27 1214036

AbstractThis study examines previous literature on construction projects cost and schedule overruns, with the specific

aim of identifying the causes and effects of cost schedule overruns in

construction projects. This is because the concept of construction

projects cost and schedule overruns has attracted much attention in

recent years and that researchers and research bodies, be it corporate

or government that try to formulate remedies to projects cost and

schedule overruns should begin with an understanding of the causes

of these overruns and their effects to the construction industry as a

whole. The study is conducted with reference to existing theoretical

literature, published and unpublished research. The study is mainly

a literature review/survey on the causes and effects of construction

project cost and schedule overruns. The primary findings emanating

from the study revealed that empirical studies have identified a

number of important factors which cause projects cost overruns,

such as fluctuation of prices of material, cash flow and financial

difficulties faced by the contractor, poor site management and

supervision, lack of experience and schedule delay. The study

further revealed that poor site management, delay in progress

payments, poor communication and financial difficulties by the

contractor are among the identified causes of construction projects

schedule overruns by previous scholars. Literature also revealed that

extension of project, additional cost, budget short fall, adversarial

relationship between participants of the project, delayed payments to

contractors, poor quality workmanship and dissatisfaction by project

owners and consequently by end users as the major effects of cost

overruns. Furthermore, it was observed that time overrun, cost

overrun, arbitration, litigation, disputes and total abandonment of

projects were the effects of construction projects schedule overruns.

The study explores the causes and effects of construction projects

cost and schedule overruns and presents a robust background on the

theories of construction project cost and schedule overruns.

KeywordsCost overruns, Schedule overruns, Construction Industry, Causes and effect of cost and schedule overruns.

Mulenga. Mukuka is an MTech students with the Department of

Construction Management and Quantity Surveying, University of Johannesburg,

Johannesburg, 2028 South Africa (corresponding author to provide phone:+27

(0) 11 559 6398; fax:+27 (0) 11 559 6630; e-mail: [email protected]).

Clinton. Aigbavboa is a Lecture with the Department of Construction

Management and Quantity Surveying, University of Johannesburg,


(0) 11 559 6398 ; fax:+27 (0) 11 559 6630; e-

mail:[email protected]).

Wellington. Thwala is a Professor with the Department of Construction

Management and Quantity Surveying, University of Johannesburg,


(0) 11 559 6048; fax:+27 (0) 11 559 6630; e-mail: [email protected]).

I. INTRODUCTION

OST and schedule overruns can occur for a wide variety

of reasons on various types of projects which has led to

the debate on how to minimise these construction projects

cost and schedule overruns [1]. However, Memon, Rahman,

Asmi, and Azis, [2] states that in order to find measures of

minimising these overruns, the very first and most important

step is to identify and understand the factors responsible for

the overruns. Hence, this paper examines previous literature

on causes and effects of construction projects cost and

schedule overruns.

II. CONSTRUCTION PROJECTS COST OVERRUNS

Cost overruns are very common in the construction

industry. Hardly few projects get completed within original

costs [3]. Al-Najjar [4] defines cost overruns as the change in

contract amount divided by the original contract award

amount. However, Zhu and Lin [5] states that cost overrun

can be defined as excess of actual cost over budget. Cost

overrun is also sometimes called cost escalation, cost increase

or budget overrun. Memon, Rahman and Abdul Azis [2]

outlines that cost is among the major considerations

throughout the project management life cycle and can be

regarded as one of the most important parameters of a project

and the driving force of project success. Olawale and Sun [6]

states that despite the availability of various control

techniques and project control software many construction

projects still do not achieve their cost objectives. Hence,

despite its proven importance it is not uncommon to see a

construction project failing to achieve its objectives within the

specified cost [2]. Park and Papadopoulou [7] states that

construction cost overruns mean negative publicity for the

design team and loss of client confidence. The repercussions

for contractors are similar as they see their profit margins

shrink.

