1

IDENTIFYING CAUSES OF COST OVERRUNS AND EFFECTIVE COST

CONTROL MEASURES OF PUBLIC PROJECTS IN THE FREE STATE

PROVINCE

by

THABISO GODFREY MONYANE

Submitted in partial fulfilment of the requirement for the degree

MAGISTER OF TECHNOLOGIAE: QUANTITY SURVEYING (STRUCTURED)

In the

Department of Building Sciences

Faculty of Engineering and Built Environment

TSHWANE UNIVERSITY OF TECHNOLOGY

Supervisor: Prof AA Talukhaba

Co-supervisor: OJ Okumbe

OCTOBER 2013

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Declaration and copyright

"I hereby declare that the dissertation submitted for the degree M Tech: Quantity

Surveying, at Tshwane University of Technology, is my own original work and has

not previously been submitted to any other institution of higher education. I further

declare that all sources cited or quoted are indicated and acknowledged by means of

a comprehensive list of references”

T.G Monyane

Copyright© Tshwane University of Technology 2013

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Dedication

Firstly, this dissertation is dedicated to the ALMIGHTY GOD, who gave me the

strength and courage to accomplish the goals for this phase of my academic

development.

Secondly, I dedicate this dissertation to my loving wife, Tumi, for her support and my

son, Lesedi, for too often asking me what I was doing while working on this

dissertation at home.

Thirdly, I dedicate this dissertation to my late parents, may their souls rest in peace,

I know they were watching me all this time and giving me guidance when I was not

looking, as well as to my late brother, Mokes.

My surviving brothers, George and Michael, we were always a cohesive family no

matter what.

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Acknowledgements

The success of this research endeavour is anchored in the support of the Central

University of Technology, FS. I am deeply grateful for the attributes of the academic

environment provided by the Institution and the resources given to me during my

studies. Most importantly, I am indebted to Dr Fidelis Abumere Emuze, you have

been outstanding and your mentorship and advisory support has made it possible. In

addition I would also want to thank my Supervisors Prof Talukhaba and James

Okumbe for your guidance.

I further wish to express my gratitude to the following people for their advice and

support:

Professor Alfred Ngowi, for his advice and support at the commencement of this

work;

Mrs Erica Greyling for her guidance and endless advice, you are like a mother to

me;

Dr Ayodeji Aiyetan for always pushing me and asking endless questions about

my progress, and

My dearest colleague Cameron Brits, for always lending me an ear when I

became frustrated.

I must also mention the support I received from individuals who were prepared to fill

out the questionnaires to make this possible. And not forgetting the contribution by

The Association of South African Quantity Surveyors (ASAQS) FS Chapter, for

granting me the opportunity to distribute the questionnaires during their meetings.

The FS Institute of Architects, who also allowed me to distribute the questionnaires.

I also wish to express my appreciation for the support and guidance of the

Ramanamane family, especially my cousin Sampo; she has been the rock of my

family for years now.

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ABSTRACT

Aim: To identify the major cost overrun factors in the construction sector of the Free

State Province of South Africa and the effective remedial cost control measures,

generate and recommend possible solutions.

The primary objective: to identify the major causes of cost overrun in the construction

sector of the Free State Province of South Africa and the related effective remedial

cost control measures.

Methodology: The study is based on a literature review investigating causes of cost

overruns as well as a survey that was conducted among professionals in the

construction industry.

Data collection: The survey investigated the factors that cause cost overruns in

public sector construction projects and the remedial cost control measures that could

be employed to counteract unreasonable overruns, during the three major phases of

the life cycles of a typical project.

Findings: they indicate that the causes of the most severe cost overruns are

inadequate project preparation planning, additional work requested by owner and

poor workmanship. The findings also indicate that the best remedial measures were

adequate pre-contract planning, proper project implementation, timely resolving of

disputes and good workmanship.

Recommendations: The practical implications of this study are that the stakeholders

of the Free State construction industry need to take careful account of the factors

that influence cost overrun in each stage of the life cycle of the projects that they

undertake.

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Table of Contents

CHAPTER ONE ..................................................................................................................................... 9

1.1 Introduction ............................................................................................................................ 9

1.2 Research Problem Statement ............................................................................................... 10

1.4 Research Aim: ....................................................................................................................... 11

Objectives of the Study ..................................................................................................................... 11

1.5 Scope of the study ................................................................................................................ 12

1.6 Assumptions of the Study ..................................................................................................... 12

1.7 Significance of the Study ....................................................................................................... 12

1.8 Preliminary Literature Review .............................................................................................. 13

1.9 The Causes of Construction Cost Overruns........................................................................... 13

1.10.1 Work previously done on the subject .................................................................................... 14

1.10 Research Design and Methodology ...................................................................................... 15

1.11 Structure of Dissertation ....................................................................................................... 15

CHAPTER TWO ........................................................................................................................... 17

2.1. Introduction .......................................................................................................................... 17

2.2. Causes of Construction Cost Overrun ................................................................................... 17

2.3. Project Cost Management .................................................................................................... 29

2.4. Implementation of Cost Control ........................................................................................... 30

2.5. Contingency Budget Provisions............................................................................................. 31

2.6. Causes of Cost Overrun in Public Sector Projects ................................................................. 31

2.7. Magnitude of Cost Overruns ................................................................................................. 32

2.8. Performance Implications of Cost Overrun Occurrence ....................................................... 34

2.9. Summary ............................................................................................................................... 36

CHAPTER THREE ......................................................................................................................... 37

3.1. Introduction .......................................................................................................................... 37

3.2. Background to the Free State Province ................................................................................ 37

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3.3. Research Method .................................................................................................................. 40

3.4. Data collection ...................................................................................................................... 40

3.5. Questionnaire Design ............................................................................................................ 42

3.6. The Population ...................................................................................................................... 42

3.7. Sample Size Determination ................................................................................................... 43

3.8. Role of QS as the Main Sample ............................................................................................. 43

3.9. Appropriateness of Adopted Research Method ................................................................... 46

3.10. Analysis of the Data .......................................................................................................... 48

3.11. Conclusion ......................................................................................................................... 49

CHAPTER FOUR .......................................................................................................................... 51

4.1 Introduction .......................................................................................................................... 51

4.2. Please Indicate how long your organisation has been in existence?.................................... 52

4.3. Responses to Questionnaires ................................................................................................ 52

4.4. Please Indicate Your Current Position in the Organisation? ................................................. 53

4.5. Please indicate the length of your experience in the Construction Industry? ................... 53

4.7. Causes of Cost Overrun ......................................................................................................... 54

4.7. Causes of Cost Overrun that are Prevalent in Public Sector Projects in the FS Province? ... 59

4.8. How Frequently Do Projects in the FS Province Experience Cost Overrun? ......................... 60

4.9. Does the Frequency of Cost Overrun Constitute a Performance Problem for the

Construction Industry? ..................................................................................................................... 60

4.10. Remedies for Cost Overrun ............................................................................................... 61

CHAPTER FIVE ............................................................................................................................ 67

5.1. Introduction .......................................................................................................................... 67

5.2. Summary of the Findings ...................................................................................................... 67

5.9. Conclusions related to Research Objectives ......................................................................... 68

5.4. General Conclusions .............................................................................................................. 69

5.5. Conclusions from Research Findings..................................................................................... 70

5.6. Recommendations ................................................................................................................ 71

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5.7. Further research ................................................................................................................... 72

6. REFERENCES ....................................................................................................................... 73

APPENDIX 1 ............................................................................................................................... 79

APPENDIX 2 ............................................................................................................................... 80

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CHAPTER ONE

THE PROBLEM AND ITS SETTING

1.1 Introduction

(Chimwaso, 2001) discovered that one of the challenges facing the construction

industry in developing countries is the chronic problem of construction cost overruns.

Therefore, the result of the contract sum cannot always be regarded as a firm price.

Even where the work is ordered based on “fixed price”, measurements related to

provisional work, adjustment of prime cost and provisional sums and variation orders

will still occur (Chimwaso, 2001). The costs arising from these unforeseen

circumstances are a sure cause for the adjustment of the contract sum.

Consequently, the initial tender price is not what is finally paid, due to the many

factors that influence cost overruns. It goes without saying that this results in poor

cost performance of construction projects, leaving many clients unsatisfied.

In construction, however, it is difficult to talk about actual construction cost: the

money the client pays the contractor for carrying out the work, until the project is

completed and the final account agreed upon. For this reason, the anticipated final

construction cost is always referred to as the projected or estimated final account

(Chimwaso, 2001). The public construction industry has been experiencing

exorbitant budget cost expenditure (cost overruns), where in extreme cases some

development projects have had to be put on hold, deferred to future development

plan periods due to insufficient funds caused by money being diverted to complete

long delayed running projects; and thus; distracting the whole long term government

development plans.

Anecdotal evidence and empirical findings have shown that the construction industry

in South Africa is not free from cost overruns which are, usually, loosely blamed on

lack of cost control (Chimwaso 2001). However, this is said to stem from a poor

definition of cost control that focuses only on monitoring of costs and recording of

data. According to Flybjerg (2003) cost are underestimated in almost 90% of the

projects, and that on average actual cost are 28% higher than estimated costs. Due

to this phenomena of lack of forecasting, Flybjerg (2009) further suggests that this

can be attributed to three underlying reasons: 1) delusions or honest mistakes; 2)

deception or strategic manipulation of information or processes; 3) bad luck. This

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study attempts to evaluate the cost performance of public projects in the Free State

Province and sets out to identify and rank the factors that influence cost overruns.

The research findings are presented together with empirical data from completed

public projects. This study is of significance in that it raises the level of awareness

among professional and gives the design team a sense of preparedness from the

inception of the project.

The treatise is organised as follows: firstly, a literature review on the problem of cost

overruns is presented, followed by the identification of the factors that influence

these overruns. The objectives of the study, the method of data collection and the

structure of the questionnaires are then described. This is followed by the

presentation of the findings. The factors that influence cost overruns are then ranked

in order of significance. Finally, summaries, conclusions and recommendations are

presented in the light of the primary and secondary data pertaining to the study.

1.2 Research Problem Statement

The Construction Industry (CI) plays an important role in the development of a

country through the delivery of projects and other related activities that generate

income for individuals and firms. This contribution is deemed to be greatly enhanced

when project delivery is on target in terms of stated performance parameters.

However, this is generally considered not to be the case, either nationally or

internationally. However projects will be successful if major factors that contribute to

cost overrun are identified and examined beforehand, so professionals can learn

from historical data. Furthermore it is essential for the identified major causes to look

at cost control measures that the professionals in the construction industry can apply

to minimise the reoccurrence of these construction cost overrun. It will benefit the

industry to identify those that are common in the public sector since literature has

indicated that they are severe in public sectors in the developing countries. To better

understand the level of the occurrence of cost overrun professionals should indicate

their awareness of the frequency of occurrence of the overrun in the public sector

projects. The literature is dense with examples of performance related problems that

incur cost overruns in construction. In essence, the assumed problem statement for

this study states that “public sector construction projects are prone to and experience

cost overruns that propagate a mirage of problems in the Free State Province of

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South Africa”. To resolve this problem, five questions were formulated to act as

springboard for the empirical work. The questions include:

What are the major causes of construction cost overruns and what are the

effective remedial measures to be applied in South African construction industry?

Which causes of cost overruns are prevalent in public sector projects in the Free

State province of South Africa?

How frequently do public sector projects in the Free State Province experience cost overruns?

Does the frequency of cost overruns constitute a performance problem for the

construction industry in the Free State Province?

What interventions can best be deployed in order to stem the tide of cost

overruns in South African construction, especially in the Free State Province?

1.4 Research Aim:

To identify the major cost overrun factors in the construction sector of the Free State

Province of South Africa and the effective remedial cost control measures, generate

and recommend possible solutions.

Objectives of the Study

Within the context of the study, the research project:

a) Identified the major causes of cost overruns and associated remedial measures

for use in South African construction.

b) Identified the common causes of cost overruns in public sector projects in the

Free State province of South Africa.

c) Determine the plausible frequency of cost overruns among public sector projects

in the Free State province of South Africa.

d) Ascertain if the rate of cost overrun occurrence constitutes a performance problem

in the Free State province of South Africa.

e) Formulate recommendations aimed at solving the current and future cost related

challenges in the South African construction industry.

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1.5 Scope of the study

The research population of this study was therefore limited to active private and

public quantity surveying professionals involved in public building projects in and

around the Free State Province. The study was furthermore limited to public building

projects executed anywhere in the FS Province using a traditional tender

procurement system utilised by the Free State province departments. The traditional

procurement system is chosen because the public sector is the main client in the

Free State, so other methods of procurement will prove difficult to obtain data. The

reason for choice of traditional procurement system is that is where the bulk of the

work is carried out by professionals in the province. Public building projects are

chosen because it is an area where quantity surveyors are playing an immense role

in the control of cost of the projects. Other infrastructure construction projects are not

part of this study. Cost growth, cost changes, variations and cost overrun are

considered to have the same meaning for the purpose of this research and may be

defined as the difference between the final cost and the initial budget when the

decision to build was taken.

1.6 Assumptions of the Study

Leedy and Ormond (2010: 59) explain that “…assumptions are so basic that without

them the research problem itself could not exist”. It is evident from the background of

the problem that the following assumptions may be presumed:

Costs are a key parameter of the project‟s success or failures for any client

wishing to commence with a project;

Public sector projects are mainly undertaken for social reasons where the

public will be the ones using the assets rather than for profit;

Public sector projects tend to experience more cost overruns than private ones

due to the fact that they are not built for profit.

Cost consultants are always involved in construction projects and therefore are

in the best position to contribute to minimising the recurrence of cost overrun.

