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Aggregation of Factors Causing Cost Overruns and Time Delays in Large Public Construction Projects Trends and Implications
Aggregation of Factors Causing Cost Overruns and Time Delays in Large Public Construction Projects Trends and Implications
www.emeraldinsight.com/0969-9988.htm
Public
Aggregation of factors causing construction
cost overruns and time delays in projects
Abderisak Adam, Per-Erik Bertil Josephson and Göran Lindahl Received 7 September 2015
Revised 12 January 2016
Department of Construction Management, Chalmers University of Technology, 22 March 2016
Göteborg, Sweden Accepted 11 May 2016
Abstract
Purpose – The purpose of this paper is to explore the impact that cost overruns and time delays exert on
large public construction projects to clarify how past and current research regard factors causing cost
overruns and time delays in large public construction projects.
Design/methodology/approach – This paper, which is based on an analysis of a literature selection
consisting of 40 journal articles, investigates and ranks the occurrence of and the explanations for
cost overruns and time delays in large public construction projects. The study makes use of a kiviat
diagram/radar chart in order to visualize multivariate data.
Findings – Aggregated rankings of important causes of cost overruns and time delays are reported.
These show a strong emphasis on the management aspect as a primary cause of cost overruns and delays.
Additionally, there seems to be a trend toward deemphasizing the role of financial considerations in
explaining cost overruns and delays. It is argued that there needs to be a more rigorous assessment of the
impact that each factor has on cost increases and delays based on factual observed data as opposed to
retrospective accounts from questionnaire respondents.
Research limitations/implications – Only public construction projects have been considered. The results
will not be directly applicable to privately funded construction projects and/or projects of a smaller size.
Originality/value – The use of trend data, as illustrated in a kiviat diagram, showing how different ranking
factors causing cost overruns and time delays has changed in importance over time.
Keywords Project management, Costs, Public sector organizations, Construction management,
Construction operations, Cost estimates
Paper type Research paper
Introduction
The construction industry has been plagued by cost overruns (Akinci and Fischer, 1998).
Unrelenting in its severity, the mere mention of a construction project by media outlets,
especially infrastructure projects of considerable size, has become more or less tantamount
to costs exceeding budget and completion times reaching further than what was set out
initially (Morris, 1990; Raftery, 2003; Siemiatycki, 2009). The public’s perception can hardly
be deemed unwarranted as made evident by the staggering number of projects that go
beyond budgetary limits. According to Baloi and Price (2003), a sizable majority (63 percent)
of 1,778 construction projects funded by the World Bank exceeded their budgets. The case is
further aggravated when it comes to large infrastructure projects such as rail and road
construction. Skamris and Flyvbjerg (1997) report that a large share of such projects exceed
their initial budgets with cost increases of 50-100 percent being commonplace and increases
beyond 100 percent not uncommon. In stating these figures, the authors not only shed light
on the severity of the problem, but also on its global implications. The data upon which the
Engineering, Construction and
study was based had been gathered from a range of different geographical locations, Architectural Management
spanning five continents, 20 countries, both developed and developing nations, from the late Vol. 24 No. 3, 2017
pp. 393-406
1920s to the late 1990s. This shows that the challenge of cost overruns is clearly a global © Emerald Publishing Limited
0969-9988
phenomenon and although there are minor differences depending on the geographical DOI 10.1108/ECAM-09-2015-0135
ECAM location, the problems persist in nearly every continent. The situation is even more dire in
24,3 the developing world where corruption carries a significant impact on actual costs and
accounts for 10-30 percent of the value of a single construction contract (World Bank, 2012).
This development calls for a thorough examination of how these problems arise. In doing so,
it becomes of paramount importance to not only identify the factors that cause cost overruns
and delays but also to understand how the impact of these factors has changed over time.