III. CONSTRUCTION PROJECTS SCHEDULE OVERRUNS

Projects or construction works that are not delivered on

time to the client are referred to as projects that have

undergone schedule overruns. Hence, Mohamad [8] Defines

schedule overruns as an act or event that extends the time to

complete or perform an act under the contract. Also, Assaf

and Al-Hejji [9], defined schedule overruns as the time

overrun either beyond completion date specified in a contract,

A Theoretical Review of the Causes and Effects

of Construction Projects Cost and Schedule

Overruns

Mukuka M.J, Aigbavboa C.O., and Thwala W.D.

C

International Conference on Emerging Trends in Computer and Image Processing (ICETCIP'2014) Dec. 15-16, 2014 Pattaya (Thailand)

112

or beyond the date that the parties agreed upon for delivery of

a project. It is basically a project slipping over its planned

schedule and is considered as common problem in

construction projects worldwide. Assaf and Al-Hejji [9]

further illustrates that, to the owner, schedule overruns means

loss of revenue through lack of production facilities and rent-

able space or a dependence on present facilities. In some

cases, to the contractor, schedule overruns means higher

overhead costs because of longer working periods, higher

material costs through inflation, and due to labour cost

increases. Alkhathami [10] states that schedule overruns can

be defined as extra time required to finish a given

construction project beyond its original planned duration,

whether compensated for or not.

IV. CAUSES OF CONSTRUCTION PROJECTS COST OVERRUNS

Cost overruns do not just occur naturally, there are a

number of factors during the construction process that when

not managed properly can lead to cost overruns. Al-Najjar [4]

identified a total of 42 factors that cause cost overruns and

ranked the top ten causes as follows: Technical incompetence,

poor organizational structure, and failures of the enterprise,

lack of cost reports during construction stage, inadequate

project preparation, planning and implementation, delays in

issuing information to the contractor during construction

stage, lack of coordination at design phase, change in the

scope of the project or in Government policies, Some

tendering manoeuvres by contractors, such as front- loading

of rates, incomplete design at the time of tender, bad

allocation of labour inside the site and delays in decisions

making by government were ranked the top ten causes of cost

overruns.

Eshofonie [11] revealed a total of 40 causes of cost

overruns with the top ten causes being the following: cost of

materials, incorrect planning, wrong method of estimation,

contract management, fluctuation of prices of materials,

previous experience of contractor, Absence of construction

cost data, Additional cost and Project financing. However, the

study of Ameh, Soyingbe and Odusami [12] identified factors

that cause of cost overruns, these factors were then

categorised in 5 categories namely: environmental factors,

construction factors, construction Item Factors such as

frequent design changes, Cost estimating factors and

financing factors. Baloyi and Bekker [13] revealed that

increase in material cost, inaccurate material estimates,

shortage of skilled labour, clients late contract award, project

complexity, increase in labour cost, inaccurate quantity take-

off, difference between selected bid and the consultants

estimate, change orders by client during construction and

shortage of manpower.

Rahman, Memon and Abd. Karim [14] identified the

following as the top ten causes of cost overruns in large

construction projects: fluctuation of prices of material, cash

flow and financial difficulties faced by the contractor, poor

site management and supervision, lack of experience,

schedule delay, inadequate planning and scheduling,

incompetent subcontractors, mistakes and errors in design,

frequent design changes and poor financial control on site.

These results were not in agreement with the results of

Memon el al [15] where poor design and delays in design,

unrealistic contract duration and requirements imposed, lack

of experience, late delivery of materials and equipment,

relationship between management and labour, delay in

preparation and approval of drawings, inadequate planning

and scheduling, poor site management and supervision,

mistakes during construction and changes in material

specification and type were identified as the top causes of cost

overruns. Kasimu [16] identified five categories of causes of

cost overruns which include: financial related factors, factors

related to construction parties, factors related to construction

items, environmental related factors and politics related

factors.

