CAUSAL ATTRIBUTES OF COST OVERRUN IN CONSTRUCTION PROJECTS OF PAKISTAN

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1 International Journal of Civil Engineering and Technology (IJCIET) Volume 8, Issue 6, June 2017, pp , Article ID: IJCIET_08_06_052 Available online at ISSN Print: and ISSN Online: IAEME Publication Scopus Indexed CAUSAL ATTRIBUTES OF COST OVERRUN IN CONSTRUCTION PROJECTS OF PAKISTAN Muhammad Akram Post graduate Student, Civil Engineering Department, Mehran University of Engineering & Technology, Jamshoro, Pakistan TauhaHussain Ali, Nafees Ahmed Memon Professor, Civil Engineering Department, Mehran University of Engineering & Technology, Jamshoro, Pakistan Shabir Hussain Khahro Lecturer, Department of Engineering Management, Prince Sultan University, Riyadh, Saudi Arabia ABSTRACT Project cost overrun turned to be a major problem for the practitioners and academic researchers since years. It has been observed that construction projects are rarely completed within the estimated budget. There is an assortment of factors contributing to cost overrun in all kinds of projects. The cause of cost overrun varies depending upon nature and size of the project. Hence, this paper focuses on identification and level of cost overrun factors with specific reference to public sector projects of Pakistan. Data was collected using a set of questionnaire within different parties involved in projects. Average Index (AI) has been used as a statistical method for data analysis. The result indicates that inadequate planning and scheduling, fluctuation in prices of materials, insufficient fund provision by client, inaccurate cost estimates, delays in payment by the client, financial difficulties by client, additional works, poor financial control on site, delays in decision making and frequent design changes are the top most factors causing project cost overrun. The findings of this study will help the stakeholders of construction industry to make more informed decision to deal with project cost overrun. This study will help to prevent cost overrun in upcoming public sector projects in construction industry of Pakistan. Keywords: Cost Overrun, Construction Industry, Public Sector Projects Cite this Article: Muhammad Akram, TauhaHussain Ali, Nafees Ahmed Memon and Shabir Hussain Khahro Causal Attributes of Cost Overrun In Construction Projects of Pakistan. International Journal of Civil Engineering and Technology, 8(6), 2017, pp editor@iaeme.com

2 Muhammad Akram, TauhaHussain Ali, Nafees Ahmed Memon and Shabir Hussain Khahro 1. INTRODUCTION Currently, Pakistan construction industry is in the developing phase and is playing a major role in economic growth of the country. Construction industry in general contributes significantly in the socio economic development of any country (Pinto et al., 2011, Azhar et al., 2008). Any project if completed within estimated cost and meeting specified quality standards is considered as successful project (Ejaz et al., 2013). Although, Pakistan anticipated funds are spent on construction industry but still the industry is facing several issues such as budget overrun of project from actual estimated cost, delay in completing the project and building defects (Faroqui et al., 2011). Pakistan construction industry is facing many serious challenges. Where, frequent project cost overrun is one of the major challenged faced by this industry. Project cost overrun can be defined as; the project completion cost exceeds the original estimated cost of the project keeping same scope and specification (Avots, 1983). As Azhar et al., (2008), reported that cost overrun is a major issue in both developing and developed countries. Although the tendency is more towards the cases of developing countries as compared to developed ones, as there had been instances where the cost overrun exceeded beyond 100% of the initial expected cost of project. A study by Hartley concluded that construction projects experience an increase in cost of about 33% on average (Hartley and Okamoto, 1997).Similarly, a comprehensive research made on cost overruns in global construction industry (Flyvbjerg et al., 2003), it was major finding of this research that 9 out of 10 projects faced cost overrun problem. Memon and Rahman (2014) highlighted that cost overrun is still a major issue in construction projects resulting in additional burden to all related stakeholders. Cost is amongst the major considerations throughout the project life cycle and is weighted as key factor of achievement for any construction work. Rarely, the construction projects are completed within estimated budget so; cost overrun is a critical problem and essential to be worked out for the upcoming projects (Azhar et al., 2008). There are several factors that affect construction cost and various research works have been conducted to address it causative factors. Tejale et al., (2015) mentioned that material shortage, labour shortage, delay in material and equipment delivery at site, unavailability of competent personnel, poor productivity of labour, delay in progressive payment, poor construction adopted by constructor, fluctuation of material prices, poor communication and poor coordination among the client, consultant and constructor are few of the several such factors contributing project cost overrun in India. Another research work conducted by Kaliba et al., (2009), declared that change in the scope, frequent stormy weather due to heavy rains and the resulting floods, environmental safety, pressure from local government, strikes, minor mechanical challenges, schedule delays and rise in material prices are major causes of cost overrun in Zambia construction projects. There are most significant factors of cost overrun in highway construction projects of Pakistan such as, improper planning, inappropriate government rule and regulations, additional work, accident on site, delay in progressive payment by client, insufficient number of equipment, price inflation of major construction materials and equipment, poor project management, delay in obtaining the permits, inaccurate quantity and cost estimation (Nasir et al., 2012). In Gaza, according to 3C (Client, Consultant, Constructor) the most causative factors of cost overrun in construction projects are delay in execution work, inflation in the prices of construction materials, construction materials control by constructor, poor funding from government, poor cost planning, poor monitoring during pre-contract agreement stage and post agree stage, frequent changes in drawing during execution work, design changes and inaccurate quantity take-off (Enshanssi et al., 2009). A study of Jordan indicated that most prominent factors of cost overrun in public sector are material cost increase by inflation, editor@iaeme.com

