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Identifying Construction Resource

Factors Affecting Construction Cost:
Case of johor
Aftab Hameed Memon

Malaysian Technical Universities International Conference on Engineering & Technology (MUiCET

2011)

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 Malaysian Technical Universities International Conference on Engineering & Technology (MUiCET 2011)

Identifying Construction Resource Factors

Affecting Construction Cost: Case of Johor
Aftab Hameed Memon*, Ismail Abdul Rahman, Ade Asmi Abdul Aziz, Kumarason V. Ravish, and
Noor Ikmalah Mohammad Hanas
Faculty of Civil and Environmental Engineering,
Universiti Tun Hussein Onn Malaysia, 86400 Parit Raja, Batu Pahat, Johor, Malaysia

*Corresponding e-mail: aftabm78@hotmail.com

Abstract
The success of any construction project highly depends on proper and effective management of construction
resources flow. Studies show various resources factors that affect the cost management resulting in significant
amount of cost overrun. This study focuses on the significant resource factors causing construction cost overrun
in the state of Johor. Data collection was carried out through a structured questionnaire survey consisting of 16
factors identified through a comprehensive literature review. Data was analyzed with statistical software package
SPSS. It was found that average cost overrun for this study is in the range of 10% to 15% of the project cost. The
Cronbach's alpha of the data was 0.910 which means that the data collected was highly reliable. The factors were
ranked through mean rank calculation and it was found that fluctuation of prices of materials, cash flow and
financial difficulties faced by contractors and shortages of materials were the significant factors affecting
construction cost overrun. Insufficient numbers of equipment, relationship between management and labour, and
labour absenteeism were found as factors of least significance causing cost overrun. The result of Spearman test
indicates that cash flow and financial difficulties faced by contractors, and financial difficulties of owner
correlates with each other at a significant value of 0.752. Furthermore, equipment availability and failure, and
insufficient numbers of equipment are correlated with the value of correlation 0.703. Similarly, shortage of site
workers, financial difficulties of owner, and cash flow and financial difficulties faced by contractors are inter-
correlated significantly between them.

Keywords: Construction management, construction resource factor, cost overrun, Johor