1.7 Significance of the Study

The research attempts to provide stakeholders in the Free State Province with a

broader understanding of the frequent causes of cost overruns. The study is

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important as it also sheds light on how construction professionals can implement

cost control measures in place to avoid recurrence of these problems. The study

focuses on challenges faced by the client, who in the main is the government sector

in FS Province; professionals in the industry and contractors involved in public

projects.. The attainment of effective cost control measures for government

development projects is a prerequisite for the successful completion of such projects,

which are vital for the country‟s socio-economic advancement.

1.8 Preliminary Literature Review

Construction cost overruns may be defined as an extra cost beyond the contractual

cost agreed to during the tendering stage of a project life cycle (Endut et al., 2005).

Cost overruns may also be called “cost increases” (Koushki et al., 2005), and

“budget overruns” (Zhu & Lin, 2004). Cost overrun is defined as the change in the

contract amount divided by the original contract amount. This calculation may be

converted to a percentage for ease of comparison (Jackson, 1999 cited in Al-Najjar

2008).

1.9 The Causes of Construction Cost Overruns

Abdullah et al. (2010) pointed out that cash flow and financial difficulties faced by

contractors; their poor site management and supervision; inadequate contractor

experience; a shortage of skilled site workers and incorrect planning and scheduling

by contractors were significant factors affecting construction costs. Le-Hoai et al.

(2008) in their research argue that in general, poor site management and

supervision, poor project management assistance, financial difficulties of an owner,

financial difficulties of a contractor and design changes are the five most frequent,

severe and important causes of cost overruns in the construction industry.

In another study, conducted by Ramabodu and Verster (2010), they established that

construction cost overruns should be addressed in the Free State Province based on

the perceptions of respondents who are resident in the region. Furthermore, their

research divided the factors on cost overruns into three categories: very critical

factors, moderately critical factors and less critical factors. Of those categories, five

factors were considered to be very critical contributors, four were considered to be

moderate and five were considered to be less critical to the manifestation of cost

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overruns. In addition, Mahamid and Bruland (2011) conducted research on road

construction in the West Bank in Palestine and discovered that the top five

influencing factors from the consultants‟ point of view were: materials‟ price

fluctuations, insufficient time for estimation, experience in contracts, size of contract

and incomplete drawings.

There has been limited studies, surveys or researches on this particular subject

matter in South Africa, apart from the one conducted by Ramabodu and Verster

(2010). Ramabodu and Verster (2010) reported the main five very critical causes of

cost overruns on public projects as (i) changes in scope of work on site, (ii)

incomplete design at time of tender, (iii) contractual claim, that is, extension of time

with cost claims, (iv) lack of planning and monitoring of funds and (v) delays in

costing variations and additional work.

1.10.1 Work previously done on the subject

The survey findings were exclusively based on responses from twenty five practicing

professionals. Notably, the Ramabodu and Verster (2010) survey focused on the

final phase of the project development cycle, whereas, cost overrun factors affect the

whole project development cycle beginning with the conception/planning phase to

the completion / commissioning phase. There are causal factors which would span

the whole project development cycle, unless some control mitigation steps are

implemented, for example, incompetent project team selection.

The survey, did not address the aspect of possible remedies and professional

accountability apportionment, which will be extensively addressed here. The effects

of cost overruns in the public construction sector have seemed negligible, since the

country is still under the struggling economy. But the literature review, however,

alludes that problems of projects‟ cost overruns affects the construction industry

globally, hence, it would be a gamble to ignore its long term effects on the South

African public construction industry. A brief mention of work done on the subject is

provided in this section; followed by a more detailed exposition of the same in the

literature review part of this report. There have been prominent surveys carried out in

Africa, the Middle East, Europe, USA and Asia, for a variety of projects; like dam

building, ship building; highway construction; sport and entertainment facilities; to

underline the global nature of the cost overrun problem.

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1.10 Research Design and Methodology

In terms of design, the literature significantly influenced the questions used to

generate the primary data for the study. From existing research findings, factors that

influence cost overruns were identified and used as a framework. These factors were

organised into different sections in the questionnaire, which was designed to enable

respondents to add any other factor that they consider necessary for inclusion in the

list of factors.

Questionnaires were distributed to registered Quantity Surveyors (QS), who

according to the ASAQS Free State Chapter are conversant with public sector

projects in the Free State Province. Sampling was done from amongst professional

QS in the private sector and the public service in the province. These respondents

have over five years of industry experience in this province.

The descriptive statistical method was used to compute the rank of mean scores of

responses. The procedure used in analysing data was intended to establish the

relative importance of the various factors that contribute to cost overrun, effects of

cost overrun, and effective remedies of minimising construction cost overrun. There

are three steps used in analysing the data: calculating the Relative Importance

Index; ranking of factors in each project cycle based on this Index, and determining

the degree of correlation on ranking the factors among the two groups.

The rank agreement Factors for each cost overrun causes and remedies are

computed from each professional, according to how they have ranked the causes

and remedies. Cost overrun causes rank agreements and effective cost control

remedial measures are given in Tables in Chapter four, for all three of the project

phases.

1.11 Structure of Dissertation

Chapter one presents the background of the study in the form of a statement of the

problem, research questions, aim and objectives, scope of the study, assumptions of

the study and its significance. Chapter two addresses the review of the related

literature, whilst Chapter three identifies the research method employed. Chapter

four relays the participants‟ perceptions concerning the problems identified on the

survey and Chapter 5 presents the summary, conclusions and recommendations

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that were deduced from the research project. The covering letter, questionnaire and

list of abbreviations are located in the appendices.

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CHAPTER TWO

THE REVIEW OF THE RELATED LITERATURE

2.1. Introduction

Project success depends on five outcomes of project management. For any project

manager to lay claim to a successful project, it has to be constructed within the

expected duration of the project, within budget, with the right quality and in the right

environment and needs to be achieved safely. Analysing the reasons for cost

overrun is an important step so that professionals can improve the delivery of

projects. The documented reasons will enhance budget cost estimates, cost

management and project contingencies.

This study attempts to identify factors causing cost overrun at the three stages of

construction processes: the Design phase, the Construction phase and the

Completion phase. The literature was therefore reviewed in order to identify

problems of cost overrun in these stages.

This chapter provides a literature review on identifying the factors that cause cost

overrun and mitigation thereof. It commences with the causes of construction cost

overrun in general, followed by project cost management, implementation of cost

control and contingency budget provision. It then focuses on identifying project cost

overruns in the public sector. The review also examines the magnitude of such

overruns as well as the implications of these for the performance of the projects.

2.2. Causes of Construction Cost Overrun

A degree of change can be, and to a certain extent should be, expected in

construction, as it is difficult for clients to visualise the end product that they procure.

Cost overrun is also known as “change orders” (Zawawi, Azman, Shamil and Kamar,

2010). As mentioned, percentage cost overrun is defined as the deviation from the

amount agreed, as per the contract sum divided by the agreed, original amount of

the contract:

Cost overrun = Final Contract Amount – Original Contract Amount

Original Contract Amount

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However, most forms of rework (with the exception of that caused by weather) are

preventable (Endut et al., 2005). An analysis conducted by Koushki et al. (2005) has

shown that public and private sector projects exhibit similar patterns of cost

overruns. They go on to reveal that the three main causes in order of frequency,

severity, and impact are contractor-related problems, material-related problems and

owners‟ financial constraints. This research further found that cost overrun is in

mainly influenced by project complexity, characteristics of the client or their

representative and payment modality. In addition, the research reveals that cost

overruns appear to be greatly influenced by both procurement and non-procurement

related factors.

There are a number of factors, about which several research studies have been

conducted to investigate the causes and extent of overruns, which may influence

cost. In research conducted by Ramabodu and Verster (2010) to establish whether

construction cost overrun is seen as a problem in the Free State Province, all the

respondents considered cost overruns as a problem that needs to be addressed.

Furthermore, their research divided the factors on cost overruns into three categories

i.e. very critical factors, moderately critical factors and less critical factors. And of

those categories, five factors were considered to be very critical: firstly changes in

scope of work on site by the client seemed to be the one with the most influence

according to the respondents, but cannot be seen as controllable by the design team

and is thus not seen as cost overrun related to budget items and must be equated

for through an approval process driven by the client body. Incomplete design at the

time of tender, contractual claims and lack of cost planning and monitoring were

cited to be major causes.

Based on a sample of 258 projects, Flyvbjerg et al. (2003) found that:

Nine out of 10 transport infrastructure projects fall victim to cost escalation (n = 258).

For rail, average cost escalation is 45% (n = 58, SD = 38). For fixed links (bridges

and tunnels), average cost escalation is 34% (n =33, SD =62). For roads, average

cost escalation is 20% (n= 167, SD = 30). Cost escalation exists across 20 nations

and five continents and appears to be a global phenomenon (n = 258).

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Cost escalation appears to be more pronounced in developing nations than in North

America and Europe (N =58; data for rail only). Cost escalation has not decreased

over the past 70 years. No learning seems to have taken place (n = 111 / 246).

The sample utilised to arrive at these results was the largest of its kind, covering 258

transport infrastructure projects in 20 nations. The project worth was approximately

US$90 billion (1995 prices). In a related study, researchers found that a wide variety

of factors influenced construction costs of highway projects. In a further study

conducted in Australia, Creedy et al. (2010) established that of particular concern are

changes in project designs and scope changes during project development.

Similarly, Ameh, Soyingbe and Odusami (2010) reported that the factors which

ranked the highest under related factors were economic stability, inadequate

production of raw materials by the country and government policies (law and

regulations) . The factors ranking highest in the “construction-related” category were

lack of contractor experience, incorrect planning and poor financial control on site.

All these factors resulted in cost overruns in telecommunication projects in Nigeria.

Furthermore, Ameh et al., (2010) discovered that factors which ranked the highest,

under the variables that caused cost overruns in the “cost estimating” factors

category, were the cost of materials, fluctuation of prices of materials and high

interest rates charged by banks on loans received by contractors. Al Gwaiy et al.

(2006) undertaken research in Saudi Arabia and identified factors interviewing

different professionals involved in the projects. They reported the following:

For consultants, changes in design and duration of contract are equally the

most influential cost factors.

Contractors consider local laws and regulations to be the most influential cost

factor, followed by project planning and scheduling.

Developers regard on-site disputes as the most influential cost factor followed

by work experience.

As previously mentioned Memon, Rahman, Abdullah and Azis (2010) observed that

cash flow and financial difficulties faced by contractors, contractor's poor site

management and supervision, inadequate contractor experience, shortage of site

workers and incorrect planning and scheduling by contractors were significant

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factors affecting construction cost. Le-Hoai et al. (2008) equally contend that poor

site management and supervision, poor project management assistance, owners‟

financial difficulties, contractors‟ financial difficulties; and design change have severe

impact on cost overruns in construction. Delay in construction projects would cause

extra cost and loss in financial return. Thus, delay is costly for both owner and

contractor (Rahman et al., 2008).

Ganiyu and Zubairu (2010) showed that project cost depends largely on factors

related to adequacy of contractor‟s plant and equipment, contractor‟s experience on

similar types of project, time allowed for project bid to be evaluated, level of

technological advancement and client commitment to timely completion of the

project, percentage of repetitive work, level of design complexity, importance for

project to be delivered, project scope, percentage of special issues, communication

among project team, level of construction complexity, contractor experience on

similar size of project and contractor‟s prior working relationship with clients. As

mentioned earlier Mahamid and Bruland (2011), who undertook a study of the

causes of delays in West Bank, reported that Palestine road construction projects

reveal that the top five influencing factors from consultants‟ point of view are:

materials‟ price fluctuation, insufficient time for estimate, experience in contracts,

size of contract, and incomplete drawings. Amusan (2011) discovers that lack of

experience on the side of contractors is largely responsible for cost overruns on a

Nigerian project. The same study by Amusan (2011) argues that inadequate

planning, inflation, variation orders, and design changes constitute major factors

contributing to cost overruns.

In the same context, Odeyinka et al. (2010) concluded that significant risk factors

affecting the variability between tender sum and final account relate to the level of

design information or lack of it at the pre-construction stage of a project. Such risk

factors include changes in design, variations by the client, changes in scope of works

and unexpected site conditions. A closer look at the study by Odeyinka et al. (2010)

further indicates that for the commercial projects, the mentioned factors were

significant. However, for educational project variations requested by the client,

extremely bad weather, changes in scope of work and unexpected site conditions

constitute major factors in this regard. Similarly, Kaliba, Muya and Mumba (2009)

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suggest that bad weather and scope changes alongside delayed payments are

major factors that bring about cost overruns in Zambian road construction projects.

Nega (2008) affirmed in his study that parties blamed each other for encountered

cost project escalations in the Ethiopian construction industry. Nega (2008) then

suggests that it was important to identify the stakeholders who are responsible for

causing cost overruns in public building construction projects in order to evolve

corrective measures. Nega (2008) reported that there were claims made by clients

concerning issues related to design, specifications and contract documentation.

Table 2.1 indicates causes and corresponding, responsible parties, for cost overruns

according to the literature (Nega, 2008).

