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Introduction of Cost Overrun
Introduction of Cost Overrun
Introduction of Cost Overrun
Project success can be defined as meeting goals and objectives as prescribed in the
project plan. A successful project means that the project has accomplished its technical
performance, maintained its schedule, and remained within budgetary costs. Project
management tools and techniques play an important role in the effective management of a
project. Therefore, a good project management lies in the management tools and techniques
used to manage the project. Project management involves managing the resources—workers,
machines, money, materials and methods used. Some projects are effectively and efficiently
managed while others are mismanaged, incurring much delay and cost overruns
2.0 DEFINITION
2.2.1 COST
Basically, cost overrun is defined as actual budget is more than the planning budget.
More than that, it is an unexpected cost incurred in excess of a budgeted amount due to an
under-estimation of the actual cost during budgeting.
3.0 OBJECTIVE OF THE PROJECT
The main objective of this study is to understand the practices of construction cost
management in various construction projects in Malaysia.
In construction works, cost always becomes the ‘X-factor’ in deciding the quality of
the works done. However, eventhough the budget of the work is extremely high, but without
a proper project management, the project won’t succeed too. A construction works normally
consist of various workers and equipments, so it need a well organize team to handle all of
these property as well as to ensure the project achieved the goal set up by the owner.
For this section, we interviewed two different people with different construction
background. The reason for conducted two different interviewed is to get the opinions from
various views. The interviewed was conducted with a senior quantity surveyor and a sub-
contractor. The senior quantity surveyor talked for behalf of owners and contract and the sub-
contractor talked behalf of contractors. There are five scale used in the questionnaire.
1 2 3 4 5
From 59 questions, she chose 9 questions as the main factors of cost overrun. They
are as listed below:
Most of these factors lay in contract management issues. Besides that, she also
mentions that this project which is UTHM mosque trapped in this kind of problems due to
interference of the owner. In general, if too much interference comes from the outsider,
obviously it will bring bad effects to the constructions.
At the same time, she also said that a contractor, once they won the tender, they must
work their best to ensure the project run smoothly. No matter how the won the tender, but the
must important thing is do the job seriously. If the management failed, delayed will followed
and this will lead to cost overrun.
Besides that, she also indicated the important of having a good design. If the design
keep changing, this not only brings difficulties to all parties but surely it will add an extra
cost to the budget.
Respondent B (sub-contractor, behalf of contractor)
8.0 RECOMMENDATIONS AND SUGGESTIONS
At the same time, long life learning must also be adapted in both contractors and
workers. They must be familiar with the project management techniques and process. By
doing so, it will lead to effective and efficient performances.
9.0 CONCLUSSION
Cost and construction are always link together. Without a proper cost planning, a
construction will surely get a huge problem. In addition, project planning also played a great
role in deciding the quality of the construction. A good project planning will able to minimize
any unwanted things that might lead to cost overrun .
The most commonly used explanations for cost overruns found in literature are
economical rational behavior, strategic behavior, optimism bias, structure of
the organization, relation between actors and values of actors and their relation to the
environment. The explanations can be grouped in four different categories: technical,
economical, psychological, and political explanations.
10.0 REFERENCES
Surihartati Murni Lestari Sutekno, Senior Quantity Surveyor UTHM, 15 March 2011
Projects: Roads, Rails, Airports, And Ports, Journal Of Urban Planning And Development ©
ASCE.pp 59-62
Chantal C. Cantarelli, Bent Flyvbjerg, Bert van Wee, and Eric J. E. Molin