V. CAUSES OF CONSTRUCTION PROJECTS SCHEDULE OVERRUNS

Causes of schedule overruns are factors that lead to

construction projects not being finished according to the

planned scheduled time at the inception of project. Ade-ojo

and Babalola [17] states that there are 6 major causes that

would lead to schedule overruns, the identified causes were

ranked as follows: design error, poor site condition, delay in

payment, financial incapability of client, financial

incapability of contractor and non-availability of

subcontractor and supplier. Further, Akinsiku and Akinsulire

[18] show that, financial or cash flow difficulties, financial

difficulties faced by contractors and public agencies, frequent

change order and design, failure to pay for completed works,

shortages of resources, considerable additional work,

escalations of material prices, increases in the scope of work,

delay in design work and late delivery of materials are the top

ten causes of schedule overruns on construction projects.

However, Ali, Smith, Pitt and Choon [19] shows that

labour Shortage, contractors financial difficulties,

construction mistakes and defective works, coordination

problem, material shortage and poor Site management are the

major factors that contribute to schedule overruns con

construction projects in Malaysia. Furthermore, Memon et al.

[20] revealed that design and documentation issues, financial

resource management, project management and contract

administration, contractors site management, information and

communication technology, material and machinery resource,

labour (human) resource and external factors as the major

factors affecting time performance on construction projects.

The study of Pourrostam and Ismail [21] shows the following

as the top ten causes of schedule overruns: poor site

management, delay in progress payments by client, change

orders by client during construction, ineffective planning and

scheduling of project by contractor, financial difficulties by

contractor, slowness in decision making process by client,

delays in producing design documents, late in reviewing and

approving design documents by client, poor contract

management by consultant and problems with subcontractors.


113

VI. EFFECTS OF COST OVERRUNS

Effects are the consequences that will be encountered when

cost overruns occur on a construction project. Nega [22] states

that cost overruns have obvious effects for the key

stakeholders in particular, and on the construction industry in

general. To the client, cost overrun implies added costs over

and above those initially agreed upon at the onset, resulting in

less returns on investment. To the end user, the added costs

are passed on as higher rental or lease costs or prices. To the

professionals, cost overrun implies inability to deliver value

for money and could well tarnish their reputations and result

in loss of confidence reposed in them by clients. To the

contractor, it implies loss of profit for non-completion, and

defamation that could jeopardize his or her chances of

winning further jobs, if at fault. To the industry as a whole,

cost overruns could bring about project abandonment and a

drop in building activities, bad reputation, and inability to

secure project finance or securing it at higher costs due to

added risks [22].

The study of Nega [22] further identified the following

as the major effects of cost overruns: delays during

construction, supplementary agreement, additional cost,

budget short fall, adversarial relationship between

participants of the project, loss of reputation to the consultant,

the consultant will be viewed as incompetent by project

owners, high cost of supervision and contract administration

for consultants, delayed payments to contractors, the

contractor will suffer from budget short fall of the client and

poor quality workmanship. However, Eshofonie [11]

identifies four effects of cost overruns as follows: company or

firm liability to insolvency and liability of the companies or

firms to bad debt, under-utilization of man-power resources,

plants and equipment, increased project cost due to extension

of time: Longer project duration means that more resources

will need to be allocated to the project, which then increases

the project costs and project abandonment.

VII. EFFECTS OF SCHEDULE OVERRUNS

Effects of schedule overruns are the consequences that will

occur when the causes of these schedule overruns are not

identified and worked on effectively. The study of Pourrostam

and Ismail [21] identifies and ranks the effects of construction

delays as follows, time overrun, cost overrun, dispute,

arbitration, litigation, and total abandonment of projects.

These findings are in general agreement with other studies as

carried out by Aibinu and Jagboro [23] and Motaleb and

Kishk [24]. However, the study of Baki [25] brings in the

aspect of claims as one of the effects of delays in construction

projects.

VIII. RESEARCH METHODOLOGY

The research was conducted with reference to existing

theoretical literature, published and unpublished literatures.

