Reduce Cost Overruns Research Articles

Critical success factors for cost overrun minimization in public construction projects in developing countries: the case of Ghana

Purpose It is widely accepted that one criterion for determining if a construction project is successful is whether it is completed within the expected budget. There have been advancements in the management of building projects throughout time but cost overruns remain a key concern in the construction sector internationally, particularly in emerging economies such as Ghana. This study aims to answer the question, “What are the critical success factors (CSFs) that can assist reduce cost overruns in public sector infrastructure projects in the Ghanaian construction industry?” Design/methodology/approach This study used a quantitative survey method. The questionnaire was pre-tested by interviewing 15 contractors to ascertain the validity of the content. Factor analysis and multiple regression were adopted to analyze the data. Findings This study discovered that the critical factors that can reduce cost overruns in construction projects in Ghana are directly linked to five themes: early contractor involvement in the project planning stage, adequate funding, good project team relations, competent managers/supervisors and project participant incentives/bonuses. This study identifies indestructible, empirically measurable important success criteria for reducing cost overruns in public building projects in Ghana. Practical implications When well thought through from the project initiation stage to completion, these critical successes can also be used to deal with damaging economic effects such as allocative inefficiency of scarce resources, further delays, contractual disputes, claims and litigation, project failure and total abandonment. Originality/value The uniqueness of this research resides in the fact that it is, to the best of the authors’ knowledge, a first-of-its-kind investigation of the CSFs for reducing cost overruns in public building projects in developing countries.

Modeling the Causes and Mitigation Measures for Cost Overruns in Building Construction: The Case of Higher Education Projects

The formidable need for building projects places greater pressure on stakeholders to deliver these projects on time, within the budget, and with high quality. However, many building projects have experienced extensive cost overruns despite extensive research on their causes and mitigation measures. Thus, the effectiveness of mitigation measures is questionable. This study examines the status of cost overrun in building construction projects and develops a structural equation model to establish the relationships between causes of cost overrun and mitigation measures, using higher education building projects as a case study. This study analyzed cost overruns in 27 higher education building projects. Furthermore, 118 responses were collected using a questionnaire survey and analyzed using descriptive statistics, the Kruskal–Wallis H test, exploratory factor analysis, and partial least-squares structural equation modeling (PLS-SEM). The findings suggest that around 93% of the 27 higher education building projects experienced cost overrun, and the majority overran between 5% and 10%. The findings illustrate that bid evaluation and project planning mitigation measures positively affect efficiency and contract management- and design-related causes. Furthermore, project initiation and contractor selection mitigation measures positively affect claim management-, efficiency and contract management-, estimation and scheduling-, and design-related causes. These findings will help policymakers make informed decisions in selecting effective mitigation measures to reduce cost overrun and improve industry efficiency.

Reducing cost overruns through data-driven methods used in uncertainty analyses

This article focuses on how data from completed projects can be applied to uncertainty analysis. Cost estimates and risk assessments in public construction projects rely on expert opinions and, by little extent, historical figures. By analysing the relationship between project features and budget deviation through statistical methods, we find that total area and estimated square meter price is significantly negatively correlated to cost overruns. Smaller projects tend to have higher cost overruns than larger ones. We argue that cost risk analyses can be improved by such insight.

A bibliometric review of the statistical modelling techniques for cost estimation of infrastructure projects

PurposeCost overrun in infrastructure projects is a constant concern, with a need for a proper solution. The current estimation practice needs improvement to reduce cost overruns. This study aimed to find possible statistical modelling techniques that could be used to develop cost models to produce more reliable cost estimates.Design/methodology/approachA bibliographic literature review was conducted using a two-stage selection method to compile the relevant publications from Scopus. Then, Visualisation of Similarities (VOS)-Viewer was used to develop the visualisation maps for co-occurrence keyword analysis and yearly trends in research topics.FindingsThe study found seven primary techniques used as cost models in construction projects: regression analysis (RA), artificial neural network (ANN), case-based reasoning (CBR), fuzzy logic, Monte-Carlo simulation (MCS), support vector machine (SVM) and reference class forecasting (RCF). RA, ANN and CBR were the most researched techniques. Furthermore, it was observed that the model's performance could be improved by combining two or more techniques into one model.Research limitations/implicationsThe research was limited to the findings from the bibliometric literature review.Practical implicationsThe findings provided an assessment of statistical techniques that the industry can adopt to improve the traditional estimation practice of infrastructure projects.Originality/valueThis study mapped the research carried out on cost-modelling techniques and analysed the trends. It also reviewed the performance of the models developed for infrastructure projects. The findings could be used to further research to develop more reliable cost models using statistical modelling techniques with better performance.

