FACTORS AFFECTING COST OVERRUN IN CONSTRUCTION PROJECTS

2021 ◽  
Vol 8 (1) ◽  
Author(s):  
Mohammed Algahtany
Keyword(s):  
Saudi Arabia ◽  
Construction Projects ◽  
Cost Overrun ◽  
Cost Overruns ◽  
Factors Affecting ◽  
Public Projects ◽  
Low Performance ◽  
Major Factors ◽  
Public Construction ◽  
The Cost

Public construction projects in Saudi Arabia have been suffering from low performance for the past decade. Cost overrun is one of the most important issues in project’s performance and is nearly associated with most of public projects. The aim of this study is to identify and assess the major factors leading to cost overruns in education construction projects in the Northern Province of Saudi Arabia to minimize the risks’ effects in future projects. The research methodology started by identifying cost overrun factors through literature review, project’s documentations, and experts’ interviews. Professionals who worked at the construction projects undertook a questionnaire survey to investigate the importance of the cost overrun factors. The top factors of cost overrun were identified through the analysis of the factors’ occurrence and severity. The study main results included the top causes of cost overrun which are delay in contractors’ progress payment by client, difficulties in financing project by contractor, delays in sub-contractor’s work, additions of quantities such as excavation, backfill, and concrete works, and bid award for lowest price. The investigated risks in the study should be evaluated and mitigated in future projects to minimize their effects and enhance the industry performance.

scholarly journals Upgrade the Saudi Arabian Procurement System Delivery Method

2015 ◽  
Vol 7 (1) ◽  
pp. 146
Author(s):  
Ahmed Alofi ◽  
Yasir Alhammadi ◽  
Dean Kashiwagi ◽  
Kenneth Sullivan
Keyword(s):  
Saudi Arabia ◽  
Construction Projects ◽  
Public Procurement ◽  
Saudi Arabian ◽  
The Public ◽  
Public Projects ◽  
Potential Risks ◽  
Low Performance ◽  
And Performance ◽  
Procurement System

Saudi Arabia has had many issues in delivering mega construction projects, such as delays, high costs, and low customer satisfaction. Some studies show that around 70% of public projects in Saudi Arabia are delayed. One factor that might be causing these performance issues is the traditional low bid contracting system in Saudi Arabia, or the Saudi procurement system. In Saudi Arabia, owners select contractors based only upon the lowest price. This paper researched ways to modify the current Saudi procurement system and show quick and simple modifications that can be done to improve the low performance. This research proposes that by adding the clarification phase from the Performance Information Procurement System (PIPS) to the Saudi traditional procurement process could greatly improve construction performance. The clarification phase requires the selected contractor to submit a project scope, detailed and milestone schedule, potential risks that they do not control, and performance measurement before a contract is awarded. The PIPS system is one of the most successful systems around the world, which shows success rate of 98% in six different countries with risk and cost reduction up to 30%. The clarification phase has been identified as the most important step in the PIPS to ensuring a successful project. This paper conducted a survey among construction professionals in Saudi Arabia, including 157 engineers, 33 consultants 9 owners, 5 vendors, 13 academics, and 28 architects, in order to develop the public procurement system in Saudi Arabia. The participants work in government sectors with an interest in the Saudi Arabian procurement system. The survey confirmed that professionals in the Saudi construction industry believe that the procurement system should be changed and that the inclusion of the clarification phase to the procurement system is a way to improve the procurement system.

scholarly journals Factors Affecting Contractors’ Bidding Decisions for Construction Projects in Saudi Arabia

Buildings ◽  
2019 ◽  
Vol 9 (2) ◽  
pp. 33 ◽  
Author(s):  
Mohammad Alsaedi ◽  
Sadi Assaf ◽  
Mohammad Hassanain ◽  
Abdullatif Abdallah
Keyword(s):  
Saudi Arabia ◽  
Construction Projects ◽  
Critical Factors ◽  
Start Time ◽  
Design Quality ◽  
Factors Affecting ◽  
Importance Index ◽  
Efficiency And Effectiveness ◽  
Major Factors ◽  
Level Of Agreement

