While previous studies have covered many benefits in outsourcing, the aspect of
project performance has been virtually neglected. The benefits that a client will derive in terms
of the outcome of projects which is the focus of this study are not in the studies.
Despite these numerous benefits, several problems have been observed on the use of external
consultants. Outsourcing can lead to loss of overall market performance (Bettis et al., 1992;
Kotabe, 1992) or less investment in research and development which may lead to decline in
innovation (Teece, 1987). In a project that involved a change of client, Michell et al., (2007)
discovered problems concerning cooperation between consultants and contractors. As a
solution to the problem of inaccurate proposals submitted by consultants, Tembo and Rwelamila
(2007) suggested that organisations should formulate an evaluation process for the assessment
of project proposals from consultants in a manner that will reflect true costs and schedules.
These problems show that the practice of outsourcing products or services by an organisation is
not without losses.
Research Methods
A questionnaire survey approach was adopted for the study and a field survey involving 164
clients was conducted. A list of 211 organisations made up of 56 government and 155
organised private establishments was prepared through a preliminary survey conducted in the
first quarter of 2010 because a reliable list or statistics of organisations involved in project
development could not be obtained. These organisations were used as the population frame for
the study. The study sample was selected from this population by stratified random sampling. In

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
50
the sampling, the population was classified into public and private organisations thereafter; the
respondents were selected from each sector randomly. One project preferably the one with the
highest contract sum executed by each of the sampled organisations was selected to ensure
that the consultants selected for the study were required in the project.
Data were collected on the characteristics of the projects sampled, the sources of six
consultants discovered to be common to all the projects sampled, respondents’ assessment of
project duration, cost, quality, extent of risks, variations, fluctuation, compliance with contract
obligations and conflicts and disagreement between client and contractors, client and
consultants and contractors and consultants of the projects using five ranks namely: poor, low,
moderate, high and very high. The ranks were assigned scores of 1, 2, 3, 4 and 5 respectively.
Data on the initial and actual duration and cost of the projects were also collected. The data
were collected using structured questionnaires. The instrument was administered to the
respondents by hand through personal visits paid to the organisations sampled in mid 2010 and
completed questionnaires were also collected through the same approach. The extent of use of
the two categories of consultants investigated was defined as the percentage of the six selected
consultants engaged in-house or outsourced to procure the projects sampled. Time-overrun
was defined as the percentage of the difference between actual and initial contract periods
divided by initial contract period while cost-overrun was defined as the percentage of the
difference between actual and initial contract sums divided by initial contract sum. The data
were analysed using percentage, mean, t-test, Chi-square and Spearman correlation tests.
Results of Data Analysis
The results of the analysis of the data collected for the study are presented as follows.
Characteristics of Projects used for the Study
The characteristics of the projects used for the study were investigated for the purpose of
understanding the projects which the results of the study apply to. Five project characteristics
and their sub-types stated Table 1 were investigated. The percentages of each sub-type of
project characteristics were analyzed. The results are presented in Table 1.
Table 1 shows that the projects sampled were procured by four notable methods namely: direct
labour, traditional contract, design-build and labour-only however the percentage of projects
procured by direct labour method was the highest. On the owners of the projects used for the
study, Table 1 shows that both government and private sector projects procured were covered
in the sample but private sector projects constituted the majority. On the type of construction,
Table 1 shows that both new construction and renovation/maintenance works were sampled but
the majority of the projects were new projects. Table 1 shows that projects were procured by the
construction management method in which the construction manager is the coordinator, the
project management system in which the project manager was the project leader and the
traditional management method in which the architect was the project leader were sampled.
The analysis of the rise of the buildings sampled shows that low-rise (1-3 floors), medium-rise
(4-7 floors) and high-rise (above 7 floors) buildings were covered but the majority of the projects
were low-rise buildings. The analysis of the value of the projects shows that the five value
intervals selected were covered in the projects sampled which indicates that the projects
sampled were both small and large. On the duration of the projects sampled, Table 1 shows that
the percentage of long duration (above 52 weeks) projects is the highest while the percentage
of medium duration (26-52 weeks) projects is the lowest. On the contractor type that executed
the projects sampled, Table 1 shows that projects executed by both indigenous and expatriate
contractors in Nigeria were covered however, majority were executed by indigenous

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
51
contractors. The analysis of the use of the buildings sampled shows that the projects covered by
the study have several uses.
