Cost Overrun in Construction Projects in Indonesia

Abstract

Cost overrun is one of the problems faced by most construction projects in Indonesia. The unexpected budget in cost overrun can raise many problems in the project. Hence, it is important for every stakeholder in the project to have a good understanding of the factors causing cost overrun to avoid or to minimize the risk of it in the project. The aims of this study are to identify factors causing cost overrun in a project and to analyze factors that most influence the occurrence of cost overrun in construction projects in Indonesia as perceived by the owner and contractor. This research used a questionnaire to collect data. 15 factors were identified in this research i.e. site availability delay; site conditions; social site conditions; change order; rework; subcontractor and/or vendor performance; approval/permit delay; inaccuracy in budgeting; scheduling and resource planning; materials price fluctuations; rules and regulations; owner additional requirements; inflation; delay in payment; weak cash flow and bad weather. From a total of the 15 factors identified, both parties agreed on rework as the most factor causing cost overrun in construction projects in Indonesia.