The study is mainly a literature survey/review and looks at the

literatures relating to construction project cost and schedule

overruns. This is because the concept of projects cost and

schedule overruns has attracted much attention in recent

years and that researchers and research bodies, be it corporate

or government that try to formulate remedies to construction

projects cost and schedule overruns should begin with an

understanding of the causes and their effects. The current

methodology falls within the qualitative research

methodology.

IX. LESSONS LEARNT FROM LITERATURE REVIEW

Literature reviewed showed that the major causes of cost

overruns include: cost of materials, incorrect planning, wrong

method of estimation, contract management, and fluctuation

of prices of materials [11]. Other causes identified through

literature include, environmental factors, construction factors,

construction Item Factors such as frequent design changes,

Cost estimating factors and financing factors [12].

Furthermore, literature showed that the major causes of

schedule overruns include: design error, poor site condition,

delay in payment, financial incapability of client, financial

incapability of contractor and non-availability of

subcontractor and supplier [17]. Other causes of schedule

overruns included: financial or cash flow difficulties,

financial difficulties faced by contractors and public agencies,

frequent change order and design, failure to pay for

completed works, shortages of resources, considerable

additional work, escalations of material prices, increases in

the scope of work, delay in design work and late delivery of

materials [18].

Literature further identified the following as the major

effects of cost overruns, delays during construction,

supplementary agreement, additional cost, budget short fall,

adversarial relationship between participants of the project,

loss of reputation to the consultant, the consultant will be

viewed as incompetent by project owners, high cost of

supervision and contract administration for consultants,

delayed payments to contractors, the contractor will suffer

from budget short fall of the client and poor quality

workmanship [22]. Furthermore, literature showed the major

effects of schedule overruns to be time overrun, cost overrun,

dispute, arbitration, litigation, and total abandonment of

projects [21].

X. CONCLUSION

This article has examined literature relating to construction

project cost and schedule overruns. Literature review showed

that the causes of cost and schedule overruns range from

those caused by poor construction management to those that

are caused by other external factors like poor weather

conditions. Further, literature revealed that there are

corresponding negative effects of construction project cost

and schedule overruns that can eventually lead to total project

abandonment.

REFERENCES

[1] Alinaitwe, H., Apolot, R. and Tindiwensi, D. 2013, Investigation into the Causes of Delays and Cost Overruns in Uganda's Public Sector

Construction Projects: Journal of Construction in Developing Countries,

18(2), 3347, 2013. [2] Memon, A.H., Rahman, I.A., Asmi, A. and Azis, A., 2010, Factors

Affecting Construction Cost in Mara Large Construction Project:


114

Perspective of Project Management Consultant: International Journal of

Sustainable Construction Engineering & Technology: Vol 1, No 2,

December 2010.

[3] Subramani, T., Sruthi, P. S. and Kavitha, M. 2014, Causes of Cost Overrun In Construction: IOSR Journal of Engineering (IOSRJEN): ISSN

(e): 2250-3021, ISSN (p): 2278-8719: Vol. 04, Issue 06 (June. 2014),

||V3|| PP 01-07.

[4] Al-Najjar, J.M., 2002, Factors Influencing Time and Cost Overruns on Construction Projects in the Gaza Strip: Masters Thesis: The Islamic University of Gaza.

[5] Zhu, K. and Lin, L., 2004, A stage by stage factor control frame work for cost estimation of construction projects, Owners Driving Innovation:

International Conference. http:/ flybjerg. Plan.aau.dk / JAPAASPUBLISH.

[6] Olawale, Y. A, and Sun M., 2010, Cost and time control of construction projects: Inhibiting factors and mitigating measures in practice.

Construction Management and Economics, 28 (5), 509 526. [7] Park, Y-III and Papadopoulou, T. C. 2012, Causes of cost overruns in

transport infrastructure projects in Asia; Their significance and relationship

with project size: Built Environment Project and Asset Management, Vol.