Table 1: Causes of cost overrun

No Causes of cost overrun Responsible party

1 Inflation or increase in the cost of construction

materials

Government & others

2 Lack of planning and co-ordination or less emphasis on

planning

Client & consultant

3 Fluctuations in the cost of labour and/or material or any

other matter affecting the cost of the execution of the

works and subsequent legislation that affect the project

Government & others

4 Insufficient geotechnical investigation Consultant

5 Additional costs due to variations work Consultant

6 Change in foreign exchange rate (for imported

materials)

Government & others

7 Change orders and/or lack of control on excessive

change orders

Client & consultant

8 Costs due to special risks which very often include

outbreak of war, hostilities, contamination and other

such risks

Government & others

9 Delay of drawings and/or order requested by the

contractor in accordance with sub clause 6.3)

Consultants

10 Changes in plans and drawings Clients, end user, &

consultants

No Hypothesized causes of cost overrun Responsible party

11 Inappropriate/inexperienced contractor Clients, consultants &

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contractor

12 Encountering of unforeseeable physical obstructions

and conditions

Consultants & others

13 Failure to identify problems and institute necessary and

timely design and programming changes.

Consultant & contractor

14 Failure on the part of the employer to hand over

possession of the site in accordance with the terms of

the contract

Client

15 Inaccurate quantity estimate or excess quantity during

construction

Consultant

16 Unclear specifications or changes to specification Consultant

17 Contractor‟s bankruptcy Contractor

18 Cost underestimation Client, consultant &

contractor

19 Additions and/or enhancements required by clients or

end users

Client & end user

20 Difficulties in obtaining construction materials in the

local market

Government & contractor

21 Errors in setting out which are based on incorrect

written data supplied by engineer

Consultant

22 Ambiguities or discrepancies of documents Consultants

23 Loss or damage due to excepted risks or employer‟s

risk

Government, client & others

24 Suspension of work ordered by the engineer Consultant

25 Complexity of construction projects Consultant &contractor

26 Poor communication among contractor, consultants

and the client

Client, consultant and

Contractor

27 Mistakes during construction or defective work Consultant & contractor

28 Supplementary/additional agreement Client & consultant

29 Cost associated with test samples not provided in the

contract

Client & consultant

30 Funding problems or client‟s shortage of finance or

delayed payments to contractors

Client

31 Lack of end user involvement Client, consultant & end user

32 Executive bureaucracy in the client‟s organisation Client

33 Uncovering of works that have already been Client & consultant

23

completed, but they are found to have been executed

in accordance with the contract

34 Acceleration required by the owner (shortening of

contract time)

Client & end user

35 Indemnities that the employer has contractually

undertaken to assume

Client & others

36 Different consultants for design, supervision & contract

administration

Consultant

37 Increase in tax/change in government fiscal/monetary

policies

Government

38 Searching for defects which are not the fault of the

contractor

Client & consultant

39 Fossils or discovery of things of geological or

archaeological interest

Others

Source: Nega (2008)

Danso and Anti (2012), in their study of factors influencing the time and cost

overruns in Ghana telecom construction projects, identified 14 major factors. These

factors were listed as:

Price fluctuations;

Ineffective cost control systems;

Lack of coordination at design phase;

Design scope changes;

Inadequate review of drawings and contract documents;

Frequent breakdown of plant and equipment;

Deficiencies in prepared cost estimates;

Planning and scheduling deficiencies;

Inadequate project preparation;

Planning and implementation;

Delay in issuing information to the contractor during construction;

Lack of cost planning / monitoring during pre and post contract stages;

Delays in costing variations, and

Additional works.

24

Yusuf, Abidin and Bambang (2008) emphasised the notion that many construction

firms in Indonesia seem to be placing a greater focus on project cost rather than

concentrating on other factors that might reduce these costs. The implication of their

research findings is that that these construction firms tend to neglect time and

quality, which are also important targets needing to be taken into consideration. For

these reasons, Yusuf et al. (2008) contend that in developing countries such as

Indonesia, many construction project failures occur as a result of poor monitoring

and control; lack of documentation on project lessons learned; by their not being

adaptive to information technology development as well as delays and mistakes in

decision making. Therefore by virtue of being more concentrated on project cost at

the expense of other key project considerations, cost overruns are often manifested

in Indonesia. Yusuf et al. (2008) illustrate their assertion by mentioning the causes of

project material cost overruns in terms of 58 events and 57 causes, furthermore with

regard to their analysis; they identified the sources of risks that cause most events

on material cost overruns as purchasing and material usage. Eight events that

exercise the most influence on such cost overruns, which are related to purchasing,

are:

Project delay, which is largely caused by schedule variance and purchasing of

materials in contravention of the stipulated specifications and requirements;

Increased material costs, caused mostly by delay in purchasing and poor

strategy in selecting sellers;

Change order changes and excess materials, which are mainly due to

materials that are not purchased in accordance with specifications and

requirements;

Delay in material procurement, which is mostly caused by shortages in the

market, changes in materials‟ sources that are related to project location,

delay in payment, and delay in purchasing;

Delay in project works execution, which is largely due to the same factors;

Increased procurement cost which is mostly caused by a supply shortage in

the market, and

Delay in delivery of materials to project site, which is most commonly due to

poor strategy in selecting sellers.

25

It is notable that the cost overruns indicators that are influenced by the eight events

mentioned are purchasing costs, storage costs, and excess material cost. In another

study undertaken by Enhassi, Arain and Al-Raee (2010), they rated the top ten most

important causes of variation orders in construction projects in Gaza Strip. These,

according to survey respondents, included: the lack of construction materials and

equipment spare parts due to closure and siege; changes in design by the

consultant; the consultant's lack of knowledge of available materials and equipment;

errors and omissions in the design; conflicts between contract documents; owner's

financial problems; lack of coordination among parties involved in the project;

international consultant using inadequate specification to be followed in local

conditions; internal political problems, and change in specifications by owner. The

lack of materials and spare parts of equipment because of closure is the most

important cause of variation in orders in construction projects in Gaza Strip.

In the South African construction context, Baloyi and Bekker (2010) identify the

causes of cost overrun related to the stadia built or refurbished for the 2010 FIFA

World Cup. The top ten causes in order of importance included:

Increase in material cost;

Inaccurate material estimates;

Shortage of skilled labour;

Client‟s late contract award;

Project complexity;

Increase in labour cost;

Inaccurate quantity take-off;

Difference between selected bid and the consultant‟s estimate;

Change orders by client during construction, and

Manpower shortage

Potty, Irdus and Ramanathan (2011) make several interesting points regarding time

delay and cost overruns in their study of multiple design and build projects. While the

owner and consultants of these multiple bridge construction projects in Malaysia

perceive that the project was completed within time and within budget, the contractor

had to bear the risk of both these factors because design and build projects transfer

it to the contractor. Therefore, they will both agree on the projects‟ success. On the

26

other hand the contractor is heavily overloaded with delays and severe cost overruns

of the projects since he is responsible for managing the contract and bearing all the

risks involved. Potty et al. (2011: 4) also conducted several case studies as part of a

study that made use of opinion surveys for data collection. Insights from the cases

and the opinion survey are detailed below:

Contractors’ opinions

The contractors reported that projects were delayed and the reasons for cost

overruns include but are not limited to:

The widespread project location that caused logistics related challenges while

transferring resources to the site at the time of requirement.

Continuous changes in design and drawings due to incomplete initial

drawings prepared with insufficient design data.

Change of construction drawing during execution of construction works.

The lack of progress of specialist work due to inefficient planning.

Limitation of consultants‟ working hours and having the supervision team to

work with overtime charges.

The delay in land and property acquisition obstructed and prevented progress

in the construction work.

The interference of the local community and their unreasonable demands on

the contractor.

Inclement weather due to the change in weather patterns. The unstable river

which swells when the catchment receives rainfall. This cannot be predicted

at the project site location.

Fluctuation in cost of construction materials and fossil fuels.

Shortage of materials in the local markets, causing delays in delivery and

excess costs for additional transportation.

Delay in approval of material by consultant.

Monopolisation of special machinery and equipment.

Mistakes in quantity take off provided at the time of tendering.

27

Consultants’ opinions

The consultant reported the following most significant causes of delay:

Design data unavailable when required causing changes to the design at the

time of construction.

The dependency on specialist work without alternative plans.

Limited hours worked by contractor.

The land and property acquisition obstructing construction work.

Frequent price fluctuation of construction materials and fossil fuels.

Lack of materials at the site. No schedule of material delivery was provided or

monitored by contractor.

Poor management of project works.

Rework due to lack of quality caused by rushed work. It was also due to

failure of soil compaction for roads.

Poor judgement in estimating time and resources due to inadequate

experience of the contractor.

Cash flow problems faced by contractor due to delayed payment from the

client.

Additional work required on site at owner‟s request.

Inaccurate quantity take off.

Contractor‟s shortfalls in labour, supervision and technical staff.

Owners’ opinions

The owners‟ reports on cost and time overruns are summarised as follows:

Mismanagement by the contractor and the consultant in completing and

delivering the project on time.

Slow delivery of material by contractor to the site. No proper material delivery

schedule in place.

Inappropriate construction method used by contractors.

Less quality and rework having to be done by contractor due to rushing work.

Price variation of the construction materials and fossil fuels.

Bad weather conditions.

Shortage of skilled workers.

28

As mentioned above, Potty et al. (2011) garnered the opinions of the three parties

included and carried out case studies to further clarify the findings of the research.

The findings regarding the cases studies are listed below:

Case study 1:

The project was delivered on time, within budget, in the opinion of the owner and the

consultant. However, the contractor was obliged to bear the risk of the cost overrun

beyond the budget. The contractor had to deal with this situation due to the frequent

changes in the design, even when the work was in progress. Typically, the kind of

cost overrun is not considered in D&B contracts in which the owner has transferred

their risk to the contractor through the contract.

Case studies 2 & 3:

The same finding applies to these projects. The cost overrun in this project occurred

partially due to the work variation requested by the owner.

Case study 4:

The project suffered delay due to inclement weather, which caused damage to the

completed post-tension beams. This event resulted in a 75% rework of the

completed construction work being required and subsequently caused a delay of the

project completion date. In this case, the contractor was not the main cause for delay

as it was due to external factors. This type of delay is known as non-compensated,

excusable delays.

Case study 5:

The project suffered delay due to obstacles on site. Such obstacles pertained to

property encroachment and public utilities. The project could not progress until the

government authorities took appropriate action for acquisition and compensation.

This procedure took too long and resulted in a delay of the project commencement

date, which in turn caused a setback in the completion of the project. Therefore, the

contractor is not considered responsible for the delay in this project. This type of

29

problem is also known as non-compensated, excusable delays. The cost overrun in

this project happened partially due to the work variation requested by the owner.

Case study 6:

The project suffered a delay due to obstacles on site stemming from the

encroachment on public utilities. The project could not progress until the government

authorities took appropriate action to do the necessary shifting work. These

procedures were too lengthy and delayed the project commencement date, which

subsequently caused a delay in the completion of the project. The contractor was not

responsible for this. Such a type of delay is also known as non-compensated

excusable delays. The cost overrun in this project occurs partially due to the work

variation requested by the owner.

Case study 7:

The project is expected to be completed on time, within the budget.

2.3. Project Cost Management

The management of costs in a project is a common thread running through the entire

life of a project. The feasibility of a project depends on its cost and financial viability

and the project is not complete until the last payments and paperwork have been

completed. Caruthers et al. (2008) state that the management of costs begins with

the financial feasibility study, progresses through all the costs that are required to

purchase all the resources needed by the project, through to using cost control to

ensure that all work that is done is properly completed. Kimmons (1990,,cited in

Caruthers et al., 2008:161) states that at any stage during the project, the total

predicted cost consists of the defined elements, the contingency, the escalation, and

the scope creep (or job growth). Any cost forecast needs to make allowances for all

of these, although it is imperative that scope creep must stay out of these forecasts,

which should be based on a particular project scope. The cost implications of scope

creep need to be very rigorously controlled by way of formal variation orders

(Caruthers et al., 2008).

30

Research conducted by Azis, Memon, Rahman, Latif and Nagapan (2012) focused

on the objective of assessing the level of effectiveness of various cost management

techniques implemented in large construction projects in South Malaysia. The results

of the study show that the most effective technique of cost management was cash

flow forecasting, tender budgeting / estimating, and an elemental cost plan.

As mentioned, Caruthers et al. (2008) however describe a cost estimate as an

approximation. Therefore, cost estimations require the utmost accuracy in order for

clients to ensure that they have sufficient funds to execute the projects without

delays due to underestimations (Kaliba et al., 2010).

2.4. Implementation of Cost Control

Oosthuizen et al. (1998), cited in Dibonwa (2008) describe project cost control as a

process of gathering, analysing, comparing and monitoring the costs of a project and

reporting the results continuously during the development cycle of a project. Keong

(2010) in turn elaborated on the fact that cost control requires searching out the

“whys‟‟ of both positive and negative variances. Cost control must be thoroughly

integrated with the other control processes: scope change control, schedule control

and quality control. The control system for construction costs should include the

purposes in the following terms (Keong, 2010):

To provide immediate warning of uneconomic operations, in the short and long

term.

To provide the relevant feedback, to the estimator who is responsible for

establishing the standards in the past and future, giving carefully qualified and

detailed information, concerning all the conditions under which the work has been

carried out,.

To provide data to assist in the valuation of those variations that will arise during

the course of the work.

To promote cost consciousness and summaries of progress.

Performing an adequate constructability review to minimise unexpected costs.

Establishing a construction cost cash flow plan.

Monitoring cost performance to detect and understand variances from plan.

Ensuring that all appropriate changes are accurately recorded in the cost

baseline.

31

Preventing incorrect, inappropriate, or unauthorised changes from being included

in the cost baseline.

Informing appropriate stakeholders of authorised changes.

Acting to bring expected costs within accepted limits.

2.5. Contingency Budget Provisions

Caruthers et al. (2008) describe a contingency as an allowance that a cost estimator

makes in order to allow for unforeseen costs or to allow for things that may go

wrong. Furthermore, they point out that cost contingency reserves are required and

need to be budgeted for. According to Dibonwa (2008), the use of budgetary

provisions to cover cost escalations, price fluctuations and inflation has become a

common practice. These have also received sharp criticism from the unwilling-to-

spend clients, resulting in excessive costs due to limited budget provisions.