Characteristic
Sub-type
N
%
Characteristic
Sub-type
N
%
Procurement
method
Design-Bid-Build
Direct labour
Design-build
Labour-only
Total
42
64
42
16
164
25.6
39.0
25.6
9.0
100
Project value
N 1- 25 million
N26-50 million
N51-75 million
N76-100million
Above N100 million
Total
32
22
26
8
28
116
27.6
19.0
22.4
6.9
24.1
100
Client type
Public
Private
Total
28
136
164
17.1
82.9
100
Project
duration
1-26 weeks
27-52 weeks
Above 52 weeks
Total
48
40
74
162
29.6
24.7
45.7
100
Construction
type
New construction
Renovation
Total
122
42
164
74.4
25.6
100
Contractor
type
Expatriate
Indigenous
Total
42
122
164
25.6
74.6
100
Management
method
Traditional
Project mgt
Construction mgt
Total
42
58
64
164
25.6
35.4
39.0
100
Project use
Residential
Commercial
Industrial
Social
Total
88
62
2
12
164
53.7
37.8
1.2
7.3
100
Building rise
1-3 floors
4-7 floors
Above 7 floors
Total
96
6
22
124
77.4
4.8
17.7
100
Table 1 Descriptive result of characteristics of projects used for the study
N=Number of respondents. N=Naira (Nigerian official currency; 1US$=158N), mgt=management
Priority Accorded the Use of In-sourced and Outsourced Consultants
To investigate the priority accorded the use of in-sourced and out-sourced consultants in project
development, the percentages of the consultants in-sourced and outsourced were analysed and
ranked separately. The results are presented in Table 2.
Consultant
Total
N
In-source
N % Rank
Outsource
N % Rank
Electrical engineer
Mechanical engineer
Architect
Structural engineer
Quantity surveyor
Project manager
94
90
98
112
108
102
43 45.7 6
46 51.1 5
55 56.1 4
63 56.3 3
68 63.0 2
77 75.5 1
51 54.3 1
44 48.9 2
43 43.9 3
49 43.7 4
40 37.0 5
25 24.5 6
Table 2 Ranks of the sources of selected project consultants
N=Number of respondents
Table 2 shows that the percentage of in-sourced project managers (75.5) ranked first while that
of quantity surveyors (63) ranked second. The percentage of in-sourced structural engineers
(56.3) ranked third while those of architects (56.1), mechanical engineers (51.1) and electrical
engineers (45.7) ranked fourth, fifth and sixth respectively.

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
52
Test of Difference between the Use of In-sourced and Outsourced Consultants
To test whether or not there is difference in the preference of the respondents for in-sourced
and outsourced consultants, the first hypothesis was postulated. The hypothesis states that the
extents of use of in-sourced and outsourced consultants in project development are not
significantly different. The hypothesis was tested using the t-test with p≤0.05. The rule for the
acceptance or rejection of the hypothesis is that when p-value>0.05, the hypothesis is accepted
but when p-value≤0.05, the hypothesis is rejected. The results are presented in Table 3.
Variables compared
N
Mean
t-value
Df
p-value
Decision
Diff
% of in-sourced consultants
% of outsourced consultants
164
164
50.27
49.73
0.158
158
0.874
Accept
NS
Table 3 Results of t-test for difference between the use of in and out sourced consultants
N=Number of respondents, Df=Degrees of freedom. Diff=Difference, NS=Not significant
Table 4 shows that the p-value (0.874) for the test of difference in the extent of use of in-
sourced and outsourced consultants is greater than the critical p-value (0.05) therefore the
hypothesis is accepted. This result implies that the extent of use of in-sourced consultants is not
significantly different from the extent of use of outsourced consultants. The result implies that
clients have no preference for in-sourced or outsourced consultants in project development.
Relationship between the Use of In-sourced and Outsourced Consultants and
Project Performance
To determine the influence of the use of the two types of consultants on project performance,
the second hypothesis of the study was postulated. The hypothesis states that the extent of use
of in-sourced and outsourced consultants and project performance are not significantly related
that is the extent of use of either in-sourced or outsourced consultants does not have significant
influence on project performance. For the test of the hypothesis, data collected on the use of the
two variables of project consultants and the respondents’ assessment of the twelve variables of
project performance as stated in the research methods were used. The hypothesis was tested
using the Chi-square and Spearman correlation tests with p≤0.05. The rule for the acceptance
or rejection of the hypothesis is that when p-value>0.05, the hypothesis is accepted but when p-
value≤0.05, the hypothesis is rejected. The results are presented in Table 4.