394
Research methodology
This paper explores the impact that cost overruns and time delays exert on large public
construction projects. In particular, the focus is on mapping the causes underlying cost
overruns and time delays in large public construction projects. This is done by segmenting
the causes into different categories (Table II) which is then followed by an analysis of
potential trends. The trend data are visualized using a kiviat diagram (Figure 2) which
illustrates how the significance of the identified causes for cost overruns and delays have
shifted in the period 1985-2014. The study encompasses large public construction projects in
general including both singular mega projects as well as a portfolio of standardized projects
that collectively make up a large-scale project (e.g. housing development). However, the
lion’s share of projects covered in this study relate primarily to infrastructure as these are
the most prevalent type of large scale public projects discussed in the research literature.
The adopted methods for scoping the available literature draws on the methodical
framework developed by Arksey and O’Malley (2005) which consists of five steps:
• Stage 1: identifying the research question;
• Stage 2: identifying relevant studies;
• Stage 3: study selection;
• Stage 4: charting the data; and
• Stage 5: collating, summarizing and reporting the results.
The objective consisted of exploring how past and current research regards the causes of
cost overruns and time delays in major public construction projects. In order to investigate
the aforementioned research objective, a literature study was carried out. The covered
literature consisted predominately of empirical studies discussing cost overruns and time
delays in public construction projects. The literature selection included both qualitative and
quantitative studies, with an emphasis on the latter, covering the causes of cost overruns
and delays in public construction projects. The resulting data were then chartered in a kiviat
diagram (Figure 2) where they were subsequently analyzed.
Selection criteria
The literature search generated a total number of 3,833 results of which only peer-reviewed
journal articles were selected, excluding 1,830 results and leaving 2,003 papers. Following this, a
cross-checking of the papers were performed in order to remove all duplicate papers that were
No. of No. of journal
Public
Database Keyword string results articles construction
projects
Scopus TITLE-ABS-KEY (“cost overruns” OR “cost increases” OR “cost escalations”
OR “budget overruns” OR “delays”) AND TITLE-ABS-KEY (construction
OR infrastructure) AND (“factor” OR “determinant” OR “cause” OR
“explanation” OR “predictor”) AND TITLE-ABS-KEY ( projects) 1,103 587
Science TITLE-ABSTR-KEY((“cost overruns” OR “cost increases” OR “cost 395
Direct escalations” OR “budget overruns” OR “delays”) AND (“construction”
OR “infrastructure”) AND (“factor” OR “determinant” OR “cause” OR
“explanation” OR “predictor”) AND (“projects”)) 2,148 1,757 (998)
Web of TS ¼ (“cost overrun*” OR “cost increase*” OR “cost escalation*” OR
Science “budget overrun*” OR delay*) AND TS ¼ (construction OR Table I.
infrastructure) AND TS ¼ (factor* OR determinant* OR cause* OR The keywords and
explanation*) AND TS ¼ ( projects) 582 418 databases used in the
Note: Science Direct limits the number of results that can be retrieved literature search
bound to be included as a result of having used multiple databases. Removing all duplicate results
left 1,748 papers remaining. The final step consisted of qualitatively assessing the relevance of
each remaining paper. This assessment was bipartite. The first part consisted of reading through
titles and abstracts in order to determine whether the papers in question were relevant to the topic
being studied. Papers exhibiting any of the following characteristics were removed:
(1) Papers not discussing factors that cause cost overruns or delays in the construction
industry.
(2) Irrelevant use of keywords. If a paper included the search terms but used them in a
different context than that intended for the purposes of this study.
(3) Exclusive studies of small and/or private construction projects. In keeping in line
with the research objective, only studies whose sample size or unit of analysis
included large-scale public construction projects were considered.
Filtering the selection according to these criteria yielded a total number of 113 papers
remaining. The second part of the assessment consisted of reading through each individual
paper and excluding those studies that did not rank the listed factors. This was done in
order to be able to make comparisons of the factors causing delays and cost overruns.