However, project managers should base their cost proposals on precise

measurements of a degree of risk and uncertainty (Dibonwa 2008: 42).

2.6. Causes of Cost Overrun in Public Sector Projects

Many researchers have attempted to identify the causes of cost overruns in

infrastructure projects. One of the prolific and influential writers includes Flyvbjerg,

Garbuio and Lovallo (2009). There are also other authors who have covered the

factors that influence cost overruns in infrastructure projects; Kasimu (2012) lists the

following critical factors that do so:

Market conditions

Fluctuation in foreign exchange

Inflation

Delay in payment

Lack of financial management and planning

Method of estimating adopted

High loan interest rate charges levied by banks

Tax increases

Insurance costs

Personal experience in the contract works

Poor financial management and control

32

Improper coordination and interaction within parties involved in works

Lack of a qualified project manager

Lack of application of risk management process

Knowledge of clients and consultant play a crucial part

Financial status of the client

Government policy.

Bari, Ahmad, Jaapar, Yusuff, and Ismail (2012), in their study of factors influencing

construction costs of Industrialised Building Systems in Malaysia, indicated that

factors related to “project / IBS Characteristics”, “economics and market conditions”

and “contractors‟ attributes” are common factors that may influence the construction

costs of IBS projects. Moreover, most of the factors grouped in “project / IBS

characteristics” were regarded as important, based on the analysed data. These are

repeatability and standardisation; repeated use of design, mould and construction

techniques; fast track construction; economies of scale and comprehensiveness of

IBS principles in the design.

2.7. Magnitude of Cost Overruns

Flyvbjerg et al.’s (2009) study provides a clear indication of the severity of cost

overruns in large infrastructure projects by deducing that over-budgeting and

overtime occur repeatedly. Furthermore, explanations of project underperformance

in terms of optimum bias and strategic misrepresentation lead to high failure rates for

projects as a consequence of flawed decision-making ( Flyvbjerg et al., 2009).

However, Love (2011) argues that simply assuming that strategic misrepresentation

and optimum bias are overarching actions which lead to the unsuccessful delivery of

social infrastructure projects is misleading, considering the complex array of

conditions and variables that interact with one another during the procurement of a

project. He goes on to say that understanding the conditions that result in design

errors is necessary to reduce their incidence within projects. More importantly,

focusing solely on addressing such actions may mask the underlying conditions that

continually contribute to the adoption of opportunistic project and managerial

practices. An examination of a social infrastructure case presented by the same

author reveals that errors contributed to a great deal of dissonance between project

33

team members as well as increased project costs. Love (2012), in a study

undertaken in Australia to determine the probable costs of rework, confirmed that the

rate of cost overruns for construction projects ranged from a maximum of 244% to a

minimum of -84% (cost under run). In brief, of the 218 projects assessed by Love

(2012), 79% of them experienced total rework costs of less than 16%.

Makovsěk, Tominc and Logozăr (2012) found systematic cost overruns of 30%

among 20 projects that form one sample frame in Slovenia. Furthermore, in their

second sample that covered 36 projects, they observed systematic cost overruns of

19%. Cantarelli, van Wee, Molin & Flyvbjerg (2012) indicate that the magnitude of

cost overruns on construction projects in The Netherlands did not differ from that of

other countries as they highlighted the range of cost overruns, of -40.3% to 164.0%.

The data implied an average cost overrun of 16.5%. Cantarelli et al. (2012) further

stated that 55% of the projects‟ actual costs were greater, when compared to

estimated costs. Love, Sing, Wang, Irani and Thwala (2012), in their analysis of 58

transportation infrastructure projects undertaken from different states in Australia,

revealed mean rework costs of 11.21%, cost overruns of 13.28% and schedule

overruns of 8.91%. In a study conducted by Ijigah, Ogunbonde & Ibrahim (2012), the

average percentage of cost overruns of Abuja Millennium Development Goals

construction projects was found to vary between 48.9% and 7.1%.

Kagiri and Wainaina (2008) in their study based in Kenya about the factors of time

and cost overruns in power projects discovered that Kenya was also not a stranger

to the recurrence of cost overruns in their projects. The projects experienced time

and cost overruns at the same time, but cost overruns on their projects ranged from

9.4% to 29%. The crucial factors that contributed to overruns in the power projects

were contractor inabilities, improper project preparation, resource planning, and

interpretation of requirements, definition of works, timeliness, government

bureaucracy, and risk assessment.

Osman, Orman and Foo (2009) conducted research in the northern state of

Malaysia, and reported that most of the projects handled by the respondents display

variation, as about 95% of the respondents have never handled a project that

experiences no variation. Furthermore, all projects handled by the respondents have

realized net additions. This shows that variations usually cause the construction

34

costs to inflate due to the additional work that the contractor is required to carry out.

As referred to earlier, Mahamid (2013) conducted an investigation into the effects of

projects‟ physical characteristics on the cost deviation of 74 road constructions in

Palestine. In the analysis of cost under-estimation based on the project‟s category,

the study showed that small projects have the highest average of cost under-

estimations of 24.9% while large projects have the largest average of 15.9%. In the

analysis of cost overestimation in road construction, based on a project‟s category,

the large projects have the highest average of cost over the estimation of 8.2%,

while medium projects have the smallest average of 2.2%. In the analysis of cost

deviation in road construction based on a project‟s category, it was shown that small

projects have the highest cost deviation of 24.9%, while large projects have the

smallest average of 12.3% on average. Overall, this indicates that the average of

cost deviation in 74 road construction projects is 16.7%, ranging from 20.3% to 56%.

In conclusion, the statistical analyses of cost deviation of 74 road construction

projects indicated that 10% of the projects suffered from cost deviation.

ILL-Park and Dopoulou (2012) conducted research into causes of cost overruns of

35 transport infrastructure projects in Asia. The cost overruns reported in the study

ranged from a minimum of 2.3% to a maximum of 98.2% of the original contract sum.

The mean rate of cost overrun for the 35 projects examined was 28.6% signifying

that on average additional funds exceeding one quarter of the original contract sum

were needed to complete these projects. Results from the survey questionnaire

indicated that awarding contracts to the lowest bidder is the most significant and

frequently occurring cause of cost overrun in transport infrastructure in Asia. The

survey also revealed that 64% of the respondents confirmed that they encountered

cost overruns mainly in lump sum contracts, in contrast to 33% who reported cost

overruns primarily in measurement and 3% in cost reimbursement contracts.

2.8. Performance Implications of Cost Overrun Occurrence

Costs are considered to be the most crucial factor that contributes to the success of

a project, and in reality are the only factors on which everything hinges, and are the

most critical factor in the decision on whether a project commences or is shelved.

Azhar, Farooqui and Ahmed (2008) confirmed that a majority of cost overrun factors

(88%) lie in the medium severity impact range in the Pakistani study that they

35

undertook. The research also brought to light that large firms experienced 40% of

cost overruns.

Azhar et al. (2008) pointed out that the leading factor of cost overruns related to the

business and regulatory environment, which encourages corner costs and unsound

construction methods, is the prevailing practice of Pakistan Government to

implement its lowest bid price method. This method contains inbuilt problems and

does not produce the best value for money. Problems encountered with this method

were that the actual bid price was 50% of the estimated price.

Ali and Kamaruzzan (2010) concluded that cost performance of construction projects

in Malaysia is a critical issue in that country and the recurrence of this problem

indicated a need for research to clarify what should be done to mitigate the said

problem. Danso and Antwi (2012) highlighted that the development infrastructure

segment in Ghana is associated with many issues related to poor quality, lack of

safety concerns and project delays due to insufficient project planning and control.

The issues that were raised concerned the telecoms infrastructure projects which

proved very costly to the clients in the same industry, including raising concerns of

clients losing confidence in consultants, added investment risks, inability to deliver

value to clients and the lack of investment in telecoms projects.

Farooqui, Hussain, Umer and Lodi (2012) confirmed that the factors affecting costs

in Pakistan are the most crucial criteria for assessing the success of a project. In

their study, they have reached the following conclusions: Poor project management

drawn from (management factors) is the key factor affecting the construction costs;

this shows that the project manager and his/her teams are in urgent need of

improving the performance graph as far as the construction industry of Pakistan is

concerned. Delay in the involvement of the contractor in the design stage (design

factor) is the second most important factor affecting the construction cost; which

reveals just how critically this area needs the attention of the authorities. Poor

performance of work (management factor) is the third most crucial factor with a

definite potential for affecting the construction cost. The top three location factors

are: political unrest in the area, followed by remote location and unforeseen

ground conditions. The top three design factors are: delay in the involvement of

contractor during design stage followed by buildability / constructability and

36

incomplete drawings. The top three management factors are poor project

management followed by poor performance of work and poor cost control.

The above findings make the situation evident that the professional behaviour of the

people concerned to the construction industry is highly demanded.

2.9. Summary

The literature reviewed extensively covers the problem of cost overrun and proves

that it is a problem in developing countries. More importantly, literature on problems

of cost overrun in the context of South African projects has been examined. Recent

literature has also revealed that professionals in the construction industry at large

see this problem recurring more and more frequently; (see Cantarelli et al. 2012);

Love et al. (2012); Ijigah et al. (2012).

37

CHAPTER THREE

METHODOLOGY

3.1. Introduction

The literature review explored and provided sources which articulated methods for

the data collection, analysis and exposition, with respect to the objectives of the

research.

The following section affords a general description of the research strategy adopted

for this dissertation as well as a rationale for the methodology. Research may be

defined as a systematic process of collecting, analysing and interpreting data carried

out by researchers to be able to relate their studies to the scientific community

(Leedy and Ormond, 2010: 2).

The key topics in this chapter are: research method, data collection, sample size,

questionnaire design and data analysis.

3.2. Background to the Free State Province

A map is provided in the figure below.

38

Figure 3.1 Map of Free State Province

Source: www.tembalodges.co.uk and www.saeverything co.za

This province lies in the central part of South Africa, with the Kingdom of Lesotho

snuggling in the hollow of its bean-like shape. Bloemfontein, the capital of the Free

State, is also the judicial capital of South Africa. It is nicknamed the “City of roses”,

but is also known as Mangaung, the “Place of the cheetahs” by Sesotho speakers.

Mangaung is now the name of the Local Metro Municipality, which includes

Bloemfontein and a number of surrounding towns. The city has a well-established

judicial, institutional and administrative infrastructure.

The road network density of the province is the third highest in the country. The large

national road which forms the “artery” between Gauteng and the Western and

Eastern Cape, passes through the middle of the Free State Province.

The socio-economic difficulties faced by the province remain a daunting challenge

for provincial government. The issues of unemployment, poverty and disease remain

stubbornly high and seem to overshadow the strides it has made as a province. The

39

rapid rate of urbanisation also seems to put strain on the work that has been

achieved, with regard to provision of houses. This rate not only has a negative

impact on housing but also has implications for basic service delivery. National

Government has clearly indicated that education and health are the key priorities and

there is thus a need for provincial government to secure optimal funding for the two.

The Free State government also acknowledges the two key priorities, reflected in the

allocation awarded to the abovementioned priorities; the two are allocated close to

70% of the provincial budget (DOF, FS 2012).

The provincial infrastructure remains crucial for the economic growth of the province;

construction and proper maintenance of road infrastructure is at the centre of

ensuring prosperity for the Free State. The geographical centrality of the province

needs to be economically exploited for the benefit of its population; thus there is a

greater need to ensure that the road and rail infrastructure is of international

standard and is capable of attracting required investments (DOF, FS 2012).

Investing in infrastructure is greatly emphasised by the province, precisely because

of its labour intensive nature and thus its potential to create job opportunities. The

core components of an efficient, competitive and responsive infrastructure network

include:

Roads;

Water;

Electricity;

Information and Communication Technology (DOF, FS 2012).

Infrastructure spending for the province is an estimated amount of R2, 578 billion in

the 2013/2014 financial year (DOF, FS 2012). With that amount of money spent in a

single financial year it is imperative that most of it is used in such a way as to provide

value for money from the province‟s point of view. Bearing the objective of this study

in mind, if we were to say that for example 10%-20% of that expenditure went

entirely on cost overrun, it would mean that the province has actually not done

justice to its people in terms of what it has promised them. For instance, how many

houses could have been built for the communities as a result of spending that much

on cost overrun alone?

40

3.3. Research Method

Comprehensive literature review was conducted and used as secondary data. Once

the literature review was done, the research design was formulated by addressing

the research problem, and sub-problems. Research questions were formulated to

answer the research problems and objectives were also addressed to answer the

research questions. The research incorporated a field survey involving the

consultant QS who are executing projects in the FS province. Following this, the

questionnaire designed was distributed to a sample according to the criteria defined

in the sample determination.

The research strategy used in this study is descriptive in nature. A quantitative

approach was used to gather factual data and to study relationships between facts

and how such facts and relationships relate to theories and past empirical findings.

This method was used in order to understand the perception of QS professionals in

the Free State province of South Africa. The factors perceived to be influencing cost

overruns at construction projects in the province form the nexus of the survey.

The strategy followed in this research commenced with problem identification, done

through an unstructured literature review after which the research design was

formulated. The research included the above literature review in which the costs of

overruns were reviewed. In addition, a pilot study was undertaken prior to conducting

the main survey. The purpose of the said study was to test and ensure that the

questionnaire questions were clear and would be answered in a manner that would

achieve the target of the study. The questionnaire was modified based on the results

of the pilot study and was then distributed for the main survey. The questionnaire

was used to collect the required data in order to achieve the research objective.

