Factors Affecting Cost Overruns in Micro-scaled Construction Companies

Abstract

The ultimate goal of any construction company is to make profit and thereby earn money at the end of each undertaken project. In order to achieve this goal, construction companies should complete the projects within their anticipated budgets and durations, and expected quality targets. However in most construction projects severe cost overruns occur due to various factors. Experiencing cost overruns is a very important problem for construction companies, but especially for micro-scaled construction companies. Severe cost overruns may even cause micro-scaled construction companies’ bankruptcies. Therefore, micro-scaled construction companies should thoroughly analyze the factors that prevail in the project in question. The main objective of this study is to investigate the importance levels of factors that may bring about cost overruns in construction projects undertaken by micro-scaled construction companies. For this purpose, an extensive literature review was conducted and 38 factors were identified. These factors were categorized into 7 major groups, which are: 1) Contract-related factors, 2) Time-related factors, 3) Cost-related factors, 4) Quality-related factors, 5) Human resource-related factors, 6) Communications-related factors, and 7) Risk-related factors. A questionnaire, which consists of 10 questions, was designed based on information gathered from the literature review. The questionnaire mainly comprises 3 sections. These questionnaires were delivered to 136 micro-scaled construction companies. Out of these 136 companies, 78 returned completed questionnaires. This accounts for a response rate of 57%. Reliability and ranking analyses were carried out on the collected data. The survey results indicated that design problems (i.e., design changes, constructability problems, delays in design approvals) is the most critical factor.