The Mediating Influence of Organizational Capacity on the Relationship between Financial and Contract Management Practices and Construction Cost Overruns in Real Estate Projects within Nairobi and Kisumu Counties, Kenya

Abstract

Real estate projects often require significant investments and involve complex processes. Understanding the mediating effects of organizational capacity on the relationship between financial and management practices and construction cost overruns could help project managers anticipate challenges and implement risk-mitigation strategies, leading to smoother project execution and timely completion. This study established the mediating effects of organizational capacity on the relationship between financial and contract management practices and construction cost overruns. Using quantitative data from 351 project professionals who worked in projects enlisted by National Construction Authority between 2018 and 2019 in Nairobi and Kisumu counties respectively. Data analysis entailed descriptive statistics, correlation and regression analysis. The data was confirmed to be normally distributed and construct valid, which permitted statistical analysis. A significant linear relationship was identified between mediating effects of organizational capacity on the relationship between financial and management practices and construction cost overruns with improvements in organizational capacity leading to predictable changes in cost overruns. The regression analysis showed a strong positive correlation (R = 0.713) and explained about 50.9% of the variance in cost overruns as a result of organizational capacity. The p-values of 0.05, implied null hypothesis was rejected, therefore suggesting organizational capacity significantly mediate on the relationship between financial and management practices and construction cost overruns in real estate projects. The findings underscore the critical role of mediating influence of organizational capacity in managing cost overruns, emphasizing the importance of effective project management and robust organizational practices. Future studies need to shift attention to other crucial tenets of organizational capacity such as legal and regulatory compliance, monitoring and evaluation and learning and innovation policies to establish their effect on construction cost overruns in real estate projects.

Keywords: Organizational Capacity; Financial and Contract Management Practices; Construction Cost Overruns