3.4. Data collection

The primary data used in this research were obtained from various hard copy and

online sources. Journal articles, conference papers, books, government reports, and

previous theses were reviewed. The search for information was undertaken in the

Central University of Technology, Free State (CUT) library and computer

laboratories. The primary data used in the study were acquired through the

41

administration of a structured questionnaire. The administration of the questionnaire

was expedited as follows:

An email was sent using the questionnaire to the members of the sample frame

with an accompanying introductory letter on the 8th of February, 2013.

A reminder email was sent to the individuals

who did not return the questionnaire by 8th of March, 2013.

Due to the low response rate, another email reminder was sent to the members

who did not return the questionnaire by 4th April 2013.

Owing to the low response rate even after reminders, questionnaires were

additionally handed out during the ASAQS Chapter Meeting held on the 17th of

April, 2013.

Validity and reliability of results

The statistical process by which researchers discover whether two or more variables

are in some way associated with one another is known as correlation. The resulting

statistic, called a correlation coefficient, is a number between -1 and +1. Most

correlation coefficients are decimals (either positive or negative). Correlation

coefficients for two variables simultaneously say two different things about the

relationship between those variables (Leedy and Ormond 2010).

The strength of the relationship is indicated by the size of the correlation coefficient.

A correlation of +1 or -1 indicates a perfect correlation. A number close to either +1

or -1 (e.g., +.89 or -.76) indicates a strong correlation. In contrast, a number close to

0 (e.g., +.15 or -.22) indicates a weak correlation. Correlations in the middle range

(e.g., +.40 and .50 positive or negative) indicate a moderate correlation.

The Cronbach Alpha coefficient is a measure of inner consistency (Memon et al.,

2010). Reliability is low when Cronbach alpha is less than 0.3 and it cannot be

accepted (Memon et al., 2010). However the reliability of data is at a high level when

the Cronbach Alpha scores are more than 0.7 (Memon et al., 2010). In this research,

Cronbach Alpha was calculated using SPSS v17. It is indicative in each project cycle

as well as overall data are found to be scores of higher than 0.7 and therefore

considered high level and highly reliable for further analysis.

42

3.5. Questionnaire Design

The questionnaire was developed to assess the perceptions of QS consultants due

to the importance of the index of causes and remedial cost control measures as

regards cost overrun in the FS construction industry. Causes were first examined

and identified through a relevant literature review and by conducting a pilot study that

sought advice from experienced construction practitioners in the province.

The questionnaire contained three sections:

Section A addressed general information pertaining to the respondents.

Section B elicited responses pertaining to the factors causing cost overrun at

various phases: Design, construction and completion. A 5-point Likert scale

ranging from 1 to 5 (never to always), including an „Unsure‟ option, was applied in

the section.

The questionnaire included an additional question, where respondents were

required to mention the causes of cost overrun that are prevalent in the public

sector projects in the FS

This was followed by another question, rating answers on a scale of 1 to 10

where respondents were asked to indicate how frequently projects in the FS

experience cost overruns.

Lastly, answering Yes, No or Unsure, respondents were asked to indicate if the

frequency of cost overrun constituted a performance problem for the construction

industry in the province.

Section C concerned remedies to cost overrun in terms of project phases:

Design, Construction and Completion. A 5-point Likert scale ranging from 1 to 5

(not effective to very effective), which included an „Unsure‟ option was used.

3.6. The Population

Registered QS operating in the FS province were the main source of the primary

data for this particular study. The professionals have valid registration according to

the FS Chapter of the ASAQS. The studied population consisted of the professional

QS that have executed public building construction projects in this Province.

43

3.7. Sample Size Determination

A sample is a small proportion of a population selected for observation and analysis.

This research initially attempted to involve Architects, Construction Project

Managers, and Engineers practising in the province. Due to low responses from

these professionals, other than QS, the research population was ultimately limited to

registered QS alone. As far as possible, attempts have been made to ensure that the

samples drawn from the population are representative. The purposive sampling

method was used for this research. The sample size comprised 62 professionally

registered QS in the province, based on the ASAQS FS Chapter. The numbers were

determined on the basis of the time available for conducting the research work, and

the reliability of the respondents, so that the overall research work would indicate the

reality of the situation.

From the 62 questionnaires distributed to practitioners, 44 participated in the main

survey, which equates to a 70% response rate.

3.8. Role of QS as the Main Sample

Quantity Surveyors play a vital role in cost management of a project. They manage

all expenses relating to civil and building construction projects, from the initial

calculations to the final account figures. Their main purpose is to minimise the costs

of projects and ensure value for money. According to the JBCC principal agreement,

a principal agent is the one issuing an interim payment valuation certificate to the

client for payment to the contractor. On most of the projects in FS province the QS

seldom acts as the principal agent, as that role is usually held by the architects;

however, that does not absolve the QS from performing his or her cost management

duties on the project. In addition, the Project Manager has a responsibility to see that

the project is completed inter alia, within budget and relies on the expertise of the QS

to assist him/her to reach that goal. Thus, based on the objective of identifying

factors that influence cost overrun, QSs are central to the operation and are

therefore in a good position to assess the impact of any deviations from the planned

project, especially those which have cost implications for the projects. To highlight

the reasons for the chosen population the duties of the Quantity Surveyors‟ key role

in the construction projects are hereby stated as follows according the ASAQS: The

quantity surveyor emerged in England at the beginning of the nineteenth century,

44

although the firm Henry Cooper and Sons of Reading was established as early as

1785. Prior to the first usage of the term “quantity surveyor” in 1859, the terms

“measurer”, “custom surveyor” or “surveyor” were used. According to (ASAQS)

Association of South African Quantity Surveyors the services that are generally

offered by the quantity surveyor are:

Estimating and cost advice

Estimates and cost advice during all stages of the development of a project are

essential if the correct decisions with full awareness of their financial implications

are to be made.

Sophisticated techniques, extensive cost data banks and an intimate knowledge

of building and construction economics enable quantity surveyors to provide

reliable cost advice.

Cost planning

Clients want to know that they are receiving value for money, not only with regard

to the capital cost but also in respect of the running and maintenance cost of a

project.

Cost planning enables decisions on various design alternatives to be made with

actual costs being constantly monitored against original budgets.

Property development advice

A building should meet the functional dimensional and technological

requirements for which it was designed, should be aesthetically pleasing and

meet the cost limits of the client's budget.

A quantity surveyor is able to provide pre-design feasibility studies involving

technical and/or economic investigations thereby enabling a client to decide

whether, and in what form, to proceed.

Advice on tendering procedures and contractual arrangement

45

The choice of an appropriate form of contract for any given project will depend on

the nature of the project, the circumstances under which the work is to be carried

out and the particular needs of the client.

Quantity surveyors, in collaboration with architects are able to advise their clients

on the most advantageous procurement methods available, including: Contracts

incorporating bills of quantities, provisional bills of quantities and schedules of

rates.

Negotiated, lump-sum, managed and cost plus contracts, Package deals, turnkey

offers, etc. While Bills of Quantities are generally regarded as the most

economical and best method of obtaining a competitive price, the alternative

methods and types of tender documentation available need to be carefully

examined in consultation with the quantity surveyor, architect, etc. before a final

decision is made

In addition there will be other services such as: Financial control over contracts,

Valuation of work in progress, Cash flow budgets Final account in respect of the

contract.

The quantity surveyor's duty is essentially one of cost control. They measure and

value work in progress, determine the value of variations ordered by the architect or

engineer and ensure that a fair and equitable settlement of the cost of the project is

reached in accordance with the contract conditions. In conjunction with the architect

and other consultants the quantity surveyor will ensure that the financial provisions of

the contract are properly interpreted and applied.

Act in disputes, etc.

Quantity surveyors possess knowledge and expertise in the fields of costs and

contracts which equip them to prepare valuations for fire insurance, to advise in the

settlement of insurance claims and to be called as expert witnesses or act as

arbitrators in any court or arbitration on building disputes.

Other services include: Material list and values, Quantity surveying services in

respect of civil, mechanical, and electrical work, Property economics, Project

management, Fast track construction, Remuneration.

46

3.9. Appropriateness of Adopted Research Method

Dibonwa (2008) carried out a study identifying causes and remedies for cost

overruns in Botswana. The research was performed using a survey questionnaire

and multiple case studies of identified projects. A questionnaire on 81 causes was

divided into project cycles: 23 factors for the inception and planning stage, 44

factors for the implementation phase and 14 factors for the completion phase.

Furthermore, it dealt with 60 remedial measures, also divided into project cycles: 15

remedial measures for the inception and planning stage, 32 remedial measures for

the implementation stage and 13 remedial measures for the completion stage. Three

data analysis methods: (1) the Relative Importance Index (RII), (2) the rank

agreement factor and (3) the Kendall‟s coefficient of correlation were used. The first

two methods were a build-up to the Kendall‟s coefficient of correlation, which

provides a conclusive summary of ordinal, ranked cost overrun causal factors and

effective cost control measures.

Enhassi et al. (2010) also conducted an investigation that analysed the causes of

variation orders in construction projects in the Gaza Strip. A questionnaire was

developed to assess the perceptions of clients, consultants and contractors on the

relative importance of these causes. Through open ended questions the respondents

were asked to highlight their recommendations about any other factors which might

cause variation orders. The respondents were also requested to identify

recommended controls for minimising such orders. A five point Likert scale, ranging

from1 to 5 was adopted to analyse the importance of causes of variation orders. To

ensure validity of the questionnaire, two statistical tests were applied. The first is a

criterion-related validity test (Spearman test), which measures the correlation

coefficient between each item in one group and the whole group. From this test, the

correlation coefficient for each item of the group factors and the total of the field is

calculated.

Olawale and Sun (2010) conducted a study on cost and time control of construction

projects in the UK using a quantitative and a qualitative approach. A questionnaire

survey and semi-structured interviews were conducted as the data collection

methods of the study. The RII was used to analyse the survey results. Ramabodu

and Verster (2010) identified factors that contribute to cost overruns in the FS

47

Province of South Africa using a questionnaire survey and also conducted personal

interviews for data collection.

Mahamid and Bruland (2011) utilised a questionnaire to examine 51 causes

identified from their literature review and discussions with a number of parties

involved in the construction industry. These causes were classified into 5 groups,

according to the sources of cost overrun: financial factors, factors related to

construction parties, factors related to construction items, environmental factors and

political factors. They developed the questionnaire so as to identify the impact level

of the identified causes from the consultants‟ point of view. The impact level was

categorised on a five-point scale as follows: very high, high, moderate, little and very

little (on a 1 to 5 point scale). The collected data were analysed through calculation

of factors of importance index.

In addition, Doloi (2011) used the soft system methodology (SSM) employed for

problem analysis, based on an accurate identification of problems and thoughtful

articulation of the current industry situations, for insight to the consistent cost

overruns in major projects. The study also carried out interviews with selected

professionals. Amusan‟s (2011) study dealt with factors affecting cost performance in

Nigerian construction sites. Collection of the primary data took place with the aid of a

structured questionnaire designed on a Likert Scale of 1 to 4 rating scale, using the

severity index in determining the extent of severity of the factors discovered. „Very

relevant‟ was rated 5, „relevant‟ 4, „just relevant‟ 3, „irrelevant‟ 2 while „very irrelevant‟

was rated as 1.

Baloyi and Bekker (2011), investigated the causes of construction cost and time

overrun pertaining to the 2010 Soccer World Cup stadia in South Africa. The survey

was conducted by means of a questionnaire of carefully described factors. To

analyse and rank the results, the RII was used. RII = ΣW / (A × N), (0 ≤ index ≤ 1),

where W = weight given to each factor by the respondents, and ranges from 1 to 5

(where “1” is “never” and “5” is “always”), A is the highest weight (5 in this case) and

N = total number of respondents.

Ejaz and Ali (2011) did an assessment of delays and cost overrun during

construction projects in Pakistan, carrying out the study by means of a questionnaire.

The questionnaire was arranged in an order of priority scale: 1 = very low (less than

48

20%), 2 = low (20-50%), 3 = medium (50-70%), 4 = high (70-90%), 5 = very high

(100%). For the analysis of results, the relative importance of the factors responsible

for project delays and cost overruns was considered. Therefore, the observations

made and scoring given by the consultants, contractors and other respondents are

arranged by their relative weights, according to the level of importance of each (Ejaz

and Ali 2011).

In the literature review, Memon et al. (2011) identified 78 factors causing cost

overrun. A questionnaire survey and interviews were carried out amongst selected,

experienced personnel for their expert opinion in order to identify the significant

factors causing cost overrun in Malaysia. Five respondents were selected from each

of the respondent groups, including clients, consultants and contractors. The

questionnaire responses were analysed by the Average Index Method.

Love (2011) undertook a case study to evaluate the shortcomings of Flyvbjerg‟s

research on why economic infrastructure projects experience cost overrun. A series

of 24 in-depth interviews were held over four months. The interviews were digitally

recorded using a recording device and then transcribed and distributed to each

interviewee for comment and approval.

The objective of Kasimu‟s (2012) study was to identify the factors that caused the

cost overruns in building construction projects in Nigeria. A questionnaire was used

to obtain vital information concerning the major factors. They were ranked according

to the degree of significance as assessed by the respondents. The questionnaire

was developed to identify the significance impact level of these factors from the

viewpoint of specialists and experts in the construction industry. The five point Likert

scale method of designing questionnaires was adopted.

After reviewing the previous methodological approaches it was apparent to this

researcher that the most suitable one to use was the questionnaire survey. This type

of research is referred to descriptive exploratory method.

