Effect of contract costcontrol on operational efficiency 0f commercial state corporations in Kenya

Abstract

Commercial state corporations are formed to offer essential goods and services to the general public. Despite governmenteffortstoimprovetheireffectiveness,commercialstatecorporationshavecontinuedtoperformdismally characterized by poor resource utilization leading to massive losses, increased customer complaints and frequent bailouts by the government over defaulted loans. Some studies have associated this with poor contract cost control howeverthemagnitudeofitseffectonoperationalefficiencyhasnotbeenestablished.Theobjectiveofthestudywas toestablishtheextenttowhichcontractcostcontrolaffectsoperationalefficiencyofcommercialstatecorporationsin Kenya.DescriptiveCross-sectionalresearchdesignwasused.Thetargetpopulationofthisresearchcomprisedthirty- three commercial state corporations in Kenya and a census was undertaken. The study utilized primary data. A questionnaire was used to collect primary data among the thirty-three commercial state corporations in Kenya. Multiple linear regression analysis was used to examine the relationship between variables and t-statistic at 5% significance level was employed in testing hypothesis. The overall significance was tested using F-test. The study established a positive significant effect of contract cost control on operational efficiency with regression coefficient of0.181 withap-value of0.006. Corporationsthatimplementcontractcost controlare ableto preventcostoverruns and complete contracts within the agreed budget thus providing rational utilization of resources and minimizing wastage thus increasing operational efficiency. The study recommends that to ensure effective contract cost control andguaranteethatcontractsarefulfilledwithinthesetcontractprice,anticipatedcostsshouldbeassessedandincluded in the budget