Karunakaran 2018 IOP Conf. Ser. Earth Environ. Sci. 140 012098
Karunakaran 2018 IOP Conf. Ser. Earth Environ. Sci. 140 012098
Karunakaran 2018 IOP Conf. Ser. Earth Environ. Sci. 140 012098
E-mail: [email protected]
Abstract. Cost overrun has been severely hit down the economy and reputations for many
construction industry around the world. Many project management tools developed to control
the budget of a project. However, the cost management is still considered poor as there are
many cost overrun issues occurred in the construction industry. Thus, this paper aims to
identify and cluster the potential construction project cost overrun factors according to their
originating groups using the thematic approach. Basically, through literature review, all the
potential factors that may cause cost overrun were screened thoroughly before they were
clustered into seven (7) groups of the originating factors, namely project, contract, client,
contractor, consultant, labour and external. Each potential factor was explained clearly with
some examples based on the Malaysian case studies to illustrate the cost overrun scenario.
These findings may aid in the future to highlight on how to mitigate the critical potential
factors of cost overrun to reduce or overcome its impact on all the stakeholders involved.
1. Introduction
A construction project is conventionally designed by the consultants according to a client’s desire and
it will be executed by the appointed contractors to build the desired design works. Poor cost control
management in the construction industry may cause the project fails to meet its objective to complete
the project on time and within the budget with expected quality. When an organization fails to manage
the finance outflow of a project, then the final construction cost will tend to exceed its initial contract
budget [1] as the cost of correcting error increases as the project goes along [2]. Cost control is
necessary to ensure the money resource does not deplete during the project construction phase which
could lead to unnecessary additional expenses to overcome the excess cost. Thus, it is necessary to
conduct the post-mortem on construction projects to provide lessons for continuous improvement in
project performance [3]. Most of the studies put a great effort to identify and evaluate the potential
factors that may have caused the construction cost to overrun in the last decades [4-6] and some other
related their studies on the effect and cause of the cost overrun factors [7, 8]. However, a deeper
understanding is necessary to understand the originating factors of the poor cost management in the
construction industry. Therefore, this paper focuses on identifying and clustering the potential cost
overrun factors according to their originating groups through literature reviews to clearly understand
how the cost performances of the construction project are actually being affected. Based on the
clustering, a few examples of cost overrun scenarios were included to illustrate the impact of cost
overrun on Malaysian construction industry.
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Published under licence by IOP Publishing Ltd 1
IConCEES 2017 IOP Publishing
IOP Conf. Series: Earth and Environmental Science 140 (2018)
1234567890 ‘’“” 012098 doi:10.1088/1755-1315/140/1/012098
2. Related works
An extensive literature on the construction project cost overrun factors has been reviewed
internationally. Cost overrun crisis exists in both developed and developing countries for a very long
time [9]. Most of the studies figured out that more than 50 cost overrun factors are the most commonly
exposed to the construction industry [10-12]. Delay in schedule and increase in the cost are the two
common concerns in the worldwide construction projects. According to [13], time and cost overrun
factors are inseparable since the extension of time normally leads to the overrun of cost.
Different researchers share different opinions on the poor cost performance factors. The Malaysian
construction projects were reported to experience the overruns (time and cost) by 92% [14]. At least
about 90% of the People’s Trust Council (MARA) large construction projects have been facing delay
in a large scale since 1984 [7]. Some blamed the poor working enthusiasm of the lower grade
contractors who do not have proper planning on their cost control strategy, as the general cause of
their failure to achieve the project’s objectives in completing within budget, quality and time [15, 16].
Meanwhile, another portion pointed out that most of the construction industry nowadays had
undergone extensive complexities in terms of convoluted design, adopting advanced technologies as
well as new standards leading the organization fail to manage their finance [17]. Another study
emphasized that the final cost of a project turns uncertain if the size and nature of the project are larger
and complex [18] and one such example is the road or highway construction projects. Unpredictable
geographical location or project topology, bad weather and inaccurate site investigations are the most
common factors faced by the contracted project parties for infrastructural projects [18]. This study is
even similar with the analysis survey conducted by [19] on large construction projects in Malaysia and
with an international comparative assessment analysis performed by [20] on the electricity
infrastructure.
Cost overrun factors can be categorized into several groups. The group of cost overrun factors can
be adapted from [21], for instance, (i) non-compensable factors (unavoidable circumstances faced by
the project parties due to involvement of external parties or environment) and (ii) compensable factors
(circumstances that can be avoided by parties from causing cost overrun). Meanwhile in another study
which is concurrent with the study of [22], [23] also categorized the factors into two similar groups,
but they differentiated the groups as (i) internal cause (circumstances caused by the construction
stakeholders itself) and (ii) external cause (unavoidable circumstance that occurs beyond the control of
the parties involved). In present days, a group of researchers had refined and categorized the factors
into several groups based on the causative factors of the cost overrun factors as tabulated in table 1.