The final selection that remained consisted of 40 papers (see the Appendix for the
unabridged list of selected papers). These articles were then codified with respect to their
publication year, the journal in which they were published, and the type of cause of cost
overruns and time delays that were discussed. The different causes were identified by
means of the literature review and have been categorized as shown in Table II. Although
other researchers may categorize the causes differently, the following categorization
represents the most typical categories mentioned in the research literature.
The included articles were primarily empirical studies that used questionnaires to
determine the causes of cost overruns and time delays. The academic journals in which
these studies were published are listed in Table III.
The age of the selected papers ranged from having a publication year corresponding to
the year 1985 up to the year 2014, as shown in Figure 1.
Literature review
This section gives an account of the primary causes of cost overruns and delays in public
construction projects.
ECAM Root cause Exemplary instances Abbreviation
24,3
Communication Lack of communication between contractors and clients (C)
Inefficient communication
Financial Delayed payment to contractors/consultants (F)
Poor financial planning
Price increases
396 Management Poor site management (MG)
Inadequate managerial skills
Poor monitoring and control
Slow decision making
Client initiated change orders
Inadequate design specs
Rework
Poor labor planning
Material Shortage of equipment (MT)
Poor material planning
Organizational Unsuitable management structure (O)
Poor organization structure
Poor process procedures
Project Project complexity (PR)
Project duration
Table II. Psychological Optimism bias (PS)
Categories of factors Deception
causing cost overruns Weather Harsh weather conditions (W)
and time delays Unforeseen ground conditions
(C)
1
(W) 2 (F)
3
1985-1990
4
1991-1996
(PS) 5 (MG) 1997-2002
2003-2008
Figure 2.
A kiviat diagram 2009-2014
illustrating trend
data for the causes of
cost overruns and (PR) (MT)
time delays in
construction projects
based on the sampled (O)
literature, ranging
from 1985-2014 Notes: C, communication; F, financial; MG, management; MT, material;
O, organizational, PR, project; PS, psychological; W, weather
most significant cause. The average rank order was determined by calculating the mean Public
value assigned to each of the categories for each given time frame. For example, in the period construction
1985-1990, all of the research papers in the selection from that time period listed financial projects
factors as the primary cause for overruns. In the period 1997-2002, on average the papers
ranked financial factors to be the fourth most important cause for overruns. In cases where the
data had been compiled from different stakeholders, the clients’ responses were chosen.
The most stressed factor of all of the causes studied is that of management related causes 401
(MG). There appears to be little change with respect to time on the importance of managerial
decisions in regards to cost overruns and delays. This is perhaps to be expected considering
that most key decisions that impact both cost and time parameters are undertaken in the
early planning phases of the project. The clear relationship between managerial decisions
and cost overruns and delays offers ample support for the call to improve the capabilities of
public clients. This importance is further accentuated by the observation made by Odeh and
Battaineh (2002) noting that public clients are often the principal agents causing cost
overruns and time delays, more so than their private counterpart. Irrespective of this, a more
capable public client is conducive to improved managerial control which in turn would help
to mitigate potential cost escalations and delays.
The chart also illustrates a rather peculiar shift in how financial factors are perceived
with respect to cost overruns and delays. There seems to be a deemphasizing of this factor
as we move through time. Its crucial importance is notwithstanding, the more recent studies
give it a somewhat more modest role in causing cost overruns and delays. Another point to
consider is the low scores assigned to both communication (C) and psychology (PS) related
factors. This does not necessarily undermine their importance in causing delays and cost
escalations. Indeed, it may be so that issues relating to communication or psychology were
the underlying causes behind factors such as improper coordination or poor cost estimation,
both of which were categorized differently in the examined papers. This highlights a
problematic issue when determining the causes of delays and cost increases; it is not always
possible to ascertain where the actual cause occurs in the chain of events that unfolded prior
to the occurrence of the delay or the cost increase.