3.10. Analysis of the Data

The descriptive statistical method was used to compute the rank of mean scores of

responses. The procedure used in analysing data was intended to establish the

relative importance of the various factors that contribute to causes of construction

49

cost overrun, effects of overrun, and effective remedies of minimising overrun. There

are three steps used in analysing the data: calculating the RII, ranking of factors in

each project cycle based on RII, and determining the degree of correlation on

ranking the factors between the two groups.

The rank agreement factors for every cost overrun cause and remedy were

calculated by each professional, according to the way they ranked the causes and

remedies. Cost overrun causes rank agreements and effective cost control remedial

measures are provided in tables, in chapter four, for all three project phases.

The data collection and method of analysis used in this research were values of

Spearman‟s rank correlation. Values in the range 0 ≤ ≤ 1.0 indicate good

agreement, whereas values near –1 or in the range 0 ≥ ≥ -1.0 imply disagreement

on the factors ranked by professionals.

Reliability tests are conducted to check the stability and consistency of data. The test

carried out in this research was the Cronbach Alpha that is widely accepted, in which

data are considered low level when the Cronbach Alpha score is less than 0.3, which

is indicative of the fact that data are not reliable and therefore cannot be accepted.

Reliability is high level when the Cronbach Alpha is more than 0.7, where it indicates

that the inner consistency of the indices table is at a high level and can be readily

accepted (Memon et al., 2010).

3.11. Conclusion

This chapter focused on the fundamental research concepts relating to the

methodology adopted in the study because its objective was to outline the

methodology used. The research strategy adopted was used to justify the selection

of various methods and techniques of research. Firstly, a brief introduction and

background to the Free State province was provided. Secondly, the research

processes were described and discussed. In particular, the survey method based on

the questionnaire as a data collecting method, as the main strategy adopted for the

investigation, was discussed. The method of analysis of data was clearly articulated,

as was the way in which the test for reliability of data was carried out. The steps that

relate to the survey method were then described: the questionnaire design, the

research design, the population, sample size determination, role of QS as the main

50

sample, review of previous studies, methodology of this dissertation, and a brief

description of the analysis of the data.

51

CHAPTER FOUR

FINDINGS AND DISCUSSION

4.1 Introduction

In this chapter, the findings of the research on causal factors of cost overrun and

remedies in the FS province are presented and discussed together with an analysis

of the data collected. The main statistic calculated in the analysis is the mean. The

presentation of the data is by means of graphs, pie charts and tables. The

information relating to the background of the QS, their length of working experience

in the Industry, the response rate to questionnaires and responses are provided first.

As mentioned, questionnaires were used in the collection of the data. A five-point

Likert scale adjoined by „Unsure‟, ranging from „Never‟ to „Always‟ options for causes

of cost overrun, was employed. Additionally, a five-point Likert scale adjoined by

„Unsure‟ and ranging from „Not very effective‟ to „Very effective‟ was utilised to

measure the perceptions of QS consultants within the building construction industry

in the Free State Province. Tables 4.1 to 4.6 indicate the perceptions of respondents,

relative to causes and remedies, on the three project life cycle stages: Design,

Construction and Completion phases, in terms of percentage responses to a scale of

1 to 5, and a mean score (MS) ranging between 1.00 and 5.00. MSs were calculated

for each statement to enable an interpretation of the percentages relative to each

point on the response scale. Given that there are five points on the scale, and that 5

– 1 = 4, the ranges were determined by dividing 4 by 5 which equates to 0.8.

Consequently, the ranges and their definitions are as follows:

> 4.20 ≤ 5.00 represents a range between a near major to a major / major cause/

remedy;

> 3.40 ≤ 4.20 one between a moderate cause to a near major / near major cause/

remedy;

> 2.60 ≤ 3.40 one between a near minor to a moderate cause / moderate

cause/remedy;

> 1.80 ≤ 2.60 one between a minor to a near minor cause / near minor

cause/remedy, and

> 1.00 ≤ 1.08 one between a minor to near minor cause/remedy.

52

SECTION A OF THE QUESTIONNAIRES

4.2. Please Indicate how long your organisation has been in existence?

As shown in Figure 4.1, the respondents had balanced years of experience in the

construction industry. There were 6 respondents with experience ranging from 0 – 5

years. Furthermore, there were 23 respondents with experience ranging from 5 – 10

years and 15 respondents with experience above 10 years. As shown, 14% of the

respondents‟ organisations have been in existence for less than 5 years. In addition,

52% of these organisations have been in existence for between 5 and 10 years while

14% of these have been in existence for over 10 years.

0

10

20

30

40

50

60

0 - 5yrs 5 - 10yrs Over 10yrs

No

. & %

of

resp

on

den

ts

Years in existence

Existence of the Organisation

% of existence

Figure 4.1: Years in existence of the organisation

4.3. Responses to Questionnaires

Figure 4.2 shows that among the 62 distributed questionnaires, 44 were returned

after 8 weeks of initial distribution. Furthermore, no reasons were provided for the 18

questionnaires that were not returned. However, during visits to offices of people

who had not returned questionnaires, 10 respondents indicated reasons for non-

response such as: they did not have time to fill in the questionnaires; they forgot to

fill it in; they had misplaced it.

53

Figure 4.2 Response to questionnaires

4.4. Please Indicate Your Current Position in the Organisation?

In Figure 4.3, 11% of the respondents were directors of their respective consulting

QS firms; while 89% of the respondents were QS working for consulting firms

operating in the FS province.

Figure 4.3 Positions of respondents

4.5. Please indicate the length of your experience in the Construction

Industry?

From Figure 4.4, the years of experience of the respondents who filled out the

questionnaires may be observed. 18% of the respondents had a maximum of 5

54

years or less experience in the construction industry. In addition, 48% of the

respondents had gained experience in the construction industry for more than 5

years, but less than 10 years. Furthermore, 34% of the respondents had more than

10 years‟ experience in the industry.

Figure 4.4 Years of experience of respondents

SECTION B OF THE QUESTIONNAIRE

4.7. Causes of Cost Overrun

Table 4.1 depicts the respondents‟ rating of the causes of cost overrun during the

design phase of the project life cycle. It is notable that all causes in the category

have MSs > 1.80 ≤ 5.00, which indicates that respondents identify the causes as

falling between minor causes and major causes.

Table 4.1 indicates inadequate planning as the most critical cause of cost overrun in

the province. This finding is supported in the work of Nega (2008), Ramabodu and

Verster (2010), and Ameh (2010). It clearly shows that professionals are rushing to

have the projects started without giving themselves enough time to prepare properly.

What the table further displays is that professionals are not working together at the

time when documents are being prepared for tendering. This reveals that the most

important stage of the project, adequate planning is not allocated the requisite time

for preparation which may prevent a lot of unnecessary expenses later, when the

project has commenced. Following this, the next cause identified is that of an

55

incomplete design at the time of tender. This is supported by the research of

Dibonwa (2008), Ramabodu and Verster (2010), Mahamid et al. (2011) and Kasimu

(2012). Because of rushing to get the job out on tender, it often goes out with

designs which are subject to more revisions, leading to further cost implications. This

type of practice has shown in more ways than one that the end results of incomplete

designs often have cost implications than cost saving to the project. The incomplete

designs often open a window for the client to increase the scope of the project

further, thus resulting in cost overrun to the detriment of the project. Whereas, if the

designs were complete and the client involved in the process; then the scope could

have been finalised without expecting immense changes later that have cost

implications for the project.

The least likely cause indicated by the respondents was that of the lack of

experience as regards the project location. This also applies to new construction

work where contractors seldom have much to investigate about the sites on which

they are going to work. This of course does not mean that this cause has no direct

influence on causing cost overrun in projects. It simply means that some

respondents rate it very low because of their position with regard to the project. A

contractor will on the other hand rate the factor higher than consultants who are

agents of the client in a project.

Table 4.1: Causes of cost overrun – Design phase [a]

Cause Mean Rank

Inadequate planning 4.00 1

Incomplete design at time of tender 3.70 2

Lack of co-ordination at design phase 3.70 2

Procurement and non-related procurement related factors 3.60 3

Pre-contract budget constraints 3.50 4

Inadequate project preparation and planning 3.50 4

Lack of pre-contract project co-ordination 3.40 5

Ignoring items with abnormal rates during tender evaluation, especially items

with provisional quantities

3.40 5

Technical omissions at design stage 3.20 6

56

Cause Mean Rank

Lack of experience of technical consultants 3.00 7

Increased costs to crash activity time arising out of political pressure 2.90 8

Some tendering manoeuvres by contractors, such as frontloading of rates 2.80 9

Difference between actual geological conditions and the original survey 2.70 10

Lack of experience of project type 2.70 10

Lack of experience of project location 2.50 11

Table 4.1: Causes of cost overrun – Design phase [b]

Table 4.2 presents the respondents‟ rating of the causes of cost overrun in the

construction phase of the project life cycle. It is notable that all causes in the

category have MSs > 1.80 ≤ 5.00, which indicates that the causes may be deemed

to be more of a major factor than minor.

Table 4.2 indicates that the most critical cause of cost overrun in the construction

phase is „additional work requested by client‟. The earlier research work done by

Azhar et al. (2008), Dibonwa (2008), Kaliba et al. (2009) and Ameh (2010) confirms

this case. The professionals have no total control over what the client wants; if he

was involved during the design stage it could have been managed. As a result, their

approach has to be reactive to the problem as it arises as they are never allowed

enough time to prepare for handling such problems. The lack of preparation in the

design phase exerts a major influence on how the professionals will be able to

handle causes of cost overrun appearing in the construction phase.

The following factor is that of the contractor‟s unstable financial background, a

finding substantiated in previous studies by Long Lee Hoai (2008); and Memon et al.

(2010). Sometimes contractors are awarded tenders but do not have the cash to

finance the project, nor do they qualify for a bank loan since the tendering system

does not guarantee sustainable income. This in turn delays a project due to a

shortage of materials on-site. Although this cause will not lead to the client bearing

the costs, in the end the delay will have cost implications if the client delays payment

to the contractor. This contractor will be doing the job at the pace of the cash flow of

the current project. Finally, the respondents nominated the least likely cause as site /

57

poor soil conditions. The site investigation or geotechnical report is seldom carried

out on public sector projects, except on mega projects. This cause makes a

significant contribution to causing cost overruns, especially on unstable ground.

Table 4.2: Causes of cost overrun – Construction phase[a]

Cause Mean Rank

Additional work at owners‟ request 4.70 1

Contractor‟s unstable financial background 4.10 2

Delays in issuing information to the contractor during construction stage 3.90 3

Delays in decision making by government, failure of specific coordinating 3.70 4

Contractual claims, such as, extension of time with cost claims 3.50 5

Delays in costing variations and additional works 3.50 5

Changes in owner‟s brief 3.50 5

Monthly payments difficulties from agencies 3.50 5

Poor contractor management 3.50 5

Delay in construction, supply of raw materials and equipment by contractors 3.40 6

Improvements to standard drawings during construction stage 3.40 6

Omissions and errors in the bills of quantities 3.30 7

Labour cost increased due to environment restrictions 3.30 7

Indecision by the supervising team in dealing with the contractor‟s queries resulting in delays

3.20 8

Lack of cost reports during construction stage 3.20 8

Materials cost increased 3.10 9

Inadequate review 3.10 9

Re-measurement of provisional works 3.10 9

Adjustment of prime cost and provisional sums 3.00 10

Fluctuations in the cost of building materials 3.00 10

Logistics due to site location 2.90 11

Labour unrest 2.90 11

New information on existing site conditions 2.90 11

Lack of cost planning / monitoring during pre-and-post contract stage 2.8 12

58

Cause Mean Rank

Weather conditions 2.80 12

Lack of experience of local regulations 2.80 12

Changes made by the contractor 2.70 13

Changes made due to modifications by others 2.60 14

Change order owing to legislative change or policy change 2.60 14

Site / poor soil conditions 2.30 15

Table 4.2: Causes of cost overrun – Construction phase[b]

Table 4.3 depicts the respondents‟ ratings of the causes of cost overrun during the

completion phase of the project life cycle. It is notable that all causes in the category

have MSs > 1.80 ≤ 5.00, which indicate that the causes are significant in this context.

It is noteworthy that the most important cause of cost overrun indicated in Table 4.3

is late contract instruction after practical completion. Ramabodu and Verster (2010)

support this view in their earlier findings. Issuing a late contract instruction at this

stage of the project indicates lack of proper planning during the design stage. After

practical completion, it is anticipated that the client will take possession of the site.

Thus if there are contract instructions still being issued once the site is in possession

of the client, it is a sure indicator of extra expense to the client, when the job is

supposed to have reached completion. Following this cause is that of poor

workmanship; a view supported by the earlier work of Long Lee Hoai (2008), Ameh

(2010) and Memon et al. (2010). It is highly unlikely that the late contract instruction

will be due to a list of snags provided by the contractor. Once the principal agent has

issued the certificate of practical completion, then the building is ready for the client

to occupy, with the only outstanding work being that of the snag list which does not

have cost implications for the client. The least frequent cause in the completion

phase is errors in the bills of quantities. It could be that certain items were under-

measured so that, if they are expensive items, they could cause a major increase to

the contract sum. The respondents deemed this the least contributor as QSs often

over-measure the project to create contingencies in case the project requires more

funds.