One of the critical decisions taken by contractors is whether or not to bid for a project. This is due to the complexity and uncertainty surrounding this decision, which is influenced by many factors. Given the above challenge, this study aimed to uncover the critical factors affecting the contractors’ bidding decisions in Saudi Arabia-based construction projects. A questionnaire survey, which consisted of 31 factors, was distributed to first-, second- and third-grade contractors. In total, 67 responses were obtained. Median and relative importance index (RII) techniques were adopted for ranking the most critical factors. Based on the received responses, the top six critical factors were “size of the job”, “type of the job”, “company’s strength in the industry”, “designer/design quality”, “rate of return”, and “project cash flow”. The least significant factors were “job start time” and “labor environment (union/nonunion/cooperative)”. The findings of this study show a level of agreement among all contractors about the critical factors. The findings would benefit contractors and subcontractors by increasing their understanding of the major factors affecting the bidding decision process. Contractors armed with such valuable information will be better able to enhance their bidding decision-making process in terms of efficiency and effectiveness.

scholarly journals An Analytical Study of Critical Factors Affecting Contractor Efficiency in Construction Projects in Indian Scenario

2018 ◽  
Vol 10 (1) ◽  
pp. 1794-1802
Author(s):  
Shumank Deep ◽  
Laura Simon ◽  
Mohd Asim ◽  
Ali Rahimzadeh ◽  
Sulala Al-Hamdani
Keyword(s):  
Construction Projects ◽  
Indian Subcontinent ◽  
Uttar Pradesh ◽  
Research Approach ◽  
Snowball Sampling ◽  
Critical Factors ◽  
Cost Overruns ◽  
Factors Affecting ◽  
The Government ◽  
The Cost

Abstract Purpose: Recent studies show that lowest bidder tech­nique is mainly used in developing countries such as India to award a contract. It has been demonstrated that the lowest bid is not always the accurate one and can lead to cost overruns and time extensions amongst other prob­lems. The aim of this study was to investigate the critical factors impacting contractor’s efficiency in Indian con­struction projects. Research approach: A survey was sent to participants of construction projects awarded by the government with the lowest bidder technique in Uttar Pradesh, India. For further research, snowball sampling was used, and struc­tured interviews were conducted amongst experienced managers and engineers of these projects on both client’s and contractor’s side.Findings: It was observed that, to a greater extent, the delays were caused due to contractor’s opportunistic behaviour. The main findings are that new bidding meth­odologies are to be tested as they can lead to the choice of a more accurate and realistic bidder. In addition, subjec­tive evaluation components, such as schedule and work­force, should be reflected in contract award methods in addition to the cost criteria. Further studies should be per­formed on the choice of contract awarding methodology based on the project size and type. Originality value: The researcher’s focus was to analyze the influence of contracting methodologies and factors affecting contractor’s performance in lowest bid award project, where this is an area of least focus amongst researchers in the Indian subcontinent.

Factors Affecting Schedule Delay, Cost Overrun, and Quality Level in Public Construction Projects

2016 ◽  
Vol 32 (1) ◽  
pp. 04015032 ◽  
Author(s):  
Jesper Kranker Larsen ◽  
Geoffrey Qiping Shen ◽  
Søren Munch Lindhard ◽  
Thomas Ditlev Brunoe
Keyword(s):  
Construction Projects ◽  
Quality Level ◽  
Cost Overrun ◽  
Factors Affecting ◽  
Schedule Delay ◽  
Delay Cost ◽  
Public Construction

scholarly journals Factors of Schedule and Cost Performance of Tunnel Construction Megaprojects

2021 ◽  
Vol 15 (1) ◽  
pp. 38-49
Author(s):  
Alberto De Marco ◽  
Timur Narbaev
Keyword(s):  
Statistical Significance ◽  
Project Managers ◽  
Decision Makers ◽  
Tunnel Construction ◽  
Cost Overrun ◽  
Cost Overruns ◽  
Strategic Design ◽  
Schedule Delay ◽  
Low Performance ◽  
The Cost

Aims: This study illustrates the main factors that influence the cost overruns and schedule delays of tunnel construction megaprojects. Objective: An empirical analysis was carried out based on a dataset collected from a number of recent tunnel megaprojects worldwide. Methods: Analyses of variances and regression analyses were conducted to infer statistical significance and understand the relationships that exist between cost overruns, time delays and variables of context, technical, and governance characteristics of the sample projects. Results: The most significant factors are those related to the complexity of infrastructure and the type of contracting system used to deliver the project. In particular, some technical characteristics pertinent to the size of the tunnel reveal to be influencing factors of both schedule delay and cost overrun, while the usage of a traditional contracting mechanism is likely to impact the cost overrun. The type of infrastructure, region, ownership, and funding scheme are not found to be statistically significant determinants of cost and time performance. Conclusion: This analysis reaffirms that the size and complexity are important factors of typical low performance of tunnel construction megaprojects. The results of this study can be used for strategic design and planning by decision-makers, project managers and designers.

