Abstract:
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. Despite its proven importance it is not uncommon to see a construction project failing to achieve its objectives within the specified cost. Cost overrun is a very frequent phenomenon and is almost associated with nearly all projects in the construction industry. This trend is more severe in developing countries where these overruns sometimes exceed 100% of the anticipated cost of the project. In Pakistan, construction sector is an important sector although not working to its fullest potential but still of prime significance to the country. Growth in this sector is critical for growth in national income as it is among the largest sectors that generates employment within the country as well as a key driver for economic development of Pakistan. Like many other developing countries, Pakistan is also facing critical project management related issues among which cost overrun is quite prominent. There are several factors that are responsible for these cost overruns. This paper attempts to identify the major cost overrun factors in the construction sector of Pakistan, which can serve as the way forward for future work in coping with these overruns. A thorough literature review was done and also expert opinions from developing countries were taken, through which a number of cost overrun causes were identified in global construction industry scenario. In total forty two (42) factors were short-listed to be made part of the survey questionnaire and the survey was conducted with representatives from local general contracting firms. Results indicated that the majority of cost overrun factors (88%) lie in medium severity impact zone (with a rating between 5 to 7.5 out of 10), signifying that major attention needs to be given to these factors as they collectively cause considerable cost overrun. It is evident from the findings that both internal and external aspects of business setting are present as the prime contributors to cost overruns. The top ten cost overrun factors found were: fluctuation in prices of raw materials, unstable cost of manufactured materials, high cost of machineries, lowest bidding procurement procedures, poor project (site) 500 Management/ poor cost control, delays between design and procurement phases, incorrect/ inappropriate methods of cost estimation, additional work, improper planning, and unsupportive government policies. An additional finding is that medium sized construction firms experience a greater percentage of cost overruns owing to their tendency to assume greater risk for the purpose of business development. Major Recommendations include: stabilizing cost of materials, increasing supply of materials and machinery, more involved cost estimation processes, vigilant project planning, close observance and documentation of cost variation trends in the sector and the country, adoption of alternative procurement strategies such as design-build contracts, and best value procurement.
Page(s):
499-508
DOI:
DOI not available
Published:
Journal: Proceedings of International Conference on Construction in Developing Countries , Volume: 4, Issue: 5, Year: 2008