The potential of new models of construction procurement to counter cost overruns in construction projects: an exploratory study from a contractors’ perspective

PurposeCost overrun is a significant issue in construction, an undesirable feature the industry has long been associated with. Poor procurement practices are often blamed for subsequent cost overruns in construction, especially with conventional procurement methods leading to outrageous cost overruns. The purpose of this study is to review the features of the new models of construction procurement (NMCP) and assess their potential to reduce cost overruns in construction projects.Design/methodology/approachA literature review was conducted to identify the issues of procurement leading to cost escalations. Primary data were obtained through exploratory, semi-structured interviews using a case study approach.FindingsClients’ lack of knowledge was highlighted as a key issue in procurement that interlinks with many factors causing cost escalation. The findings suggest that the features contained within the NMCP, such as early contractor involvement and collaboration throughout the project team, have the potential to make a positive contribution to addressing cost escalation in construction.Research limitations/implicationsThe primary research was undertaken as an exploratory study and presents the contractor's perspective. Further research is therefore suggested, with multiple organisations representing all key stakeholders in a construction project, including clients, consultants, sub-contractors and suppliers.Practical implicationsThe study recommends awareness of the NMCP be raised throughout the industry, and simplified information must be made available to help widen uptake of these contemporary procurement methods.Originality/valueAddressing the dearth of research concerning the use of NMCP within the industry, this study makes a niche contribution to the body of knowledge on construction cost management by illustrating the potential offered by these new procurement methods for addressing cost escalation. For an industry where collaboration is accepted with reservations, this case study demonstrates how novel collaborative strategies such as open book costing, project bank accounts and shared pain and gain mechanisms can be implemented as part of the procurement strategy and how such strategies can contribute towards minimising the cost escalation inherent in construction projects.

LEAN SIX SIGMA METHODOLOGY TO REDUCE EXCESS WASTAGE IN A BRICKYARD: A CASE STUDY

Peruvian companies’ craft brick stands currently experience significant growth in sales. Thus brickyards seek to reduce the amount of waste to increase productivity and reduce cost overruns. In this study, the problem that has the greatest economic impact on a brick company is the excessive amount of waste. For this reason, the implementation of a model based on the Lean Six Sigma (LSS) methodology is proposed, applying Poka Yoke, Jidoka, Standardised Work, and Just in Time in order to reduce the number of defective bricks and cost overruns. The research project focused on the tambourine brick, the type whose percentage of generated waste is the highest in the production batch. To do this, the current situation was analysed; the main causes of the problem were identified and measured; and then Lean Six Sigma tools were used to attack the root cause. Finally, the proposed design reduced overheated bricks by 2.36%, wet bricks by 2.01%, and poorly stacked bricks by 1.8%, obtaining a 6.92% reduction in shrinkage and increasing the level of Six Sigma to 3.9, which contributed to the reduction of losses in the brickyard. Keywords: Lean Six Sigma, Poka Yoke, Jidoka, Standardized Work, brickyard, waste

Analysis of Construction Project Cost Overrun by Statistical Method

Abstract: Most of the construction projects suffer from cost overruns due to a multiplicity of factors. The present work is carried out on studying significant factors causing cost overruns in construction projects. A questionnaire for the survey has been prepared by Authors based on 45 common factors for cost overruns identified from literature review and discussion with experts. These factors are related with Owner, Contractor, Consultant, and Management, Material, Equipment, Labor and External. The cost overrun methodology presented in this study gives statistical method which is used in construction sector for computing impact of project cost overruns. The finding of the paper will help the project manager to act on critical causes and further try to reduce cost overrun of project. Keywords: Construction projects, Factors of cost overrun, Relative important index

Construction audit-an essential project control function

Construction projects are known to overrun their budgets and schedules, poor quality of works, wastages, loss of value and experiences increase in financial frauds. Construction audit is a critical tool for the control and monitoring of frauds and other corrupt practices. The failure of construction organisations to recognise how critical auditing and its practices are in the management of construction projects have been blamed for the poor project performance outcome.  The purpose of this study is to assess the benefits of construction audits to establish that it is a useful tool in controlling projects. Data were gathered from experts in consulting and contracting organizations using the well-structured questionnaire and purposive sampling technique in Port Harcourt, River State, Nigeria. With reliability of above 0.90, the collected data were analysed using frequency, percentage, mean score, and Mann-Whitney U test. It was found that the eve of use of auditing is high and it is recognised as a significant project control tool.  The main benefits of audit application in construction are; to reduce cost overrun, financial probity and accountability, aid in the recovery of cost to promote cost savings, to protect the clients from avoidable and unnecessary claims from contractors, and ensure that projects are delivered in accordance with the project contract provision. Auditing should be encouraged in the delivery of private and public projects to ensure that value for money is achieved and losses reduced.