budget to perform its vital function. The necessity of

1. INTRODUCTION
Money is always of special importance to those
involved in construction project. Hence, completion of
any project within the estimated cost of project is the
basic criteria for success of any project. The success of
any project highly depends on adequate availability
and efficient management of various resources. Hence,
prior and adequate arrangement for provision of
resource involved in construction such as type and
quantity of material, manpower, machines and finance
are required at each stage of construction. There are
various factors that cause failing resources
management. More common, the importance of
resource management is not considered properly in the
conceptual and planning phases of a construction
project which results in construction cost overrun.
Therefore, this leads to the project having inadequate
proper budgeting for a project, an explanation of
resource management, and the economic benefits that
would accrue to the project are addressed. In order to
control cost, equipment and labour should be utilized
in the most efficient way possible.
Managing resources in the framework of civil
engineering construction sector is usually an extremely
complex task. Factors contribute to this complexity
include the variety and great number of existing
resources of both human and material, the diversity of
tasks that each working unit is able to execute, the
performance of each working unit, the involved costs,
and the spatial distribution of all resources over the
different places, leading to the need for displacement
from one site to another. All these important factors
imply a high number of variables, resulting in a
somewhat difficult optimization process. The basic
 Malaysian Technical Universities International Conference on Engineering & Technology (MUiCET 2011)
objective of resource management is to supply and
support the project so that established time objectives
can be met and costs can be kept within the project
budget [1].
In Malaysia, many projects are facing cost overrun.
One of the main causes of cost overrun is ineffective
resource managements. There are various resource
related factors which lead to failure of resource
management resulting in construction cost overrun.
Hence, this study is aimed at investigating construction
resources-related factors that cause construction cost
overrun in Malaysian construction industry. However,
the scope of this paper is limited to investigations in
Johor state only.
2. RELATED WORKS
Completion of any project within the estimated cost
is the basic criteria for the success of any construction
project. Primary target of practitioners involved in
construction projects is to complete the project within
budgeted cost regardless of size and complexity of
project. However, completion of any project highly
depends on the construction resources. Project
resources provide the means for accomplishing the
work objectives [2]. Construction resources
management is the most important factor contributing
to cost success [3].
Construction resources management has a high and
significant relationship with cost performance for
successful projects [3]. As cited by [4] in a
multiannual research conducted in Croatia from 1996
till 1998 as part of the scientific project Construction
Project Risk and Resource Management, the
occurrence of price overrun was observed in no less
than 81% of the projects. Previous studies reveal that
there are various construction resource related factors
which significantly influence construction cost. Ref [5]
found that increment of construction materials prices
due to continuous border closures, delay in
construction and supply of raw materials and
equipment by contractors, fluctuations in the cost of
building materials, and resources constraint of funds
and the associated auxiliaries not ready, were among
the top ten factors affecting construction cost.
Financial difficulties of owner and contractor were
ranked as the first problems affecting construction cost
in Vietnam [6]. If the contractor can minimize
problems such as inefficient use and lack of
construction equipment and shortage of quality
material, the construction budget can be reduced [3].
In any project, various types of resources are
essentially required be managed for the success of the
project. The most important resources for any
construction project are:
1. Machines or Equipment Resources: This type of
resource has an advantage over manpower resource
as it can work under adverse circumstances
continuously, requires less manpower and other
facilities. The selection and utilization of equipment
in a project must be an integral part of the total
plan. The type and number of the equipments
required in any project depends on the nature of the
project. It affects significantly on construction cost.
2. Manpower Resource: For any project, manpower
resource or human labour are as significant as
financial resources and that efficient use of
manpower is critical for success. Good results
certainly cannot be achieved without the adequate
availability of skilled and unskilled manpower,
most suitable allocation and management of human
or manpower resource. Expected construction
progress can be achieved only through the
attainment of effective man-hour effort and the
meeting of scheduled mile stone dates. Effective
manpower management can reduce labour costs
and thereby increase profits for company.
3. Material Resource: Materials are the essence in
the construction industry. Material resource
represents a substantial proportion of the total value
of the project. A material management system
includes the major functions needed in construction
project, i.e. identifying, acquiring, storing,
distributing and disposing of materials. Material
planning may vary, depending on the project size,
location, cash flow requirements, and procedure for
purchasing and inspection. Regular supply of the
material in proper quantity must be ensured. It is
extremely important because late or irregular
delivery or wrong type of material delivered during
construction are major factors that contribute to the
delay of a project. Also the effective utilization of
manpower can be greatly enhanced by ensuring
proper and sufficient availability of material.
4. Money: Financial management is the use of
financial or accounting information at all levels to
assist in planning, making decisions and controlling
the activities of an enterprise [7]. Money has great
importance in the construction industry. It is the
first and foremost resource or item required for any
construction work. The design and specifications of
a project depend upon it, and without sufficient
fund, any project cannot be completed. Cash flow
affects the progress of construction. A project
cannot be completed in the absence of fund and it
will be entirely wastage of time and energy in
designing the project. Therefore, it is absolutely
 Malaysian Technical Universities International Conference on Engineering & Technology (MUiCET 2011)
necessary to manage the fund of a project. Without
proper management of the money or finance, the
management of other resource becomes useless.
Resources are organizational assets. Resource
planning should take into consideration not only
what is best for an individual project, but also what
is best for the organization as whole. Effective
resource planning is also important when
considering the impact of changes on the project
schedule [1]. Unanticipated overtime, schedule
delays, and the resulting cost overruns can all be
symptomatic of ineffective resource management.
Based on previous studies, the most frequent and
important factors related to construction resource which
affect construction cost were identified. A total of 16
factors were identified [5], [6], and [8]-[17]. The
factors were grouped in four categories, i.e. material,
manpower, machinery and money as shown in Table 1.
Table 1: Factors causing construction cost overrun
Category Resources-related factor
Fluctuation of prices of materials
Shortages of materials
Material
Changes in material specification and type
Delay in delivery of materials
High cost of labour
Relationship between management and
labour
Manpower Labour productivity
Labour absenteeism
Shortage of site workers
Financial difficulties of owner
Cash flow and financial difficulties faced
Money by contractors
Mode of financing, bonds and payments
Poor financial control on site
Equipment availability and failure
accepted reliability is when Cronbach  is greater than
0.3. If  is greater than 0.7, the collected data is
considered as highly reliable [18], [19].
3.2 Ranking Study
A five point Likert-scale of 1 to 5 was adopted to
assess the likelihood of each of the identified factor in
causing construction cost overrun, where scales of 1 =
extremely significant, 2 = most significant, 3 =
moderately significant, 4 = significant, and 5 = not
significant. The studied factors were ranked based on
the mean rank score. Lower mean rank score
represents the higher the ranking is. The equation used
to compute for the mean rank is
nR
MR (1)
M max
where, MR is mean rank, R is individual mean rank of
cause, Rmax is the maximum individual mean rank of
cause, and n is the number of causes. The
determination of the significance of the causes is based
on the mean rank score.
3.3 Correlation
The strength of associations of pairs of variables
understudy was determined by correlation
relationships. The 3 commonly used methods for
ascertaining the strength of association between 2
variables is the Pearson correlation method, the
Spearman rank correlation method and the Chi square
test of independence method.
As data collected in this study is non-parametric and
ordinal variables, the powerful method of examining
the relationship between pairs of variables is by using
Spearman’s rank order correlation [20]. Spearman’s
formula is given as
6¦ d 2
U 1 (2)
Insufficient number of equipments
Machinery
Increase cost of machinery and its
maintenance
3. METHODS
Data was collected through a structured
questionnaire survey carried out among the personnel
involved in construction industry. The survey was
conducted in Johor state of Malaysia. It was carried out
physically with the respondents. A total of 53
responses were collected.
3.1 Reliability Test
A reliability test was performed on the collected data
to determine its degree of consistency. The Cronbach 
coefficient is computed for data consistency. The
nn 2  1
where, d is the difference between ranks and n is the
highest weight.
The correlation coefficient  ranges from 1.0 to
+1.0. The closer  is to +1 or 1, the more closely the
two variables are related. The value of  close to 1
implies there is strong positive linear relationship
between the two variables while the value of  close to
1 shows a strong negative linear relationship between
the two variables [21]. Ideally, the correlation
coefficient value of ± 1 is said to be a perfect
correlation. If the correlation coefficient value lies
between ± 0.5 and ± 1, it is said to have a high degree
of correlation. For correlation coefficient value
between ± 0.3 and ± 0.5, the degree of correlation is
 Malaysian Technical Universities International Conference on Engineering & Technology (MUiCET 2011)