A preliminary study of the factors affecting the cost escalation of construction projects

2000 ◽  
Vol 27 (1) ◽  
pp. 73-83 ◽  
Author(s):  
Karla Knight ◽  
Aminah Robinson Fayek
Keyword(s):  
Fuzzy Logic ◽  
Construction Projects ◽  
Labour Productivity ◽  
Membership Functions ◽  
Monitoring And Control ◽  
Construction Costs ◽  
Cost Overruns ◽  
Factors Affecting ◽  
Definition Of ◽  
The Cost

An interview survey of Alberta-based construction contractors was conducted in July and August 1998. The purpose of this survey was to elicit information on the factors that cause unanticipated project cost escalation during construction, from the contractor's perspective. This paper presents the findings of this survey and a proposed method of modeling the factors identified. The majority of factors identified impact labour productivity, which is a major source of cost overruns. A combination of subjective, objective, and secondary indicators are used to measure these factors and to assess their impact on project performance. The main conclusion of this survey is that many of the factors affecting the cost of construction are evaluated in subjective and imprecise terms and are difficult to quantify. This paper presents a method of modeling these factors using fuzzy membership functions, which capture the imprecision and subjectivity associated with the measurement of these factors. It discusses a basis for the definition of these membership functions and a method of calibrating these functions to make them more widely applicable to suit different contexts. These membership functions are being incorporated in a set of expert rules, which reason about the factors affecting costs, their impact on the project, and the appropriate corrective actions. These expert rules are being developed as part of a fuzzy expert system for construction project monitoring and control. A method of calibrating membership functions to suit individual contexts is currently being developed, which would be a significant advancement in the area of fuzzy logic. Key words: construction, costs, expert systems, fuzzy logic, project control, survey.

scholarly journals Factors Affecting Cost Overrun in Construction Projects

2019 ◽  
Vol 9 (2) ◽  
pp. 4831-4833
Keyword(s):  
Construction Projects ◽  
Basic Problem ◽  
Cost Overrun ◽  
Quality Cost ◽  
Factors Affecting ◽  
Critical Elements ◽  
Key Factor ◽  
The Common ◽  
The Cost

Cost overrun is observed as one of the common and basic problem which took place in different construction projects and affects its progress. Construction cost can be considered as the key factor to tell whether a project is successful or not. The cost of any project may be within, under or overrun. Among these cost overrun affects the project progress directly. Since it affects profit of the contractor, financial problems, delay in completion time, compromise on the material quality. Cost overrun can push the particular company to bankruptcy. Therefore various factors influencing the cost overrun must be thoroughly analyzed in order to reduce the cost overrun in such projects without compromising the quality of the project. The need of this research is to recognize the critical elements that lead to cost overrun in such projects.

Major causes of construction time and cost overruns

2017 ◽  
Vol 15 (2) ◽  
pp. 181-198 ◽  
Author(s):  
Samuel Famiyeh ◽  
Charles Teye Amoatey ◽  
Ebenezer Adaku ◽  
Collins Sena Agbenohevi
Keyword(s):  
Interest Rates ◽  
Financial Management ◽  
Construction Projects ◽  
Cost Overrun ◽  
Construction Sector ◽  
Construction Time ◽  
Government School ◽  
Cost Overruns ◽  
Content Type ◽  
Factors Affecting

Purpose In Ghana, the duration of construction projects from inception to completion is becoming a great concern, recently, especially among clients and beneficiaries, because of the rising interest rates, inflation, development plan targets, among other factors. Hence the need to understand the causes of delays and cost overrun in the construction sector has become more important than ever. This study therefore aims to identify the major factors underlying time and cost overruns in projects related to the education sector in Ghana to proffer practical solutions in addressing them. Design/methodology/approach The study conducted a survey among clients’ consultants and representatives of the contractors working on about 60 government school projects. A relative importance index was used to determine the relative effects of the factors causing construction time and cost overruns. Findings The key factors causing construction time overrun were: financial problems, unrealistic contract durations imposed by clients, poorly defined project scope, client-initiated variations, under-estimation of project cost by consultants, poor inspection/supervision of projects by consultants. Other factors were underestimation of project complexity by contractors, poor site management, inappropriate construction methods used by contractors and delays in the issuance of permits by government agencies. Factors affecting cost overruns were financial difficulty by client, delays in payments of completed works, variations in designs, lack of communications plans, poor feasibility and project analysis, poor financial management on site and material price fluctuations. Research limitations/implications The research was limited to only the educational sector projects. Practical implications Practically, this study highlights for the construction sector the critical factors causing project time and cost overruns in Ghana. Identification of these factors provides the basis for pragmatic solutions to enhance the chances of project success. Social implications The identification and solutions to project time and cost overruns, especially for educational sector projects, contribute toward making public goods more affordable and accessible to most citizens, particularly in developing countries. Originality/value This study contributes to the debate on factors causing project time and cost overruns in the construction sector especially from a developing country’s perspective.