3 Causal Attributes Of Cost Overrun In Construction Projects Of Pakistan material shortage, design changes, fuel cost increase, poor experience of labor, inaccurate quantity takeoff, poor communication, lack of experience in local regulations and unpredictable weather conditions (Sweis et al., 2013). Salunkhe and Patil (2014) in a research found that delay in approval of land acquisition, inadequate planning by constrictor, delay in forest clearance, change in scope of project work, law and order situation problem, late delivery of equipment and construction material at site, fund constraints by government party, inflation in material prices are serious issues leading to cost overrun in Indian construction scenario. Bureaucracy in bidding method, not enough information gathered and surveys done before design, inflation, economical condition of the government, material cost changes, monthly payment difficulties, law changes by the government, mode of financing and payment for completed work, financial difficulties and changes made by the owner are regarded as common issues of cost overrun in water sector construction projects of Iran (Matin, 2016). The existing literature evidences the importance of project cost overrun in construction projects. It was also analyzed that none of such research work has been carried out for public sector construction projects of Pakistan. Hence, this paper adds in the existing body of knowledge for project cost overrun. This study will help the stakeholders of this industry to make informed decision for such problems of project cost overrun in upcoming projects. 2. DATA COLLECTION AND ANALYSIS Data has been collected from experienced personnel involved in public sector construction projects of Pakistan. On the basis of identified factors from the literature, the respondents were requested to rank the significance of these factors on a liker scale ranging from 1 to 5. Where 1 = Extremely Significant (ES); 2 = Very Significant (VS); 3 = Moderately Significant (MS); 4 = Slightly Significant (SS); 5 = Not Significant. Level of significance has been calculated with Statistical Software Package SPSS version Average Index (AI) method has been used for assessing the significance level of cost overrun factors because it has been successfully used for such data samples due to its easiness and suitability (Rahman et al., 2012, Akram, M et al., 2015). AI = (5X1 + 4X2 + 3X3 + 2X4 + 1X5) (X1 + X2 + X3 + X4 + X5) Where; X1 = Number of respondents for scale 1 X2 = Number of respondents for scale 2 X3 = Number of respondents for scale 3 X4 = Number of respondents for scale 4 X5 = Number of respondents for scale 5 Evaluation ranges to assess significant level used in this study as follows: 4.50 < AI < 5.00 : Extremely Significant (ES); 3.50 < AI < 4.50 : Very Significant (VS); 2.50 < AI < 3.50 : Moderately Significant (MS); 1.50 < AI < 2.50 : Slightly Significant (SS); 1.00 < AI < 1.50 : Not Significant (NS); editor@iaeme.com

4 Muhammad Akram, TauhaHussain Ali, Nafees Ahmed Memon and Shabir Hussain Khahro 3. RESULTS AND DISCUSSION A total number of 150 questionnaires were distributed randomly between the client, consultant and constructors, involved in ongoing public sector construction projects of Pakistan. A total number of 111 samples were successfully received. Figure 1 shows the respondents experience rate. Respondent experience was kept important for data collection because such data samples needs plenty of experience for better results. Figure 2 shows the rate of data collection based on nature of project. Figure 1 Respondent Experience & Nature of Industry 4. RELIABILITY TEST ANALYSIS The reliability test represents the degree of consistency of the collected data. Inner consistency measures through the Cronbach α coefficient. When this factor (α) is less than 0.3, then the reliability is in low level and would not be accepted. Whereas, if Cronbach α is more than 0.7, consistency index shows high reliability and it would be acceptable. Normally, the value of Cronbach α in the range of is desirable (Meepol and Ogunlana, 2006). Table 1 depicts the results of the reliability test. Table 1 Results of Reliability Test CODE Group / Category Reliability All Overall data CLI Client s side data COS Consultant s side data CON Constructor s side data This table presents the overall value of Cronbach α was and the same for each group respondents is also higher than 0.9. These values indicate that the data is desirable and acceptable as per Cronbach thorium. 5. CASUAL ATTRIBUTES FOR PROJECT COST OVERRUN All attributes having average index score more than 3.5 are considered as the most critical factors leading to project cost overrun. Figure 2 shows all critical causal attributes which significantly contributes to cost overrun in public sector projects editor@iaeme.com

