the leading causes of cost overrun in today’s major construction projects.
Abstract
Even with the development of control techniques, project management software, and modern construction methods, many significant construction projects fail to achieve their project’s targets in cost and time objectives. There are various research started on identifying sources and time overruns. Cost is an essential constituent for any construction project. Observations have revealed that cost overrun is a common feature in the construction industry worldwide. Hence, various aspects cause cost overruns. Numerous research has been done to investigate the leading causes of these overruns. Surveys are mainly used because they are convenient and quickly followed by interviews with practitioners. This paper targets the leading causes of cost overrun in big construction projects in developing and developed countries. These causes, when carefully examined, can provide valuable information or used as control measures for good practice. They can also assist project managers in increasing the useful check of their projects.
INTRODUCTION
Cost and time are the spines of any construction project. However, cost overruns in construction projects have been identified as the main regularly occurring challenge in projects worldwide and need in-depth research to mitigate it in the future. It has changed into a norm rather than a minor occurrence in the construction industry. The building industry is yet to accept that almost every project is expected to exceed its initial budget, despite the recent improvements in technology and expertise. Cost overrun can be described using more amount of money on a construction project than the estimated value. It is always a sign of project failure; hence there is a need to note and identify the problems early in the initial planning process to develop strategies to solve them and to have achievable and accurate expectations. It also gives managers early warnings to minimize the cost overrun problems. Therefore understanding these challenges allows for the best actions to end them and avoid their impacts at the end of the project. Managers can take preventive measures throughout the construction period because cost overrun occurs due to various features that are different in places and countries. These variations in factors that cause cost overruns may be due to multiple forms that surround the construction industry. The main aim of this paper is to identify and discuss the leading causes of cost overrun in today’s major construction projects.
Cost is the main component of any construction project. However, cost overrun is the main recurring and most severe risk in construction projects anywhere in the globe, where overrun exceeds 100% of the initial planned budget (Rosenfeld 2014). Building expenses that are out of control increases construction cost, adds investment pressure and affects company decision making. Hence it is vital to note the factors that cause cost overrun to prevent and minimize the problem because cost overrun can reduce the viability of a construction project (Abdel-Hafeez et al. 2016).
Underestimating project complexity
Cost overrun can be caused by the practitioners underestimating project difficulties or complexity. Many project’s stakeholders are always anxious to get the project’s building started. There may be flawed schedules and budgets, to begin with, that project is doomed for overrun from day one. The competitive nature form of the bidding process can cause wrongful expectations of the scope of work contained in the project. In typical cases, most projects are estimated on a one size fit all criteria, with a probability of overpassing that initial estimate high. It shows that there is a lack of personal diligence before the construction phase begins and also a lack of accuracy and reality on building deadlines and cost from owners towards architects and contractors. This shows that the estimation process fails to start at early stages reducing the chance where contractors, architects, and owners can raise their worry over budget and timeliness of the construction. Many people also fail to acknowledge the value of pre-construction and design services merely because they contribute up to 15% of the total cost. Skipping this critical phase leads to the rise of potential factors that cost more down the line than the pre-construction services. The pre-construction phase is vital, just like the construction phase, because it lays the foundation for the complex project. A less solid planning phase before actual building if commences leading to confusion between administrators, poor documentation, and a weak project schedule, all increasing future expenses (Pinto 2013).
Communication breakdown
There is also a communication breakdown, which can occur between two individuals involved in a project. The main miscommunication problem that costs more money is between an employee in a significant role and the project manager. Communication is too important that even with robust designs and no building changes, the project will eventually suffer overruns if communication between practitioners is limited. Problems may start at one end of the project and go unnoticed to other project managers until it causes severe damage. If the project administrators are not timely with the project’s progress, there is always the likelihood of overruns. Many owners and contractors tend to believe that increasing the number of administration helps to solve rouge administration. Still, it is not always the best way to handle things in the long run because more people leads to collaboration failures that will eventually bring cost overrun. People fail to equip administrators with appropriate modern tools like ‘project management software,’ which performs the role of many administrators instead of increasing their number. Human beings cause more errors in accounting, invoicing, and delivery monitoring that all causes overruns, whereas software could have raised the alarm (Shank 1989).
Changes in project scope or orders
Not planning for change orders is a common factor for cost overruns in building projects. A change order happens when the contractor or owner wants to try a new spec, requirements, fix or realizes that the plan is nor working after original budgets and models have been concluded. Extra requirements mostly increase costs, which directly changes the initial project budget. The added workforce, materials, and time required to finish the new initiative adds to cost overrun. Most changes added are not specified and addressed ahead of time by contractors, which adequately begin to add overruns. People always fail to set clear rules about how much change is acceptable or affordable, and by what date because projects still grow and growth comes with an added cost (Dey et al. 1994).
Poor site management
Quality control, equipment condition, and design integrity are just a few of the primary factors of a project that requires to be managed during construction. However, this does not happen all the time, which ends up causing severe cost overruns in building projects. An innate trust gap may already exist between owners and contractors because of self-centered conflicts of interest between them, which can have disastrous effects on a project’s momentum. Even if both sides keep a professional relationship, some building initiatives are too big to keep up with every occurrence, and information mar travel too slow among departments. Lack of digital calculations slows down decision making, and information may not be accurate or reliable because of office politics. A lack of site management reveals itself in many ways, including poor communication, insubordination, lack of planning, and missed or unperformed deadline, and others (Olawale & Sun 2010).
Serious project design errors
Project design errors are inevitable and always leads to cost overruns. If a design is a weak and unprofessional, inaccurate, or incomplete plan. Design deficiency is a regular occurrence and can add up to 38% of construction disputes. Incorrect or incomplete arrangements always leads to substandard work from the overall project, which can have severe legal battles later on. Contractors and subcontractors may fail to work according to design because of not agreeing on specific performance duties and ‘Scope of Work’ in the contract phase (Lightenberg 2016). The document may not have explicit references to all project requirements on design documents, a risk definition chart, warranties of the specific work to be done by contractors, and a process of unforeseen issues. Causes of cost overrun in a construction project also include hiring incompetent team, project delays, and inadequate financing, which all play a part in bringing project cost overrun (Markgraf 2018).
Conclusion
Cost overrun has become very common in that more than 70% of all projects failed to come within 10% of the budget in the last three years. The cause of cost overruns as discussed which include, inoculate project estimate, administration errors, not planning for change orders, poor site management, serious project design errors, not hiring the right team, project delays and inadequate financing is the root cause of big construction projects exceeding their estimated budgets. You cannot address the problem of cost overrun before identifying and analyzing the different forms of its cause. Even though harsh weather conditions may be beyond human capability, in most cases, a cost overrun has more significant impacts.
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