scholarly journals Cost overrun in construction projects in Oman: Case study

2021 ◽  
Vol 10 (3) ◽  
Author(s):  
Haitham Nasser Al Siyabi ◽  
Omar Khaleel
Keyword(s):  
Construction Industry ◽  
Construction Projects ◽  
Poor Quality ◽  
Building Construction ◽  
Cost Overrun ◽  
Survey Interviews ◽  
Original Contract ◽  
Major Factors ◽  
The Cost ◽  
The Impact

There are many challenges in construction industry sector, and one of the most important and critical is completion of the project within the original contract value. As the issue of cost overrun in construction projects is spread worldwide generally and commonly encountered in the Sultanate of Oman.The main objectives of this study are to identify and determine vital factors leading to cost overrun in Building Projects in Oman, evaluate the impact of cost overrun in building construction projects and develop the best protocol strategy for project management teams that can be adopted in order to control the cost overrun in future projects. These objectives have been obtained through several methods, questionnaire survey,interviews with experts in construction industry. Twenty nine major factors lead to cost overrun were identified through literature review and studied in Sultanate of Oman.The study concluded that there are three major impacts of cost overrun in construction projects and industry which are time of completion, delivery of poor quality projects and delay of payment approval. Additional to that, Hire good Supervision Team, a good Cost Controller, Project Manager, a good project design team, well planning for pre-contract stage and proper procurement strategy. Consider the Risk assessment and Risk Control are crucial to minimize the cost overrun in building construction project in Oman. The study have recommended procedure to cost control in future project such as the Employer should have a proper tender analysis of the Contractor’s bid, Detailed design should be finalized before award of work and others.

scholarly journals A MODEL FOR EVALUATING THE RISK EFFECTS ON CONSTRUCTION PROJECT ACTIVITIES

2019 ◽  
Vol 25 (7) ◽  
pp. 687-699 ◽  
Author(s):  
Usama Hamed Issa ◽  
Salah Attia Mosaad ◽  
Mohamed Salah Hassan
Keyword(s):  
Membership Function ◽  
Time Delays ◽  
Construction Projects ◽  
Construction Project ◽  
Cost Overrun ◽  
Analysis Model ◽  
Expected Cost ◽  
Cost Overruns ◽  
Proposed Model ◽  
The Cost

Cost overruns and time delays are considered to be very important challenges for the majority of construction projects. These challenges are typically attributed to their associated risks. Due to the risky and uncertain nature of construction projects, an increasing amount of attention is given to estimating and overcoming cost overruns and time delays. New techniques are being developed to help project managers to contractually complete projects within cost and time constraints. The objective of this study was to develop a new qualitative and quantitative risk analysis model that can be employed for construction projects. The proposed model, which is based on a fuzzy logic tool, consists of two modules for assessing risk factors that affect the main construction activities and computing the expected cost overruns and time delays that are associated with these risks. Using numerous logical rules, the model applies the probability of occurrences and impacts of the risks on the cost and time of the main activities. The Spearman and Kendall correlation coefficient tests are applied to verify and select a suitable membership function. Using four proposed membership functions, the results of these tests confirmed that the triangle membership function is suitable for the model. The model is verified by application to HVAC system activities in two actual construction projects, which serve as case studies. Two different methods are proposed and applied to quantify the cost overruns and time delays. The first method is based on determining the cost overruns and time delay values for each activity according to their weight in the system. Triple premise rules are proposed and applied in the second method, which is established to relate all activities. The results from the second method are more accurate compared with the first method based on actual data from the case study projects. In addition, the results demonstrated that the proposed model can be used to quantify the expected cost overrun and time delays in construction project activities and can be generalized and implemented in different construction activities.

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