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Causes of Contractor Cost Overrun in Construction Projects: The Case of Ethiopian Construction Sector

Received: 19 June 2015     Accepted: 25 June 2015     Published: 14 July 2015
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Abstract

Completion of a construction project with budget is frequently seen as a major criterion of project success by clients, contractors, consultants and related stakeholders. It is here that project management becomes essential tool for the delivery of effective projects than the traditional functional management. However, the construction industry is faced with challenges to meet budget. This study is conducted to identify the top five cost over-run factors and survey is conducted on 140 respondents. The samples were drawn using convenient sampling approach. Primary data is collected using the self-administered questionnaires. While secondary data is collected through reviewing of related materials and the analysis is conducted using SPSS version 20. As per the contractor’ response, the top five factors that causes cost overrun of construction projects were from medium to high. On the other hand, the top five factors as per the response of consultants and clients ranged between high to very high. The contractors outlined the top five factors that causes cost overrun in construction projects are poor planning, fluctuation of price of materials, poor productivity, inflationary pressure and project financing in descending order.

Published in International Journal of Business and Economics Research (Volume 4, Issue 4)
DOI 10.11648/j.ijber.20150404.11
Page(s) 180-191
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Cost Overrun, Project Management, Project Control and Project Success

References
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[2] Ali A.S. and Kamaruzzaman S.N. (2010). Cost performance for building construction projects in klang valley. Journal of Building Performance 1:1 P110-118.
[3] Azhar, N., R.U. Farooqui and S.M. Ahmed, 2008. Cost Overrun Factors in Construction Industry in Pakistan. Proceeding of First International Conference on Construction in Developing Countries (ICCIDE-1), Karachi, Pakistan, 4-5 August, pp: 499-508, Retrieved from: http:// www.neduet. edu.pk/Civil/ICCIDC-I/ Conference % 20 Proceedings /Papers/ 051. pdf, (Accessed on: May, 2015).
[4] Chabota Kaliba, Mundia Muya and Kanyuka Mumba (2008). Cost escalation and schedule delays in road construction projects in Zambia. International Journal of Project Management.
[5] Ethiopian Construction Industry Development Policy (ECIDP), (2014). Approved by Ministry mikir bet, published by December 2014.
[6] Harold Kerzner (2009). Project Management: a system approach to planning, scheduling and controlling, tenth edition. John Wiley & Sons, Inc., Hoboken, New Jersey.
[7] Ibrahim Mahamid and Nabil Dmaidi (2013). Risks Leading to Cost Overrun in Building Construction from Consultants’ Perspective. Organization, technology and management in construction • an International journal 5:2 P 860-873.
[8] Larry Rich man (2002). Project Management: Step by Step. AMACOM, a division of American Management Association, NY, USA.
[9] Li-Yin Shen, Andrew Platten and X.P. Deng (2006). Role of public private partnerships to manage risks in public sector projects in Hong Kong. International Journal of Project Management 24 P 587–594.
[10] Luka Goji Tipili and Muhammad Sa’adiya Ilyasu (2014). Evaluating the impact of risk factors on construction projects cost in Nigeria. The International Journal Of Engineering And Science (IJES) 3:6 P 2319 – 1805.
[11] Mahamid, I and Amund, B (2012) ‘Cost deviation in road construction projects: the case of Palestine’. Australasian Journal of Construction Economics and Building, 12:1 P 58-71
[12] Nahid, G. (2003). Understanding Reliability and Validity in Qualitative Research 8 P 597-607.
[13] Nega, F. (2008). Causes and effects of cost overrun on public building construction projects in Ethiopia. Master thesis, Addis Ababa University, Addis Ababa, Ethiopia.
[14] Olawale, Y., and Sun M. (2010). “Cost and time control of construction projects: Inhibiting factors and mitigating measures in practice.” Construction Management and Economics, 28:5 P 509 – 526.
[15] Operational Selection Policy (OSP), (2005). The selection of case files: sampling technique. The National Archives, UK. Accessed on January, 2015 http://webarchive.nationalarchives.gov.uk/20080107210935/http:/www.nationalarchives.gov.uk/documents/osp0.pdf
[16] PMI (1996). Project Management Institute. A Guide to the Project Management Body of Knowledge.
[17] Sekaran, U. (2001). Research methods for business: A skills building approach (2nd Ed.). New York: John Wiley & Sons, Inc.
[18] UNDP (2014). Ethiopia: quarterly economic brief. Accessed on http://www.et.undp.org/content/dam/ethiopia/docs/Economic%20Brief-%20Third%20Quarter-2014.pdf
[19] UNDP, (2014). Country Economic Brief: Ethiopia. Accessed on http://www.et.undp.org/content/dam/ethiopia/docs/Country%20Economic%20Brief%201%20final%20for%20web.pdf
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Cite This Article
  • APA Style