On the relationship between the use of in-sourced consultants and project performance, Table 4
shows that the p-values for the test of relationship between the percentage of in-sourced
consultants and the respondents assessment of project duration (0.758), variations (0.663),
fluctuation (0.229), project risks (0.097), conflicts/disagreement between consultants and
contractors (0.356) and percentage of time-overrun to initial contract period (0.080) are greater
than the critical p-value (0.05) therefore the hypothesis is accepted. This result implies that the
number of in-sourced project consultants has no significant relationship with the perception of
clients on project duration, variations, fluctuation, project risks, conflicts or disagreements
between consultants and contractors and the percentage of time-overrun to initial contract
period of projects. However, the p-values for the test of correlation between the percentage of
in-sourced consultants and the respondents’ assessment of project cost (0.033), project quality
(0.017), conflicts between clients and contractors (0.015), conflicts between clients and
consultants (0.038), compliance with contract obligations (0.001) and percentage of cost-
overrun to initial contract period (0.002) are lower than the critical p-value (0.05) therefore the
hypothesis is rejected. The result indicates that the number of project consultants sourced from
among clients’ staff has significant correlation with the perception of the clients on project cost

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
53
and quality, conflicts between clients and contractors and between client and consultants,
compliance with contract obligations and overrun in the cost of projects.
Variables correlated
N
p
Decision
Rel
% of in-sourced consultants
Res asmt of project cost
Res asmt of project duration
Res asmt of project quality
Res asmt of variations
Res asmt of fluctuation
Res asmt of project risk
Res asmt of client & contractors’ conflicts
Res asmt of client & consultants’ conflicts
Res asmt of consultants & contractors’ conflicts
Res asmt of compliance with contract obligations
% time-overrun to initial contract period
% cost-overrun to initial contract sum
164
164
164
164
164
164
164
164
164
164
80
54
2
x
0.166
-0.024
-0.186
-0.034
0.095
0.130
0.189
-0.162
0.072
0.299
R
0.197
-0.409
0.033
0.758
0.017
0.663
0.229
0.097
0.015
0.038
0.356
0.001
0.80
0.002
Reject
Accept
Reject
Accept
Accept
Accept
Reject
Reject
Accept
Reject
Accept
Reject
S
NS
S
NS
NS
NS
S
S
NS
S
NS
S
Table 4 Results of Spearman test of correlation between the use of in-sourced and outsourced
consultants and project performance
N=Number of respondents, x
2
= Chi-square value, R=Correlation coefficient, p=p-value, Res=respondent,
Asmt=assessment, Rel=relationship, S=significant, NS=not significant
Difference between Performance of Projects based on the Use of In-sourced and
Outsourced Consultants
The argument in favour of the use of outsourced consultants has been that the cost is less than
that of engaging in-sourced consultants. The attempt to justify the engagement of in-sourced
consultants prompts the comparison between the performance of projects in which in-sourced
consultants were engaged with that of projects in which outsourced consultants were engaged.
For the purpose of this comparison, the percentages of time-overrun to initial contract period
and cost-overrun to initial contract sum of projects in which in-sourced project managers,
architects, quantity surveyors and structural, electrical and mechanical engineers were engaged
were compared with those of projects in which outsourced consultants were engaged. The third
hypothesis of the study was postulated for purpose of the comparison. The hypothesis states
that the performance of projects in which in-sourced consultants were engaged is not
significantly different from the performance of projects in which outsourced consultants were
engaged. The hypothesis was tested using the t-test with p≤0.05. The rule for the acceptance or
rejection of the hypothesis is that when p-value>0.05, the hypothesis is accepted but when p-
value≤0.05, the hypothesis is rejected. The results are presented in Table 5.