5 Causal Attributes Of Cost Overrun In Construction Projects Of Pakistan Figure 2 Critical Casual Attributes Causing Project Cost Overrun Public sector construction practitioners ranked inadequate planning and scheduling extremely significant cause of cost overrun. Due to poor construction performance of constructor, that is resulting construction project handling problems. Skilled constructors will be capable to complete the construction project with high quality standards and workmanship. The genuine problem is inexperienced management personnel at construction site. The second attribute affecting construction cost as observed by construction practitioners (Client, Consultant and Constructor) is fluctuation in prices of materials. Construction practitioners consider that, this problem is very keen issue which may affect other attributes such as shortage of material, shortage of equipment and late delivery of material at construction side. Resolving this problem may resolve other problems simultaneously. The client may face some financial crisis to provide funds for the construction work. This might lead to project delay not only in terms of time but also affects the total cost of the project. In construction firms, due to discrepancy of quantity and cost estimator; no proper estimation is done during the planning phase of the project. No factor of safety is utilized during estimation phase of the project. Similarly, they are numerous other factors which also contributes to cost overrun. As per the results, there AI score is not that high but still they have potential to cause cost overrun. Figure 3 shows the complete ranking of such attributes causing project cost overrun and their AI score ranges from 2.50 to 3.50 Figure 3 Casual Attributes Causing Project Cost Overrun editor@iaeme.com

6 Muhammad Akram, TauhaHussain Ali, Nafees Ahmed Memon and Shabir Hussain Khahro 6. CONCLUSION This paper aims to focus on identification of cost overrun factors in public sector construction projects of Pakistan. A comprehensive literature was also carried out to find the research gape in the existing work done by different researcher throughout the world for project cost overrun. The result shows that inadequate planning and scheduling, fluctuation in prices of materials, insufficient fund provision by client, inaccurate cost estimates, delays in payment by the client, financial difficulties faced by constructor, financial difficulties faced by client, additional works, poor financial control on site, delays in decision making by client and frequent design changes are the most significant factors of cost overrun. This paper highlighted the major attributes which contribute to cost overrun in public sector projects of Pakistan. It also fills the gap in the existing body of knowledge in construction project cost overrun in general and with specific reference to construction industry of Pakistan. REFERENCES [1] Akram, M., Memon N.A., Stoian, M., Iqbal, U., Khahro, S.H., (2015), Time overrun in public sector construction projects of developing countries: Case Study of Pakistan., 2 nd International Conference on Emerging Issues in Management and Economics October [2] Avots, I. (1983), Cost-relevance analysis for overrun control. International Journal of Project Management, 1(3), [3] Azhar, N.; Farooqui, R. U.; and Ahmed, S. M.; (2008), Cost Overrun Factors in Construction Industry of Pakistan, Advancing and Integrating Construction Education, Research & Practice, [4] Ejaz, N.; Ali, I.; and Tahir, M. F. (2013), Assessment of Delays and Cost Overruns during Construction Projects in Pakistan, Journal of Construction Engineering and Management, p [5] Enshassi, A.; Al-Najjar, J.; and Kumaraswamy, M. (2009a), Delays and Cost Overruns in the Construction Projects in the Gaza Strip, Journal of Financial Management of Property and Construction, 14, [6] Farooqui, R. U.; Hussain, E.; Umer, M.; and Lodi, S. H. (2011), Factors Affecting Construction Cost in the Pakistani Construction Industry, 45 th IEP Convention Karachi, pp [7] Flyvbjerg, B.; Skamris Holm, M. K.; and Buhl, S. L. (2003), How Common and How Large Are Cost Overruns in Transport Infrastructure Projects?, Transport Reviews, 23, [8] Hartley, J. R., and Okamoto, S. (1997). Concurrent engineering: Shortening lead times, raising quality, and lowering costs, Productivity Press, Shelton, Conn. [9] Kaliba, C.; Muya, M.; and Mumba, K. (2009), Cost Escalation and Schedule Delays in Road Construction Projects in Zambia, International Journal of Project Management, 27, [10] Matin, M. D., (2016). Identifying The Effective Factors for Cost Overrun and Time Delay in Water Construction Projects. Engineering, Technology and Applied Science Research, Vol. 6 (4) [11] Meepol S and Ogunlana SO. Factors affecting cost and time performance on highway construction projects: evidence from Thailand. Journal of Financial Management of Property and Construction 2006; 11(1): 3: editor@iaeme.com

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