Building Schedule Risks Simulation by Using BIM with Monte Carlo Technique

Risk management in construction projects has great importance through its impact on the basic objectives of the construction projects, as controlling the risks of the construction projects helps reduce cost overruns and time overruns and improve the quality of the construction projects. This paper aims to highlight the role of BIM in risk management in construction projects by generating a predictive risk model using Monte Carlo simulation to analyze a number of risks and generating a 3D model and 4D model to show the effect of risks. The predictive risk model can help project managers control the risks that affect the construction projects and enhance communication between all stakeholders for the project. The methodology was applied to two risk scenarios, the optimistic scenario for risks, and the pessimistic scenario for risks in one of the construction projects in Iraqi through the use of four commercial programs working together. The study concluded that the building information modeling technique has great importance in reducing the risks affecting the construction project by showing the effect of these risks during the project’s construction phases and controlling them.

Impact of Procurement Methods and Procurement Requirements on Cost Over-run of Public Building Projects in Uganda

Cost over-run in building projects is endemic and routinely increases construction cost to as high as 52% of contract sums in Uganda. The consequence of this is underachievement of investment objectives due to additional costs to complete projects. This research investigated how procurement requirements and procurement methods combine to determine cost over-run of building projects. Procurement requirements of bid time, performance bond, insurance, workload and experience of contractors were investigated within contexts of procurement methods of open domestic bidding, restricted domestic bidding, open international bidding, restricted international bidding and requests for quotations. Purposive and snow-ball sampling were used in identifying construction professionals, consultants and contractors of building projects with cost over-runs. Correlation and independence of procurement requirements on 37 cost over-run datasets were analysed by Spearman's bivariate correlation co-efficient at 5% level of significance and variable inflationary factor of less than 5 respectively. Bid time and performance bond were found to reduce cost over-run of building projects most followed by workload and experience. Insurance increased cost over-run marginally. The novel contribution of this research is a model that explains 63% of cost over-run with 9% margin of error. The variants of the model for each procurement method are presented

Comparison of toll and annuity PPPs: a case study of highway projects in India

PurposeThe use of public–private partnership (PPP) approaches for developing infrastructure has been well recognized. The allocation of risk between public authority and private sector differs among the different types of PPP projects. The objective of the paper is to analyze the factors that influence the type of PPP and the performance of different types of PPP contracts.Design/methodology/approachA unique data set of 202 national highway PPP projects from India, comprising 154 toll and 48 annuity projects formed the basis of the study.FindingsThere are significant differences between toll and annuity PPP projects. The former are longer, are implemented in better developed states but are also characterized by higher cost over-runs. The latter are characterized by higher debt–equity ratio.Practical implicationsMitigating revenue risk can significantly enhance the debt capacity of the projects, thereby reducing the overall cost of capital. To make toll roads attractive for bidders, they have to be developed as longer stretches. Toll projects that are immediately ready for development at the time of award would reduce cost overruns of toll projects and sustain the interest of private developers.Originality/valueComparison of toll and annuity PPP road projects has never been done previously. The unique data set used in this study highlights the differences in characterization and performance for both the project types. The study provides evidence support to “intuition” and enables policymakers to choose the right form of PPP to realize their objectives.

The effectiveness of using virtual reality to meet clients’ needs

Clients’ dissatisfaction in the construction industry has become a challenge and this paper seeks to present findings on the effectiveness of virtual reality (VR) in the 4th Industrial Revolution (4IR) to ameliorate this challenge. Quantitative data was collected, sorted, analyzed and presented descriptively. The population sample was limited to the professionals in the built environment in Port Elizabeth and East London. The study identified that the use of virtual reality in the construction industry can facilitate the capture of clients’ requirements hence meeting their needs and reducing cost overruns and time extension. The study further provides information towards the ameliorating the challenge and menace of time and cost overruns in the construction sector. The research paper identifies VR as a tool and innovative use of technology in the built industry.