Table 5 shows that the p-values for the test of difference between the percentages of time-
overrun to initial contract period of projects in which in-sourced and outsourced project
managers (0.847), architects (0.563), quantity surveyors (0.649), mechanical engineers (0.360)
and structural engineers (0.209) were engaged are higher than the critical p-value (0.05)
therefore the hypothesis is accepted. These results imply that the time-overruns of projects in
which in-sourced project managers, architects, quantity surveyors, mechanical and structural
engineers were engaged are not significantly different from those of projects in which

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
54
outsourced project managers, architects, quantity surveyors, mechanical and structural
engineers were engaged. Similarly, the p-values for the test of difference between the
percentages of cost-overrun to initial contract sum of projects in which in-sourced and
outsourced project managers (0.937), electrical engineers (0.112) and structural engineers
(0.733) were engaged are higher than the critical p-value (0.05). These results signify that the
hypothesis is accepted that is the cost-overruns of projects in which in-sourced project
managers, electrical and structural engineers were engaged are not significantly different from
projects in which outsourced project managers, electrical and structural engineers were
engaged.
Parameter
Consultant
N
Mean
t-value
Df
p-value
Decision
Diff
Project manager
Time-overrun
Cost-overrun
In-source
Outsource
In-source
Outsource
66
14
50
14
16.29
17.01
12.81
13.35
-0.194
-0.080
78
62
0.847
0.937
Accept
Accept
NS
NS
Architect
Time-overrun
Cost-overrun
In-source
Outsource
In-source
Outsource
30
48
24
28
16.52
14.95
7.87
16.00
0.581
-2.396
76
50
0.563
0.020
Accept
Reject
NS
S
Quantity surveyor
Time-overrun
Cost-overrun
In-source
Outsource
In-source
Outsource
38
42
32
22
15.74
17.03
8.09
19.78
-0.457
-3.631
78
52
0.649
0.001
Accept
Reject
NS
S
Mechanical engr
Time-overrun
Cost-overrun
In-source
Outsource
In-source
Outsource
28
52
24
30
18.19
15.47
8.52
16.32
0.920
-2.297
78
52
0.360
0.026
Accept
Reject
NS
S
Electrical engr
Time-overrun
Cost-overrun
In-source
Outsource
In-source
Outsource
32
48
28
26
19.84
14.13
10.16
15.75
2.025
-1.618
78
52
0.046
0.112
Reject
Accept
S
NS
Structural engr
Time-overrun
Cost-overrun
In-source
Outsource
In-source
Outsource
44
34
38
14
18.07
14.40
13.67
12.27
1.266
0.344
76
50
0.209
0.733
Accept
Accept
NS
NS
Table 5 Results of t-test of difference in project performance based on the use of in-sourced and
outsourced consultants
N=Number of respondents, Diff=Difference, engr=engineer

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
55
Table 5 however shows that the p-value for the test of difference between the percentages of
time-overrun to initial contract period of projects in which in-sourced and outsourced electrical
engineers (0.046) were engaged is less than the critical p-value (0.05) therefore the hypothesis
is rejected. This result implies that the time-overrun of projects in which in-sourced electrical
engineers were engaged are significantly different from that of projects in which outsourced
electrical engineers were engaged. Similarly, the p-values for the test of difference between the
percentages of cost-overrun to initial contract sum of projects in which in-sourced and
outsourced architects (0.020), quantity surveyors (0.001) and mechanical engineers (0.026)
were engaged are less than the critical p-value (0.05) therefore the hypothesis is rejected.
These results indicate that the cost-overruns of projects in which outsourced architects, quantity
surveyors and mechanical engineers were engaged are significantly different from projects in
which in-sourced architects, quantity surveyors and mechanical engineers were engaged. The
results in Table 5 reveal that the mean time-overrun of projects in which in-sourced electrical
engineers were engaged (19.84 weeks) is higher than the mean time-overrun of projects in
which outsourced electrical engineers were engaged (14.13 weeks). This result tends to
indicate that less time-overrun was recorded in projects in which outsourced electrical engineers
were engaged compared to projects in which their in-sourced counterparts were engaged.
However, the mean cost-overrun of projects in which outsourced architects (N16 million),
quantity surveyors (N19.78 million) and mechanical engineers (N16.32 million) were engaged
are higher than the mean cost-overruns of projects in which in-sourced architects (N7.87
million), quantity surveyors (N8.09 million) and mechanical engineers (N8.52 million) were
engaged. These results indicate that less cost-overrun was recorded in projects in which in-
sourced architects, quantity surveyors and mechanical engineers were engaged compared to
projects in which their outsourced counterparts were engaged.