3. Research method
An extensive literature on the common factors influencing the project cost overrun in construction
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IOP Conf. Series: Earth and Environmental Science 140 (2018)
1234567890 ‘’“” 012098 doi:10.1088/1755-1315/140/1/012098
industry all over the world has been reviewed. In order to fully comprehend the meaning of each
causative factor of cost overrun found in the literature, it is extremely important to relate them in the
context of construction project management activities throughout the construction project life cycle.
The causative factors are then clustered and classified carefully into its associated groups. Based on
the aforesaid Table 1, using the thematic approach, the classification or taxonomy of groups of the
causative factors have been refined and presented in Table 2 to fit into seven (7) main categorizations
as shown. The frequency of the repetitive originating factors is taken into consideration to understand
which group well as which originating factor within its associated group is mostly referred to by
previous researchers. Based on Table 2, the descriptions of the related causative factors are delineated
as the followings:
References
Le-Hoai et al. (2008)
Derakhshanalavijeh
Frequency
et al. (2017)
Aziz (2013)
Overrun Factors
Project x x x 3
Contract x x x 3
Client x x x x x x 6
Contractor x x x x x x 6
Consultant x x x x x x 6
Labour x x x x x 5
External x x x x x 5
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IConCEES 2017 IOP Publishing
IOP Conf. Series: Earth and Environmental Science 140 (2018)
1234567890 ‘’“” 012098 doi:10.1088/1755-1315/140/1/012098
uncertainty factors that cause schedule slippage in the start of a construction project [18, 27].
Unexpected location difficulties [8, 24] and orientation of the road approach to the site entrance may
cause site mobilization difficulties leading to an increased cost for the transportation services [27, 28].
These factors are the subset of an inappropriate choice of site selection [6, 27]. On the other hand, land
acquisition problems mostly occur in larger construction projects such as roads, bridges, airports and
railway constructions. For example, the area of Kuala Lumpur International Airport 2 (KLIA 2) was
revised and extended from 150, 000 sqm. to 257, 000 sqm. during the construction phase with an
increase of 71% construction area [29]. The authority made last minute decision to increase the
passenger capacity from 30 million to 45 million causing delays in the construction as they had to face
site acquisition problems on the reclaimed lands. The inefficient planning made by the authority
causes the extension of time about two years with the project cost overrun around RM1.6 billion [29,
30].
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IConCEES 2017 IOP Publishing
IOP Conf. Series: Earth and Environmental Science 140 (2018)
1234567890 ‘’“” 012098 doi:10.1088/1755-1315/140/1/012098
the highest level of job completion in a shorter period. Utilization of wrong equipment (i.e.
productivity of equipment) may cause the rate of production to be lower than expected during the
construction phase [12, 26]. Mishandling of equipment [26] and misuse of materials [26] may cause
the generation of waste at the site. These issues occur due to the poor monitoring at site [8, 12, 26] by
the appointed site supervisor. In addition, inadequate quality assurance of a project [12, 24, 26] may
end up to be the main factor for the waste generation at the site. The contractors may compromise with
the quality of works due to their benefit realization [6] by using low quality materials [12] or reduce
the quantity of material use below its specification as stated in the design (i.e. fraudulent) [12, 24, 26]
causing the construction work to lose its strength and lead to additional works [6, 12, 31] or reworks
[12].
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IConCEES 2017 IOP Publishing
IOP Conf. Series: Earth and Environmental Science 140 (2018)
1234567890 ‘’“” 012098 doi:10.1088/1755-1315/140/1/012098
5. Conclusion
In a nutshell, the intention of the paper has been achieved where the factors that cause cost overrun
together with its group of originating factors have been identified. The findings were limited up to the
scenarios in the Malaysian construction industries. In total, seven originating groups of cost overrun
factors have been refined from previous studies with comprehensive details on how and why the
factors arise with few examples of Malaysian based case study. With the identifications of the
originating cause, it would be helpful in future to further the study by identifying the most critical
factors of cost overrun affecting the construction project cost performances and also corrective actions
for the identified critical factors.
Acknowledgements
In a nutshell, the intention of the paper has been achieved where the factors that cause cost overrun
together with its group of originating factors have been identified. The findings were limited up to the
scenarios in the Malaysian construction industries. In total, seven originating groups of cost overrun
factors have been refined from previous studies with comprehensive details on how and why the
factors arise with few examples of Malaysian based case study. With the identifications of the
originating cause, it would be helpful in future to further the study by identifying the most critical
factors of cost overrun affecting the construction project cost performances and also corrective actions
for the identified critical factors
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