moderate. Low degree of correlation occurs when the 4.2 Extent of Cost Overrun
correlation coefficient lies between ± 0.1 and ± 0.3. Respondents were asked about the extent of cost
Meanwhile, zero coefficient value represents no overrun compared to the contracted cost of the various
correlation at all [22]. projects they have handled. The results are presented
in Fig. 1.
4. RESULTS AND DISCUSSION
The respondents involved in the survey have had
several years of experience in handling various types
of projects. The demographic of the respondents
participated in survey are summarized in Table 2.
Table 2 indicates that majority of the respondents,
i.e. 43 out of 53, or 81.1% of the respondents had
experienced handling large construction projects, i.e.
project with contract exceeding RM 5 million [23].
52.8% of the respondents experienced in handling
building projects, 26.4% respondents experienced in
handling infrastructure project, and 20.8% respondents
were involved in both building and infrastructure
projects.

Table 2: Demographic of respondents Fig. 1 Extent of cost overrun

Cumulative
Aspects Frequency Percent Figure 1 shows that majority of the respondents
Percent
Type of agreed that cost overrun in construction projects is a
Organization common issue. Only 15.09% respondents mentioned
Client 8 15.1 15.1 that the projects were executed within the estimated
Consultant 11 20.8 35.9 cost. A significant number of respondents (37.74%)
Contractor 34 64.1 100 mentioned that cost overrun ranges from 1% to 5% of
Type of Project contracted cost followed by 5-10% cost overrun
Building 28 26.4 26.4 responded by 28.30%. However, 11.32% respondents
Infrastructure 11 52.8 79.2 mentioned that cost overrun was above 15% of
Build-Infra 14 20.8 100 contracted cost and only 7.55% responses show that
cost overrun ranging from 10% to 15%.
Size of Project
(RM) 4.3 Ranking of Resource Related Factors
< 5 Million 10 18.9 18.9 In ranking analysis, the SPSS 17 software was used
5 – 10 Million 10 18.9 37.8
to compute the mean rank of the resource related
10 – 50 Million 22 41.5 79.3
11 factors causing construction cost overrun. The results
> 50 Million 20.7 100
of the analysis are given in Table 4.
Table 4 shows that fluctuation of prices of materials
4.1 Reliability Test
is an extremely significant factor affecting
Data from each category of questionnaire were construction cost. Fluctuation of material cost can be
analyzed for its Cronbach D value. This was to ensure caused by various factors. Monopoly of suppliers
that the data collected are valid and reliable for further could be one of main reasons of fluctuation of prices.
analysis. Table 3 shows high values of Cronbach D in Unavailability of construction materials locally can
each category of the questionnaire data. The alpha also affects the cost of material. However, [5] ranked
values are in the range of 0.736 to 0.883. This range is fluctuation of material prices as the fourth most
considered high. Thus, the reliability of the important factors affecting construction cost in Gaza.
questionnaire is assured. Certainly, this indicates that Second most significant factor is cash flow and
the questionnaire data are valid and reliable. financial difficulties faced by contractors. This factor
has been found to be the most significant in large
Table 3: Reliability test results
MARA construction projects [9]. Financial difficulties
Category of data Cronbach D
Material 0.736
faced by contractor were ranked as the fourth major
Manpower 0.745 factor causing cost overrun in Vietnam construction
Money 0.883 industry [6]. In a study of Ghana, this factor was rated
Machinery 0.760 as 5th major factor causing cost overrun [15].
 Malaysian Technical Universities International Conference on Engineering & Technology (MUiCET 2011)