Discussion of Findings
The analysis of the percentages of use of the two sources of consultants in Table 2 has shown
that the extent of use of in-sourced project managers is the highest, followed by in-sourced
quantity surveyors while the extent of use in-sourced electrical engineers is the least. The
reverse is the case of the extent of use of outsourced consultants in project development. These
results indicate that clients’ preference for in-sourced and outsourced consultants in project
development varies from one consultant to another, and that clients do not rely on one of the
two sources of consultants in project development; rather they use their staff as some
consultants and source the others from outside.
The results in Table 4 that there is no significant difference between the extent of use of in-
sourced and outsourced consultants also support the finding that clients use the two types of
consultants for the development of projects. This finding shows that the two types of consultants
are important features of project development in Nigeria. It also goes to show that clients are
found of employing professionals who serve as consultants in their organizations. The results of
the influence of the use of the two types of consultants in Table 4 shows that the use of either
in-sourced or outsourced consultants has significant influence on clients’ assessment of project
cost, quality, conflicts between project team members and cost-overruns.
The results of the test of difference in the performance of projects in which the two types of
consultants were engaged tend to indicate that the engagement of in-sourced or outsourced
project managers and structural engineers does not make any difference on project
performance. This tends to imply that clients can engage their staff or external consultants as
project managers and structural engineers without any increase or decrease in both time and
cost overruns. However, the results of the study show that the engagement of outsourced
electrical engineers could help to achieve savings in the delivery time of projects compared to

Australasian Journal of Construction Economics and Building
Idoro, G I (2011) ‘Influence in-sourcing and outsourcing of consultants on construction project performance in Nigeria’,
Australasian Journal of Construction Economics and Building, 11 (4) 45-58
56
when in-sourced electrical engineers are engaged but such will not make any difference in the
overrun in the delivery cost of projects.
This result may suggest that an outsourced electrical engineer is unlikely to prolong his
involvement in a project but more willing to perform his service and disengage from a project on
time than his counterpart in the employment of the client. This interest can be attributed to the
fact that his service fee is fixed and may not vary with the duration of his involvement in a
project. The implication of this result is that considerable time can be saved in projects that have
long duration when electrical engineers are outsourced. On the other hand, the engagement of
in-sourced architects, quantity surveyors and mechanical engineers could help to achieve
savings in the delivery cost of projects compared to when outsourced consultants are engaged
but this will not make any difference in the delivery time of projects. This result may indicate that
in-sourced architects, quantity surveyors and mechanical engineers have better knowledge of
both the client and project requirements than their outsourced counterparts and this knowledge
helps to minimise incidences of variations and the likes that are responsible for cost-overrun.
The implication of this result is that cost can be saved when project design, in particular
architectural and mechanical drawings and bills of quantities are carried out in-house, that is
direct labour instead of contract.
Conclusion
The study has established that in-sourcing and outsourcing of consultants is a feature of the
project delivery process. This finding shows that clients are often faced with the challenge of
deciding which of the two types of consultants to engage when they embark on project
development. Organisations all over the world are abandoning the practice of keeping many
construction professionals as staff because construction is a service activity and they need to
concentrate on their core business activities and reduce overhead costs. This study has
contributed to existing studies on the benefits of in-sourcing and outsourcing by revealing the
benefits derived from project outcome when they are adopted. It has revealed that organisations
do not have anything to lose on project outcome by engaging external project managers and
structural engineers as project consultants. Specifically, it has discovered that outsourcing
electrical engineers in project development not only provide the clients with the numerous
benefits of outsourcing discovered in previous studies, it will equally assist organisations to
reduce the delay to be experienced in project delivery. On the other hand, the study has
discovered that by engaging in-house architects, quantity surveyors and mechanical engineers
as consultants, organisations are likely to derive the benefit of reduced cost-overrun. These
results suggest the need for organisations to engage a mixture of in-sourced and outsourced
consultants in project development. In adopting this, it is suggested that such organisations
should give consideration to electrical engineers in outsourcing and architects, quantity
surveyors and mechanical engineers in in-sourcing.
Suggestion for Further Studies
Time and cost overruns are not the only parameters of project outcome. The study could not
investigate the benefits associated with other important parameters of project outcome such as
project quality when the two consultants are engaged in project development. It therefore
suggests further studies on the influence of the use of the two consultants on other parameters
of project outcome such as project quality in order to complement the results of the study.
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