Assessment of the mitigating measures for cost overruns in the South African construction industry

This study investigated the causes of cost overruns and cost management methods to minimize cost overruns in the South African construction industry. The methodology used is a quantitative approach. Closed-ended and open-ended survey questions were used to gather data from 130 construction professionals, of which, 74 completed questionnaires were returned. The data received were analyzed by making use of both a computer programme called Statistical Package for Social Sciences (SPSS) and a content analysis method. The findings from the study revealed that the most common and significant causes of cost overruns were changes in the scope of work, decision making, planning, the inadequate experience of contractors, an increment of material prices, provision of weather conditions, unskilled labour, late design and lack of coordination. The findings also indicate the effects of cost overruns as disputes claims, extension of time, reduced profit to the contractor, and bad public relations. The study has identified cost management methods that can reduce cost overruns in the South African construction industry as effective planning, accurate estimate, tracking status of the project, use of scheduling tools, an inspection of works, communication, site meetings, proper methods of construction and evaluation of work completed. This study, therefore, suggests that all construction professionals must be equipped with factors of cost overruns in order to implement the correct measures to minimise cost overruns.

A system of key indicators enabling the forecasting of changes in the capital costs of a construction project

Introduction. Reduction of project cost overruns is a key objective of Russian production facilities against the background of tightening domestic and international market competition, a spike in the number of projects implemented within the framework of the investment programme, including large strategic investment projects, scarcity and high costs of sources of financing. The mission of this research is to offer an approach to the development of a system of key risk indicators of an construction project that will allow the management team to make decisions ahead of the occurrence of risk-bearing events to reduce cost overruns and to stay within the pre-set budget values in terms of capital costs of a project.
 Materials and methods. The co-authors have analyzed currently used approaches, instruments and methods, applicable to the development of the system of key project indicators, and classified project risks using the Ishikawa diagram. Their approach encompasses instruments and methods of the risk theory (identification and assessment of risks and key project indicators), as well as instruments of the regression correlation analysis.
 Results. The co-authors present an algorithm for the development of a system of key risk indicators and an approach to the listing of key project indicators broken down by project significance criteria.
 Conclusions. The application of the proposed approach to highly significant projects will ensure a detailed project-specific listing of key project indicators applicable to monitor the project implementation. A standard set of instruments and methods, requiring minimal human resources and time, can be applied to other projects. Besides the new approach, the co-authors offer a description of a list of potential key project indicators that enable to forecast changes in capital costs, broken down by risk factors.

Critical Risks to Construction Cost Estimation

Abstract The prevalence of cost overrun in project delivery suggests an acute dearth of inclusive understanding of the effect of risks on construction cost estimation. In aberrant to the generic assumptions, customary to inquiries in construction risk researches, this paper appraised critical construction estimating risks. The study evaluated the sources, frequency and significance of construction estimating risks, using data from a questionnaire survey of 206 quantity surveyors in Nigeria. The data were analysed using factor analysis, Fussy Set Theory, Terrell Transformation Index (TTI), and Kruskal Wallis H tests. The results showed that estimating risks are correlate seven principal sources, namely: estimating resources, construction knowledge, design information, economic condition, the expertise of estimator, geographic factor, cost data, and project factors (λ, > 0.70 <1.0). Twenty-nine risk factors likewise emerged critical construction estimation risks (TTI, 69-87 > 65 percent) and the top three were low construction knowledge, inaccurate cost information and changes in government regulations (factor scores > 0.60 > 0.50). The awareness and accurate assessment of these risks into project cost estimation would reduce cost overrun. The study, therefore, recommends synergies between projects’ internal/ external environments for proper scoping of these risks into project estimates.

An Approach Based on Bayesian Network for Improving Project Management Maturity: An Application to Reduce Cost Overrun Risks in Engineering Projects

The project management field has the imperative to increase the success probability of projects. Experts have developed several Project Management Maturity (PMM) models to assess project management practices and improve the project outcome. However, the current literature lacks models that allow experts to correlate the measured maturity with the expected probability of success. The present paper develops a general framework and a method to estimate the impact of PMM on project performance. It uses Bayesian networks to formalize project management experts’ knowledge and to extract knowledge from a database of past projects. An industrial case concerning large projects in the oil and gas industry is used to illustrate the application of the method to reduce the risk of project cost (or budget) overruns.

Re-estimating software effort using prior phase efforts and data mining techniques