Table 4: Rank analysis results Table 4 is the shortages of materials. However,

Mean previous studies have shown that this factor is
Attribute Rank Category
rank
Fluctuation of prices of
moderately important factor affecting construction cost.
5.05 1 Material Ref [14] in the study of cost escalation in Nigeria
materials
Cash flow and financial found that shortage of material was ranked as sixth
difficulties faced by 6.71 2 Money significant factor. While, in Vietnamese construction
contractors projects, practitioners have ranked this factor as the 9th
Shortages of materials 7.08 3 Material most significant [6]. In Ghana, this factor was the 15th
Shortage of site workers 7.51 4 Manpower significant cause affecting construction cost [15].
Financial difficulties of owner 7.88 5 Money 4.4 Relationship Between Factors
Mode of financing, bonds and
payments
7.89 6 Money Relation between pairs of variables was examined
Changes in Material by using Spearman’s rank order correlation [20]. The
8.24 7 Material
Specification and type correlation analysis of the factors is shown in Table 5.
Poor financial control on site 8.33 8 Money Based on Table 5, cash flow and financial
labour productivity 8.46 9 Manpower difficulties faced by contractors, and financial
difficulties of owner correlate to each other at a
Late delivery of materials 8.46 10 Material
significant value of 0.752. Also, equipment availability
High cost of labour 9.31 11 Manpower and failure, and insufficient numbers of equipment are
High cost of machinery and correlated at the value of correlation 0.703. Similarly,
9.37 12 Machinery
its maintenance
Equipment availability and
shortage of site workers, financial difficulties of owner,
10.08 13 Machinery and cash flow and financial difficulties faced by
failure
Labour Absenteeism 10.18 14 Manpower contractors are inter-correlated significantly between
Relationship between them as shown in Fig. 2. Also, there is significant
10.73 15 Manpower
management and labour correlation between poor financial control on site,
Insufficient Numbers of
10.74 16 Machinery financial difficulties of owner, cash flow and financial
equipment difficulties of owner, and mode of financing.
Summary of correlation of effect of delay is shown in
The third most significant factor as indicated in Table 6.

Table 5: Correlation between construction resources related factors causing cost overrun
 Malaysian Technical Universities International Conference on Engineering & Technology (MUiCET 2011)

Cash flow & financial

difficulties faced by contractors

Shortage of site
workers

Financial difficulties of owner

(a)
Cash flow & Financial difficulties
financial difficulties of owner
Equipment availability &
faced by contractors
failure

(c)

Insufficient Numbers of
equipment

(b)
Fig. 2 Relationship between factors causing cost overrun

Table 6: Summary of correlation between resource factors

Variable
Shortages of materials
Financial difficulties of owner
Labour productivity
High degree of correlation
9 Fluctuation of prices of materials
9 Cash flow and financial difficulties
faced by contractors
9 Labour productivity
9 Poor financial control on site
9 Shortage of site workers
9 Financial difficulties of owner
Moderate degree of correlation
9 Shortage of site workers
9 Shortage of site workers
9 Mode of financing, bonds and payments
9 Cash flow and financial difficulties faced
by contractors
9 Mode of financing, bonds and payments

5. CONCLUSION Financial problems of contractors also influence

The findings of the study carried out to identify
the problems of cost overrun and effect of resource
related factors on cost overrun in the state of Johor,
Malaysia are summarized as follows:
a) About 85% of the respondents agreed that most
construction projects face cost overrun problem.
b) About 11.32% projects face cost overrun above
15%, where the normal range of cost overrun is
between 0 and 15%.
c) Fluctuation of prices of materials, cash flow and
financial difficulties faced by contractors and
shortages of materials were found as most
significant factors causing cost overrun.
d) Cash flow and financial difficulties faced by
contractor has strong correlation with the
financial difficulties of owner.
e) Shortage of site workers, financial difficulties of
owner, and cash flow and financial difficulties
faced by contractors are significantly inter-
correlated between each other.
The financial problem faced by the owner and
contractor was the most critical issue in construction
projects. This often leads to construction delay, and
subsequently cost overrun.
the procurements of material and arrangement of
adequate number of material and equipment. This
affects labour productivity. Resolving this issue
plays an important role in achieving successful
projects.
ACKNOWLEDGMENT
The authors would like to thank Universiti Tun
Hussein Onn Malaysia for supporting this study.
Also, we are thankful to construction practitioners
for providing comprehensive and important
information, and a lot of cooperation which made
data collection easier.
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