2 No. 2, 2012: pp. 195-216: Emerald Group Publishing Limited.

Available at www.emeraldinsight.com/2044-124X.htm.

[8] Mohamad, M.R.B. 2010, The factors and effect of delay in government Construction project, Case study in kuantan: University Malaysia Pahang.

[9] Assaf, S.A. & Al-Hejji, S. 2006, Causes of delay in large construction projects: International Journal of Project Management, 24 (2006): 349357.

[10] Alkhathami, M.M. 2004, Examination of the correlation of critical success and delay Factors in construction projects in the kingdom of Saudi Arabia:

Doctor of Philosophy Thesis: University of Pittsburgh.

[11] Eshofonie, F.P., 2008, Factors affecting cost of construction in Nigeria: Masters in construction management thesis: University of Lagos akoka,

Lagos.

[12] Ameh, O.J., Soyingbe, A.A. and Odusami, K.T., 2010, Significant Factors Causing Cost Overruns in Telecommunication Projects in Nigeria: Journal

of Construction in Developing Countries, Vol. 15(2), 4967, 2010. [13] Baloyi, L. and Bekker, M., 2011, Causes of construction cost and time

overruns: The 2010 FIFA World Cup stadia in South Africa: Acta

Structilia 2011: 18(1).

[14] Rahman, I.A., Memon, A.H and Abd. Karim, A. T., 2013, Significant Factors Causing Cost Overruns in Large Construction Projects in

Malaysia: Journal of Applied Sciences 13 (2): 286-293, 2013.

[15] Memon, A. H., Rahman, I. A. and Abdul Azis, A. A. 2011, Preliminary Study on Causative Factors Leading to Construction Cost Overrun:

International Journal of Sustainable Construction Engineering &

Technology Vol 2, Issue 1, June 201.

[16] Kasimu, M. A., 2012, Significant factors that causes cost overruns in building construction project in Nigeria. Interdisciplinary journal of

contemporary research in business: March 2012, VOL 3, NO 11.

[17] Ade-Ojo, C. O. and Babalola, A. A. 2013, Cost and Time performance of construction projects under the due process reform in Nigeria. Research

Inventy: International Journal Of Engineering And Science: Vol.3, Issue 6

(Aug 2013), PP 01-06: Issn(e): 2278-4721, Issn(p):2319-6483,

Www.Researchinventy.Com.

[18] Akinsiku, O. E and Akinsulire, A. 2012, Stakeholders Perception of the Causes and Effects of Construction Delays on Project Delivery. KICEM

Journal of Construction Engineering and Project Management: Online

ISSN 2233-9582.

[19] Ali, A. S. Smith, A. Pitt, M. and Choon, C. H. 2012, Contractors perception of factors contributing to project delay: case studies of

commercial projects in klang valley, Malaysia.

[20] Memon, A.H., Rahman, I.A. and Azis A.A.A. 2012, Time and Cost Performance in Construction Projects in Southern and Central Regions of

Peninsular Malaysia: International Journal of Advances in Applied

Sciences (IJAAS): Vol.1, No.1, March 2012, pp. 45-52.

[21] Pourrostam, T. & Ismail, A. 2011, Significant Factors Causing and Effects of Delay in Iranian Construction Projects: Australian Journal of Basic and

Applied Sciences, 5(7): 450-456.

[22] Nega, F., 2008, Causes and effects of cost overrun on public building construction projects in Ethiopia: Master of Science thesis: Addis Ababa

University.

[23] Aibinu, A.A. & Jagboro, G.O. 2012, The effects of construction delays on project delivery in Nigerian construction industry: International Journal of

Project Management, 20 (2002): 593599. [24] Motaleb, O. & Kishk, M. 2010, An investigation into causes and effects of

construction delays in UAE: Robert Gordon University.

[25] Baki, M.A. 1999, Delay Claims Management in Construction-A Step-By-Step Approach: ProQuest Dissertations & Theses Full Text: pg. 36-38.


115

Documents

27 1214036