Software effort estimation has played an important role in software project management. An accurate estimation helps reduce cost overrun and the eventual project failure. Unfortunately, many existing estimation techniques rely on the total project effort which is often determined from the project life cycle. As the project moves on, the course of action deviates from what originally has planned, despite close monitoring and control. This leads to re-estimating software effort so as to improve project operating costs and budgeting. Recent research endeavors attempt to explore phase level estimation that uses known information from prior development phases to predict effort of the next phase by using different learning techniques. This study aims to investigate the influence of preprocessing in prior phases on learning techniques to re-estimate the effort of next phase. The proposed re-estimation approach preprocesses prior phase effort by means of statistical techniques to select a set of input features for learning which in turn are exploited to generate the estimation models. These models are then used to re-estimate next phase effort by using four processing steps, namely data transformation, outlier detection, feature selection, and learning. An empirical study is conducted on 440 estimation models being generated from combinations of techniques on 5 data transformation, 5 outlier detection, 5 feature selection, and 5 learning techniques. The experimental results show that suitable preprocessing is significantly useful for building proper learning techniques to boosting re-estimation accuracy. However, there is no one learning technique that can outperform other techniques over all phases. The proposed re-estimation approach yields more accurate estimation than proportion-based estimation approach. It is envisioned that the proposed re-estimation approach can facilitate researchers and project managers on re-estimating software effort so as to finish the project on time and within the allotted budget.

Socioeconomic impact assessment of highly dense-urban construction projects

Abstract Dense-urban construction is reported to affect the social and economic welfare of surrounding residents and local businesses in various ways. However, research studies and practical methodologies aimed at assessing to what extent the choice of a construction plan that reduces such effect are very limited. The objective of this paper is to present the development of an automated assessment methodology to fill this research gap. To this end, two formulations are presented; one based on multi-attributed utility functions and the other based on monetary compensations for disruptions caused by construction operations. Both formulations assess the impacts of construction plans on (1) increased travel distance; (2) residents' relocation; (3) business loss; (4) business closure; and (5) noise inconvenience. The proposed automated methodology is implemented in five sequential phases and utilizes Geographical Information Systems (GIS) and Visual Basic Application (VBA). Using the proposed implementation, the two alternative formulations are applied to an infrastructure upgrading project in Cairo, Egypt that had five possible construction scenarios. While the two formulations resulted in the same preference order for the five scenarios, they exhibited different performance in terms of their (1) assessment relative values; (2) required input data and robustness; (3) ease of results interpretation; and (4) comprehensiveness and scalability. The developed framework shows promising results in terms of identifying and sorting the major root causes of the socioeconomic disruptions caused by dense urban construction. Results show that using the proposed methodology informs decision-making and planning at the early stages of a project, which in turn helps to reduce cost overruns and schedule delays.

CHOOSING AN APPROPRIATE CONTINGENCY SUM ESTIMATING METHODS FOR HIGHWAY CONSTRUCTION PROJECTS IN NIGERIA: A LITERATURE REVIEW

In order to establish a gap to be filled in a particular field, there is a need to gather information that allows the researcher to identify and analyse the current state of researches on the topic. Contingency sum estimation for projects plays an important role for inclusion for risk taken by the contractor on the bid amount. This is good in order to meet project objectives (cost, time, quality, health and safety, and environment). The main function of contingency sum is to cater forvariations that arise during the construction phase of projects. The aim of the study is to identifying and examine the various methods for estimating contingency sum for projects with a view to propose an appropriate method which will be suitable for a specific project in order to increase accuracy and reduce cost overrun. A literature review of selected papers (journals, conference proceedings and theses) on contingency estimation was carried out. The major findings from this study is that most studies were carried out on building projects while few were carried out on highway projects. From the analysis carried out, no single method of estimating has been effective for all types of projects. These methods of estimating contingency sums have developed over the years as a result of shortcomings of one method after the other. It is therefore recommended that peculiarity of each project, ease of using each of the methods and accuracy of the estimates needed should be the basis of choosing method of estimating contingency sum.

CHOOSING AN APPROPRIATE CONTINGENCY SUM ESTIMATING METHODS FOR HIGHWAY CONSTRUCTION PROJECTS IN NIGERIA: A LITERATURE REVIEW

In order to establish a gap to be filled in a particular field, there is a need to gather information that allows the researcher to identify and analyse the current state of researches on the topic. Contingency sum estimation for projects plays an important role for inclusion for risk taken by the contractor on the bid amount. This is good in order to meet project objectives (cost, time, quality, health and safety, and environment). The main function of contingency sum is to cater forvariations that arise during the construction phase of projects. The aim of the study is to identifying and examine the various methods for estimating contingency sum for projects with a view to propose an appropriate method which will be suitable for a specific project in order to increase accuracy and reduce cost overrun. A literature review of selected papers (journals, conference proceedings and theses) on contingency estimation was carried out. The major findings from this study is that most studies were carried out on building projects while few were carried out on highway projects. From the analysis carried out, no single method of estimating has been effective for all types of projects. These methods of estimating contingency sums have developed over the years as a result of shortcomings of one method after the other. It is therefore recommended that peculiarity of each project, ease of using each of the methods and accuracy of the estimates needed should be the basis of choosing method of estimating contingency sum.