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Table 4.3: Causes of cost overrun – Completion phase

Cause Mean Rank

Late contract instruction after practical completion 4.50 1

Poor workmanship 4.30 2

Delay in resolving disputes 3.80 3

Delay in final account agreements 3.50 4

Design failures 3.30 5

Works suspended due to safety reasons 3.20 6

Artificial disasters 2.10 7

Errors in the bills of quantities 2.00 8

4.7. Causes of Cost Overrun that are Prevalent in Public Sector Projects in the FS Province?

The question posed to respondents required them to mention any cost overrun

based on their experience, which they felt was prevalent in the public sector projects

in the FS province. There were several causes mentioned by the respondents but

the commonest one was „additional work requested by the client‟, followed by

„inadequate planning during the design stage‟. The third most prevalent factor

mentioned was that of low bidding by contractors and the fourth was the inability of

engineers to do proper soil tests. This cause was as a result of most projects being

carried out without proper soil investigation, which could therefore cause a variation

order. The fifth most prevalent cause was extension of time with cost claims. The

main reason for extension of time was because of unpredictable weather conditions,

causing delays to the projects, with cost to the client. It is evident from the above

factors that if proper planning is implemented and proper time allocated in all the

projects, then cost overrun will be kept to a minimum in all the projects executed in

the FS province.

60

4.8. How Frequently Do Projects in the FS Province Experience Cost

Overrun?

According to the respondents, the frequency of cost overrun is 7.5 times out of 10.

This clearly shows that projects in the FS province are frequently experiencing cost

overruns. According to the results, when converted to percentages, 75% of the

respondents experienced cost overrun. Only 2.5% of the respondents responded

“Very low” on how frequently they experienced cost overruns here.

4.9. Does the Frequency of Cost Overrun Constitute a Performance Problem

for the Construction Industry?

It is notable in Figure 4.5 that the respondents regard the frequency of cost overrun

as a performance problem for the construction industry in the FS. Eighty-two percent

(82%) of the respondents answered “Yes” to this question. Only 6% of the

respondents answered “No” and 2% answered “Unsure”. This simply means that

professionals in the FS have to do a proper analysis of the projects they undertake in

the future. Adequate records of previous projects should be kept so as to learn to

improve the circumstances of future projects.

Figure 4.5: Cost overrun constitutes a performance problem

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SECTION C OF THE QUESTIONNAIRE

4.10. Remedies for Cost Overrun

Table 4.4 presents the respondents‟ ratings of the remedies for cost overrun in the

construction phase of the project life cycle. It is notable that all remedies in the

category have MSs > 2.60 ≤ 5.00, which indicates that the remedies could be

effective.

The remedy that is listed as most effective is that of the design being completed at

time of tender. The scope of work is directly and markedly influenced by this remedy.

The impact of completed designs at the time of tender is that it regulates the

unnecessary additions that the client could exploit, due to incomplete designs.

Finalisation of the design gives the project team a framework for what to expect from

the project. The monitoring of the project‟s progress may be easily handled since

one very important aspect has been finalised. Following on this factor is that of

project preparation and planning. Projects that are better prepared and adequately

planned often are completed with minimal disruptions or unnecessary expenses. The

public sector could also play a vital part in rolling out of infrastructure projects. Public

officials usually delay the start of project roll-outs for a given financial year. The

rolling out starts late and at this time they are eager to spend funds simply to use all

the money in the budget so they can receive more for the next financial year.

Therefore, better preparation for projects could be achieved if communication

channels were provided between public officials and professionals of the industry.

The least effective remedy that was nominated was that of proper experience of

project location. As the populations in this research are representative of the clients,

it is likely that project location will not be deemed a very effective remedy to the

project.

Table 4.4: Remedies for cost overrun – Design phase [a]

Remedy Mean Rank

Completed designs at time of tender 4.70 1

Adequate project preparation, planning 4.60 2

Adequate pre-contract project co-ordination 4.50 3

Adequate pre-contract budget 4.40 4

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Remedy Mean Rank

Adequate co-ordination at design phase 4.30 5

Adequate time provided for, instead of fast tracking, projects 4.10 6

Comprehensive project planning 4.10 6

Appointment of highly experienced technical consultants 4.00 7

Attending to procurement and non-related procurement related factors 3.90 8

Resolving items with abnormal rates during tender evaluation, especially items

with provisional quantities

3.80 9

Effective geological conditions survey 3.80 9

Minimum changes at design stage 3.60 10

Scrutinising frontloaded rates at time of tender 3.50 11

Proper experience of project type 3.30 12

Proper experience of project location 3.20 13

Table 4.4: Remedies for cost overrun – Design phase [b]

Table 4.5 presents the respondents‟ ratings of the remedies for cost overrun in the

construction phase of the project life cycle. It is notable that all remedies in the

category have MSs > 1.00 ≤ 5.00, which indicates that the remedies are rated as

being between minor and major remedies.

The remedy that is considered very effective is „controlled owners‟ requests‟. When

the project is taken from pillar to post, it creates a reactive approach to solving a

problem. Clients, as much as they are owners of the projects, do sometimes need to

be educated about their role in a project situation. Some clients are very controlling

and do not allow those professionals whom they have hired to take care of the

business of construction. While clients do have the right to be fully involved in their

own investments, the degree to which that happens needs to be clarified.

Following this remedy is the one described as minimum changes in owner‟s brief.

This remedy is similar to the former, most effective one. The minimum changes also

entail education of the client. Clients can effectively bring about a balance and make

a positive contribution to the entire project. What is important here is that they should

be advised when they are requesting excessive changes to the projects. It is not

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essential for clients to be knowledgeable in construction, but a little knowledge would

go a long way to making the representative‟s job a little easier.

The least effective remedy was that of controlled changes made necessary due to

modifications made by others. The business of construction, its constraints and

methodology, are the problem of the contractor. The probable reason for this remedy

could stem from a situation where other consultants such as interior designers

decide to introduce a different look that may have huge cost implications. This

remedy is least effective; it occurs rarely except on mega projects, which are seldom

undertaken in the FS Province.

Table 4.5: Remedy for cost overrun – Construction phase [a]

Remedy Mean Rank

Controlled owner‟s request 4.90 1

Minimum changes in owner‟s brief 4.80 2

Timely issuing of information to the contractor during construction stage 4.70 3

Timely decision making by government, failure of specific coordinating 4.50 4

Timely improvements to standard drawings during construction stage 4.50 4

Comprehensive cost planning / monitoring during pre-and-post contract stage 4.40 5

Consistent cost reporting during construction stage 4.00 6

Provision for monthly payments 4.00 6

Timely decisions by the supervising team in dealing with the contractor‟s

queries resulting in delays

3.90 7

Timely costing of variations and additional works 3.70 8

Provision for change order owing to legislative change or policy change 3.70 8

Provisions for changes made by the contractor 3.70 8

Adequate provision for prime cost and provisional sums adjustments 3.60 9

Adequate provision for contractual claims, such as, extension of time with cost

claims

3.60 9

Minimum errors in the bills of quantities 3.60 9

Proper project implementation 3.60 9

Proper contractor management 3.60 9

Adequate experience of local regulations 3.50 10

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Provisions for materials price escalations 3.40 11

Adequate re-measurement of provisional works 3.40 11

Timely supply of raw materials and equipment by contractors 3.40 11

Remedy Mean Rank

Adequate review 3.10 12

Providing sufficient site / soil conditions information 3.10 12

Adequate planning of logistics to site location 3.10 12

Provision for labour unrest 3.00 13

Contingency for new information on existing site conditions 3.00 13

Adequate provision for unpredictable weather conditions 2.90 14

Adequate provision for labour cost increased due to environment restrictions 1.50 15

Controlled changes made due to modifications by other organisations 1.50 15

Table 4.5: Remedy for cost overrun – Construction phase [b]

Table 4.6 presents the respondents‟ ratings of the remedies for cost overrun during

the completion phase of the project life cycle. It is notable that all remedies are in the

category have MSs > 2.50 ≤ 5.00, which indicates that the remedies are rated

between near minor remedies to major effects.

The most effective remedy is good workmanship. One of the aspects of project

success is completion to the right quality. Projects that are built to the right quality

are what everyone in the end is going to judge the performance of the project to. As

much as all the other attributes are also important to the project, its appearance after

completion is what will be the end results. This sums up the importance of quality

above other attributes.

Following this remedy is a method of timely dispute resolution. Sometimes

construction projects experience high levels of disagreement and conflicts may

ensue. There are healthy and unhealthy conflicts. Where money is involved conflict

could be manifested due to varying interests. The challenge here is that the

contractor is in the business of making money and sometimes may use underhand

tactics to do so. The work of the professionals is to make sure that the clients receive

the service they deserve and are given what they paid for. It must be said that

65

delaying of disputes might mean suspended work on site, which affects the project

negatively.

The least effective remedy, according to the respondents, is making provision for

artificial disasters. Disasters seldom occur in FS, but if they were to, they may result

in total destruction of the whole project. Although very rarely provided for, it is a very

important remedy to minimise what might have been a total disaster to the project.

Table 4.6: Remedy for cost overrun – completion phase

Remedy Mean Rank

Good workmanship 4.50 1

Timely resolving of disputes 4.30 2

Timely contract instruction after practical completion 4.20 3

Timely final account agreements 3.80 4

Comprehensive safety plan 3.00 5

Adequate designs 2.80 6

Minimum errors in the bills of quantities 2.50 7

Provisions for artificial disasters 2.50 7

Table 4.7 clearly indicates a strong correlation between all stages of the project. It

may be stated that there was a strong correlation among respondents from all 3

phases of the causes of cost overrun and an increase in correlation among

respondents‟ answers with the remedies for the same phases. The correlation score

was above 0.7; therefore the data was highly reliable and consistent. The correlation

scores of the design phase indicate these grew from 0.75 from respondents‟ ratings

of the causes of cost overrun to 0.78 that pertains to remedies for cost overrun. In

the construction phase, there was a near perfect correlation among respondents.

The correlation score of the causes of cost overrun increased from 0.80 to 0.95 of

the remedies of cost control measures. This, as was previously indicated, showed a

near perfect correlation matrix score among respondents of the survey.

Table 4.7: Group correlation matrix and Cronbach alpha

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Correlations Cronbach Alpha

Project Phase Causes of

cost overrun

Remedies for

cost overrun

Causes of cost

overrun

Remedies

for cost

overrun

Design .75 .78 .914 .943

Construction .80 .95 .934 .955

Completion .83 .89 .908 .897

The completion phase also showed an increase in correlation scores. These

developed from 0.83 of the causes of cost overrun ratings among respondents to

0.89 of the remedies of cost control measures of the same phase. The Cronbach

alpha of all the project phases also showed a strong development from the causes of

cost overrun to the remedies of the cost control measures that may be put in place:

based on the Cronbach alpha (0.914 to 0.943) of the design phase, followed by

(0.934 to 0.955) of the construction phase, and then (0.908 to 0.897) of the

completion phase.

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CHAPTER FIVE

CONCLUSIONS AND RECOMMENDATIONS

5.1. Introduction

This chapter discusses the research findings in fulfilment of the research objectives

and documents its contribution to original research. It also suggests areas for further

research. As presented in chapter 1 the aim of this research was to identify the major

cost overrun factors in the construction sector of the Free State Province of South

Africa and the effective remedial cost control measures, generate and recommend

possible solutions.

5.2. Summary of the Findings

Causes of cost overrun

From the design stage of the projects life cycle respondents rated inadequate

planning as the most frequent cause of cost overrun. This is followed by the

incomplete design at time of tender. The construction stage however shows that

respondents rated additional work at owner‟s request as the most frequent cause of

cost overrun. This is strangely followed by contractor‟s unstable financial

background. At the completion stage the most rated cause of cost overrun is late

contract instruction after practical completion. And then, poor workmanship by the

contractor, as the following most rated cause of cost of overrun. From rating a

causes that are prevalent in the public sector, additional work requested by the client

was rated the most frequent by respondents.

On the frequency of projects in the Free State province experiencing cost overrun,

respondents reported that 7.5 times out of 10 experienced cost overrun. And where

respondents were asked if the frequency of cost overrun constituted a performance

problem, 82% of the respondents answered Yes, and 6% answered NO, and 2%

were unsure.

Remedies for Cost overrun

From the design stage of the projects life cycle respondents rated completed designs

at time of tender as the most effective remedy of cost overrun. This is followed by the

adequate project preparation and planning. The construction stage however shows

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that respondents rated controlled owner‟s request as the most effective remedy of

cost overrun. This is followed by minimum changes in owner‟s brief. At the

completion stage the most rated remedy of cost overrun is good workmanship by the

contractor. And then, timely resolving disputes, as the following most rated effective

remedy of cost of overrun.

5.9. Conclusions related to Research Objectives

The conclusions provided are in respect of the primary objective of the study, which

is to identify causes of cost overrun and effective cost control measures of public

building projects in the Free State Province; the analysis has provided evidence

related to the topic.

Objectives:

Within the context of the study, the research project intended to:

a) Identify major causes of cost overruns in South African construction.

b) Identify the causes of cost overruns that are prevalent to public sector projects.

c) Estimate the rate of public sector projects that experience cost overruns in the

Free State province

d) Ascertain if the rate of cost overrun occurrence constitutes a performance problem

in the Free State Province.

e) Formulate recommendations aimed at solving the current and future cost related

challenges in the South African construction industry.

Some of these causes were already addressed in the literature review in Chapter

two. Based on the first objective, identifying the major causes of cost overrun in

South Africa, the study found that inadequate planning, additional work at owners‟

request and late contract instruction after practical completion were the major causes

of cost overrun at three different stages, design, construction and completion, of the

project cycle . The study also identified effective cost control measures which were

identified as: completed design at time of tender, controlled owners‟ request and

good quality workmanship, respectively during these 3 different stages of the project.

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Regarding the second objective, identifying the causes of cost overrun that are

prevalent to the public sector projects, the survey revealed that additional work

requested by client, inadequate planning and low bidding by contractors were the

causes here.