    Zinabu Tebeje Zewdu, Getachew Teka Aregaw. (2015). Causes of Contractor Cost Overrun in Construction Projects: The Case of Ethiopian Construction Sector. International Journal of Business and Economics Research, 4(4), 180-191. https://doi.org/10.11648/j.ijber.20150404.11

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    ACS Style

    Zinabu Tebeje Zewdu; Getachew Teka Aregaw. Causes of Contractor Cost Overrun in Construction Projects: The Case of Ethiopian Construction Sector. Int. J. Bus. Econ. Res. 2015, 4(4), 180-191. doi: 10.11648/j.ijber.20150404.11

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    AMA Style

    Zinabu Tebeje Zewdu, Getachew Teka Aregaw. Causes of Contractor Cost Overrun in Construction Projects: The Case of Ethiopian Construction Sector. Int J Bus Econ Res. 2015;4(4):180-191. doi: 10.11648/j.ijber.20150404.11

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  • @article{10.11648/j.ijber.20150404.11,
      author = {Zinabu Tebeje Zewdu and Getachew Teka Aregaw},
      title = {Causes of Contractor Cost Overrun in Construction Projects: The Case of Ethiopian Construction Sector},
      journal = {International Journal of Business and Economics Research},
      volume = {4},
      number = {4},
      pages = {180-191},
      doi = {10.11648/j.ijber.20150404.11},
      url = {https://doi.org/10.11648/j.ijber.20150404.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20150404.11},
      abstract = {Completion of a construction project with budget is frequently seen as a major criterion of project success by clients, contractors, consultants and related stakeholders. It is here that project management becomes essential tool for the delivery of effective projects than the traditional functional management. However, the construction industry is faced with challenges to meet budget. This study is conducted to identify the top five cost over-run factors and survey is conducted on 140 respondents. The samples were drawn using convenient sampling approach. Primary data is collected using the self-administered questionnaires. While secondary data is collected through reviewing of related materials and the analysis is conducted using SPSS version 20. As per the contractor’ response, the top five factors that causes cost overrun of construction projects were from medium to high. On the other hand, the top five factors as per the response of consultants and clients ranged between high to very high. The contractors outlined the top five factors that causes cost overrun in construction projects are poor planning, fluctuation of price of materials, poor productivity, inflationary pressure and project financing in descending order.},
     year = {2015}
    }
    

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    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
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    AB  - Completion of a construction project with budget is frequently seen as a major criterion of project success by clients, contractors, consultants and related stakeholders. It is here that project management becomes essential tool for the delivery of effective projects than the traditional functional management. However, the construction industry is faced with challenges to meet budget. This study is conducted to identify the top five cost over-run factors and survey is conducted on 140 respondents. The samples were drawn using convenient sampling approach. Primary data is collected using the self-administered questionnaires. While secondary data is collected through reviewing of related materials and the analysis is conducted using SPSS version 20. As per the contractor’ response, the top five factors that causes cost overrun of construction projects were from medium to high. On the other hand, the top five factors as per the response of consultants and clients ranged between high to very high. The contractors outlined the top five factors that causes cost overrun in construction projects are poor planning, fluctuation of price of materials, poor productivity, inflationary pressure and project financing in descending order.
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Author Information
  • Faculty of Business and Economics, Unity University and OVID Construction plc, Addis Ababa, Ethiopia

  • Faculty of Business and Economics, Unity University and Financial Training and Consultancy Plc, Addis Ababa, Ethiopia

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