Therefore, the above categorization is merely a simplification, the causes determining
cost overruns and time delays often intersect (Bhargava et al., 2010). For instance, it may be
argued that rework is a subset of improper planning and that deception is an indication of
bad hiring policies. In understanding the underlying causes, it may therefore be prudent,
like Cantarelli et al. (2010), to distinguish between causes and explanations. The former
consist of the singular factors resulting in an effect (such as cost overruns and/or time delay)
whereas the latter attempt to offer a broader and more general description of what may have
transpired that led to the subsequent effect. An explanation could therefore consist of
several causes. It may be as Majid and McCaffer (1998) suggest that the cause consists of
improper planning which in turn can be seen as an indication of either inadequacies in the
organizational structure that allows for such decisions to be made and/or the shortcomings
of individual personnel assigned to the project. Irrespective of the first cause identified,
other causes can be introduced to form a descriptive narrative. Thus, two projects may have
the same primary cause determining a cost overrun or time delay but still have differing
explanations. Each explanation is unique and path dependent to the project being studied
and can therefore not be directly transferable to a different project.
Concluding remarks
There has been an examination of the current research landscape in search for the causes
that determine cost overruns and time delays in construction projects, in particular, with
regards to large scale public projects. The existing tendency is to regard cost overruns and
delays as types of risks. It is important to emphasize that both cost overruns and delays are
ECAM consequences of other risks which occur as a result of internal or external factors.
24,3 They could essentially be viewed as symptoms of one of the eight categories of root causes
identified in Table I. It is suggested that that the categorization of the different factors
causing delays and cost overruns facilitates the process of identifying risks. Although it is
not possible to completely eliminate these factors, it should be possible to mitigate them
assuming that they have been properly identified and accounted for. This is, however,
402 predicated on the assumption that the best interest of the project is always sought, whereas
this is not necessarily the case. Indeed, the relationship between political reasoning and the
project mindset is not entirely harmonious. This is particularly a challenge in large scale
public projects where project-related decisions clash with decisions rooted in political
thinking that are not necessarily based on a cost-benefit analysis of the project. The full
ramifications of the relationship between the political and the project-related decisions go
beyond the scope of this paper. It is, however, important to keep in mind that choices that
are made regarding public construction projects are not made in a vacuum but within the
confounds of a larger political discourse.
Currently, the most prevalent way of analyzing cost overruns and delays rests on
enumerating the different factors that cause these problems, often supported by a ranking
system. The usefulness of this is that it allows for comparisons to be made. However, it may
also prematurely lull the recipient to a false sense of certainty. Just because these factors have
been identified as common factors causing delays and overruns does not mean that they,
therefore, constitute the biggest threats to delivering the project within budget and time. This
is obviously not the case. The ranking of factors only indicate their prevalence, not the
perniciousness of their implications. Although a particular factor has been identified as a
common factor causing cost overrun and delays, it is not necessarily the factor that has the
biggest impact on cost overrun or time delays. It is entirely within reason that factors that are
prevalent may or may not have a significant impact on the resulting delays or cost overruns.
Herein, a research gap can be identified; what is needed in current research into time
delays and cost overruns in construction is an understanding of the magnitude of the
different factors causing these phenomenon; particularly, in how they actually impact the
delivery of the project based not on the retrospective views by the respondents of surveys,
but instead on empirical data gathered at the initial source, i.e. from stringent project
documentation of cost overruns and delays at the moment in which they occur. This shift in
mentality, from merely regurgitating the views of respondents based on what they assume
to have been the most impactful to instead regarding the actual data at the time of its
occurrence is a necessary step in determining the precise cause of cost overruns and delays
in the construction industry. This being noted, a caveat is in order: gathering data of cost
overruns and delays at the source instead of through retrospective interviews may be
conducive to gaining a clearer picture of the challenges. It should not, however, be regarded
as a panacea. Regardless of how the data are gathered, there will remain the uncertainties of
how to assess the factors causing the cost overruns and delays, their magnitude and
perhaps most importantly, how these factors interconnect with each other, a challenge that
has yet to be solved.
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Appendix. Selection of papers included in the analysis of causes of cost overruns and
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405
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Corresponding author
Abderisak Adam can be contacted at: abderisak.adam@gmail.com
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