The third objective, to estimate the rate of public sector projects that experience cost

overruns in the FS province, was achieved because the survey indicated that 7.5 out

of ten projects fall in this category.

The fourth objective, to ascertain if the rate of cost overrun occurrence constitutes a

performance problem in the FS Province, was achieved since the survey showed

that 82% of the respondents answered “Yes”.

5.4. General Conclusions

The South African construction industry is arguably the most advanced in sub-

Saharan Africa. Therefore, performance related issues such as cost overrun need to

be evaluated and addressed so that spending on projects may be properly used for

the good of the country. The Department of Public Works is mostly in charge of the

spending on infrastructure projects in South Africa. The sooner government

improves utilisation of budgeted expenditure, the sooner such expenditure could

enhance the life of South African people. If departments are able to curb

overspending and start earning value for money on projects, then the country could

sustain itself for a long time without a high debt deficit. Government officials are

seldom worried about cost overrun, but only seem worried about reaching their

targets in terms of the cash-flow. Officials want to spend money they have budgeted

for as soon as possible so they can claim more in the next financial year. Because of

this mind-set, best value for money usage of budgets is not on their agenda, creating

a problem for the industry. On the other hand, when projects go over budget, client

representatives or the professional team revise their fees to the latest adjusted

contract amount, except the client. The contractor gains a little extra in positive

variation orders while consultants receive a little more from their fees because of the

increase in contract amounts. However, some variations are uncontrollable and

therefore cannot be avoided. The normal method of executing a project in the FS is

that consultants are appointed and the architect provides preliminary sketches for an

estimate to be provided by the QS. After this the consultants come together for a

70

discussion once the estimate has been calculated, and then transmitted to the

department for approval. After the approval it may occur that the job might not start

immediately as the government is still trying to secure the budget for the project.

Sometimes the delay might take several months; such a case offers an opportunity

for revisions in estimates to be done. This takes place with minimal co-operation

from the officials who arrive later and then resume their planning, making immense

changes to the original scope, causing projects to undergo heavy cost overruns in

the process. Sometimes projects are rushed by the officials when they realise they

have to spend money quickly just to exhaust the budget before the next financial

year commences. Officials frequently take longer to resume infrastructure spending,

especially after the new financial year has just commenced, and that puts pressure

on them to spend the bulk of the budget when the financial is about to end

Identification of causes of cost overrun is a prerequisite to minimise or to avoid cost

overrun in the construction industry. The main objective of this research was to

identify the major causes and control measures related to cost overruns on public

sector projects in the Free State Province of South Africa. Agreements of the

respondents on the causes of cost overrun, i.e. between causes of cost overrun and

remedies, in three phases of the project cycle were also tested. The data gathered

from the survey were analysed using the mean score (MS) and Spearman‟s

correlation coefficient. The analysis of the results from the open-ended part of the

questionnaire was carried out using descriptive analysis.

5.5. Conclusions from Research Findings

From the analysis of the results, the following conclusions were drawn:

Identifying the occurrences of cost overrun in public building projects in the Free

State projects is important before identifying its causes. Seventy-five percent

(75%) of the respondents said that they experienced cost overrun in the projects

they executed in the Free State.

From the results of this study, 54 causes of cost overrun were identified by the

71% of the sample group who responded. The major causes were also identified

by the study, based on the ranking of the rate of occurrence of the variables:

71

inadequate planning, incomplete design at time of tender, and late contract

instruction after practical completion.

Results of the study also show 54 effective cost control measures. The most

effective cost control measures were completed designs at time of tender,

controlled owners‟ requests and good workmanship.

The study revealed that 82% of the respondents agreed that cost overrun

constitutes a performance problem for the construction industry in the Free State.

Better planning of projects needs to be implemented, and early involvement of

government officials in projects is of paramount importance.

From the correlation results, it is notable that the causes might be remedied by

the effective cost control measures suggested by the respondents.

5.6. Recommendations

Based on the findings of the research, the following recommendations are proposed.

Continuous coordination and direct communication with the public officials, which

will eliminate the opportunity for the client to increase the scope if all his needs

are addressed in time, before going out to tender. This would help in eliminating

change orders or variations in contract documents.

It is further suggested that there is provision for flexibility in the designs of the

project so that they can be proactive towards imminent changes that may be

introduced by the client during construction.

Implementation of value management techniques to ensure that the designs

adequately cover what the client brief entails. This will also ensures that the

designs include all the needs of the client, leaving a limited opportunity for

changes at a later stage.

Improved cost control and monitoring measures should be implemented

throughout the project stages.

A comprehensive client brief is compiled at project inception.

Requests for information should be addressed in a timely and adequate manner.

72

The appointment of contractors should be defect free in terms of capabilities and

evidence of ability in knowledge and skills required to complete the project.

5.7. Further research

Although the study has identified the major cost overruns in the Free State as well as

the most effective cost control measures, a study data of the executed projects is

necessary to provide further evidence of the problem. The data gathered from the

desk study will further reinforce the findings of this research, because this study

could not address this section because of lack of data. The level of performance of

cost overrun will assist the professionals and the public officials to become aware of

how severe the problem of cost overrun in the FS Province is.

73

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79

APPENDIX 1

BLOEMFONTEIN CAMPUS

DEPARTMENT OF BUILT ENVIRONMENT

Tel . +27 (0)51 507 3649 Fax. +27 (0)51 507 3254

tmonyane@cut.ac.za

08 February 2013 Dear Madam / Sir

Re: Identifying causes of cost overruns and effective remedies of Public

construction projects in the FS Province of S.A

This survey is part of a research project aimed at meeting the requirements for an

M.tech in Quantity Surveying qualification at the Tshwane University of Technology

This study intends to, inter alia, determine the causes, effects, and remedies

associated with conflicts between built environment professions working together on

construction projects.

Kindly complete the accompanying questionnaire and return same to:

Department of Built Environment

Central University of Technology, FS

Private Bag X20539

Bloemfontein

9300

Please return either through the postal or let me know when I can pick it up at your

office or Email (preferred) tmonyane@cut.ac.za or per facsimile to: (086) 506 7643

on or before 08 March 2013.

Attention: Mr Godfrey Monyane

Should you have any queries please do not hesitate to contact Mr Godfrey Monyane

at 073 341 2646 or per e-mail at tmonyane@cut.ac.za

Please note that the confidentiality of your response is assured.

Thanking you in anticipation of your response.

Yours faithfully

80

APPENDIX 2

Mr Godfrey Monyane M.tech (Quantity Surveying

student),

Section A: General Information

Please indicate your response by making an X in the block of your choice

e.g

1. Please indicate the sector that your organisation belongs to among the under listed?

Private

Public

Both

2. Please indicate how long your organisation has been in existence?

0-5 years

5-10 years

>10 years

3. Please indicate the approximate number of employees in your organisation?

1 - 20

101 - 200

21 - 50

> 200

50 - 100

4. Please indicate your current position in the organisation?

Director

Site Agent

Foreman

Supervisor

Managing director

Construction / Project manager

Architect

Quantity

surveyor

5. Please indicate the length of your experience in the construction industry?

1-5 years

5-10 years

Over 10 years

6. Please indicate the highest formal qualification you have obtained?

Matric certificate

Bsc Honours

Diploma

Masters

Bsc Degree

Doctorate

Bachelor of Technology Other

81

Section B: Causes of cost overruns

On a scale of 1 (never) to 5 (always), please indicate the extent to which each of the mentioned causes leads to

cost overruns at the design phase in public sector projects in the Free State province (please note the ‘unsure’

option)?

1. Design Phase

Cause Unsure Never………………………………………………Always

1 2 3 4 5

Inadequate planning

Lack of co-ordination at design phase

Incomplete design at time of tender

Technical omissions at design stage

Ignoring items with abnormal rates

during tender evaluation, especially

items with provisional quantities

Some tendering manoeuvres by

contractors, such as frontloading of rates

Lack of experience of project location

Lack of experience of project type

Inadequate project preparation, planning

Lack of experience of technical

consultants

Procurement and non-related

procurement related factors

Increased costs to crash activity time

arising out of political pressure

Difference between actual geological

conditions and the original survey

Lack of pre-contract project

co-ordination

Pre-contract budget constraints

On a scale of 1 (never) to 5 (always), please indicate the extent to which each of the mentioned causes leads to

cost overruns at the construction phase in public sector projects in the Free State province (please note the

‘unsure’ option)?

2. Construction Phase

Cause Unsure Never……………………………………………...Always

1 2 3 4 5

Unpredictable weather conditions

Fluctuations in the cost of building

materials

Inadequate review

Additional work at owners request

Changes in owner’s brief

Lack of cost planning / monitoring

during pre-and-post contract stage

Site / poor soil conditions

Adjustment of prime cost and

provisional sums

Cause

Unsure

Never……………………………………………...Always

1 2 3 4 5

Re-measurement of provisional works

Logistics due to site location

82

Lack of cost reports during construction

stage

Delays in issuing information to the

contractor during construction stage

Contractual claims, such as, extension of

time with cost claims

Improvements to standard drawings

during construction stage

Indecision by the supervising team in

dealing with the contractor’s queries

resulting in delays

Omissions and errors in the bills of

quantities

Delays in costing variations and

additional works

Materials cost increased

Labour cost increased due to

environment restrictions

Lack of experience of local regulations

Inadequate project implementation

Delay in construction, supply of raw

materials and equipment by contractors

Delays in decision making by

government, failure of specific

coordinating

Labour unrest

Monthly payments difficulties from

agencies

Poor contractor management

New information on existing site

conditions

Change order owing to legislative

change or policy change

Change made due to modifications by

other organizations

Changes made by the contractor

Contractor’s unstable financial

background

On a scale of 1 (never) to 5 (always), please indicate the extent to which each of the mentioned causes leads to

cost overruns at the commissioning phase in public sector projects in the Free State province (please note the

‘unsure’ option)?

3. Completion Phase

Cause Unsure Never……………………………………………...Always

1 2 3 4 5

1. Artificial disasters 2. Design failures 3. Errors in the bills of quantities 4. Late contract instruction after

practical completion

5. Poor quality workmanship 6. Delay in resolving disputes 7. Delay in final account agreements 8. Works suspended due to safety

reasons

83

Based on your experience, please mention the causes of cost overruns that are prevalent in public sector projects

in the Free State province?

.................................................................................................................................................................

……………………………………………………………………………………………………………………

…………………………………………………………………………………………………

On a scale of 1 to 10, in your experience how frequently do projects in the Free State province experience cost

overruns? …………………..

With a Yes, No or Unsure, please indicate if the frequency of cost overruns constitute a performance problem

for the construction industry in the Free State province?

Yes No Unsure

Section C: Remedies of Cost overruns

On a scale of 1 (never) to 5 (always), please indicate the extent to which each of the mentioned remedies could

mitigate or prevent cost overruns at the design phase in public sector projects in the Free State province (please

note the ‘unsure’ option)?

4. Design Phase

Remedy Unsure

Not very effective……………………..Very

effective

1 2 3 4 5

Comprehensive project planning

Adequate co-ordination at design phase

Completed designs at time of tender

Minimum changes at design stage

Resolving items with abnormal rates

during tender evaluation, especially

items with provisional quantities

Scrutinizing frontloaded rates at time of

tender

Proper experience of project location

Proper experience of project type

Adequate project preparation, planning

Appointment of highly experienced

technical consultants

Attending to procurement and non-

related procurement related factors

Adequate time provided for instead of

fast tracking projects

Effective geological conditions survey

Adequate pre-contract project

Co-ordination

Adequate pre-contract budget

84

5. Construction Phase

Remedy Unsure Not very effective……………………..Very effective

1 2 3 4 5

Adequate provision for unpredictable

weather conditions

Provisions for materials price escalations

Adequate review

Controlled owners request

Minimum changes in owner’s brief

Comprehensive cost planning / monitoring

during pre-and-post contract stage

Providing sufficient site / soil conditions

information

Adequate provision for prime cost and

provisional sums adjustments

Remedy

Not very effective……………………..Very effective

1 2 3 4 5

Adequate re-measurement of provisional

works

Adequate planning of logistics to site

location

Consistent cost reporting during

construction stage

Timely issuing of information to the

contractor during construction stage

Adequate provision for contractual claims,

such as, extension of time with cost claims

Timely Improvements to standard

drawings during construction stage

Timely decisions by the supervising team

in dealing with the contractor’s queries

resulting in delays

Minimum errors in the bills of quantities

Timely costing of variations and additional

works

Adequate provision for labour cost

increased due to environment restrictions

Adequate experience of local regulations

Proper project implementation

Timely supply of raw materials and

equipment by contractors

Timely decision making by government,

failure of specific coordinating

Provision labour unrest

Provision for monthly payments

Proper contractor management

26. Contingency for new information on

existing site conditions

27. Provision for change order owing to

legislative change or policy change

Controlled changes made due to

modifications by other organizations

Provisions for changes made by the

contractor

85

Completion Phase

Remedy Unsure Not very effective……………………..Very effective

1 2 3 4 5

Provisions for artificial disasters

Adequate designs

Minimum errors in the bills of quantities

Timely contract instruction after practical

completion

Good quality workmanship

Timely resolving disputes

Timely final account agreements

Comprehensive safety plan

Please record your details below to facilitate contacting you, in the event that a query should arise. Please note

that your information will be treated in the strictest confidence.

Organisation Name: ______________________________________________________

Contact Person: _________________________________________________________

Tel: ___________________________________________________________________

E-mail:_________________________________________________________________

Thank you for your contribution to this research project.

© Godfrey Monyane and Prof Alfred Talukhaba 2013