Cost Overrun Causes Related to the Design Phase in the Egyptian Construction Industry

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Cost overrun is one of the most common problems that threaten any construction project. As the Design phase is responsible for many critical decisions, many of cost overrun causes are related to such phase. This paper aims to identify the most significant causes of cost overrun related to the design phase in the Egyptian construction industry from the point of view of owners, consultant, designers, project managers and contractors. A list of cost overrun causes related to the design phase collected through an extensive literature review, main causes were adapted to the Egyptian construction industry through seven semi-structured interviews. The resultant list was submitted to a questionnaire survey for the impact and frequency quantitative evaluation. the results of the research is expected to help the participants in the design phase to develop more optimized design and avoid the most usual flaws that could led to cost overruns.

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Cost Overrun Causes Related to the Design Phase in the Egyptian Construction Industry

  1. 1. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Journal of Engineering Management Research JULY 2013 VOL.1, No,5 Cost Overrun Causes Related to the Design Phase in the Egyptian Construction Industry Dr. Hisham A. Bassioni, Dr. Alaa Sarhan, Ahmad S.Zaki (Corresponding author) Department of Architectural Engineering and Environmental Design, College of Engineering and Technology, The Arab Academy for Science, Technology and Maritime Transport. Abu Kir AAST Campus, Alexandria. Egypt. P.O. Box 1029 Accepted 28 July 2013 Abstract Cost overrun is one of the most common problems that threaten any construction project. As the Design phase is responsible for many critical decisions, many of cost overrun causes are related to such phase. This paper aims to identify the most significant causes of cost overrun related to the design phase in the Egyptian construction industry from the point of view of owners, consultant, designers, project managers and contractors. A list of cost overrun causes related to the design phase collected through an extensive literature review, main causes were adapted to the Egyptian construction industry through seven semi-structured interviews. The resultant list was submitted to a questionnaire survey for the impact and frequency quantitative evaluation. the results of the research is expected to help the participants in the design phase to develop more optimized design and avoid the most usual flaws that could led to cost overruns Key Words: Buildings ; Design management; Design Phases; Cost overrun; Cost Control; Cost Planning and Egypt. 1. Introduction Construction projects could be measured or evaluated against many important performance criteria; however cost remains the most agreed indicator of a project success (Tichacek, 2006). On other hand due to a various number of cost overrun causes, it is usual for a construction project to witness variations in value regarding the first approved budget estimate describing the project cost, the contract price agreed for construction and the further final account of the project. Attempts to study and mitigate the causes and the severe consequences of such problem started during the construction boom after World War II; recently the construction industry in both developing and developed countries suffers from the same problem. Cost overrun causes are diverse regarding their sources, many are directly related to the critical pre-construction design and tender phases where most of decisions that affect the project ability to meet the addressed expectations, are made and where changes could be implemented with no severe impact on the project objectives. This paper aims to identify and evaluate cost overrun causes related to pre-construction stages in the Egyptian construction industry. 2. Literature Review Cost overrun in construction arises when the incurred costs exceeds the expected budget designated for the building. Causes of this overrun originate from a variety of reasons and many are related to the 138
  2. 2. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION stages preceding construction where most of the substantial decisions are made determining the ability of the project to meet its objectives. 2.1 Design Phase Cost Management Discussing cost overrun causes related to the pre-construction stage requires a thorough understanding of this phase cost management activities and practices; Jaggar, Ross, Smith, & Love (2002) depicted the notion of design phase cost management as it is the successful applying of planning, controlling and feedback in terms of design, cost, time and quality to achieve the project objectives through : cost planning, which define the amount to be spent on the various building components, cost controlling as the design develops, in the form of cost checks to ensure the deliverables compliance with the cost plan. The RIBA Plan of Work provides an organized presentation of the essential process of the preconstruction phase. The plan of Work is recommended by many researchers to provide a sound pattern for the procedures of the design process, and the recommended cost management practices (Seely, 1996). Accordingly the Pre Construction phase is divided into Preparation stage, Design stage and the Pre Construction stage; the following lines are intended to briefly describe the main objectives of each stage and the practical adjacent cost management practices. Figure (1) shows cost management functions related to the plan of work stages. 2.1.1 Cost management in the preparation stage The preparation stage generally aims to understand the client’s needs and develop a design brief that reflects those needs effectively. Cost management through this stage intends determine the cost of design brief through value planning and cost estimation functions. Value planning is considered as a very helpful tool To develop a consistent, reliable and optimized design brief that offers alternative solutions to meet the owner’s needs. Cost estimation at this stage tries to determine a cost limit for the project either based on the client’s maximum affordability, or on historical data for similar projects. It should be considered that during this early stage detailed information are usually unavailable, and therefore estimates rely on the design brief as a result of business case analysis recommendations that may quantify or describe generally the capacity of the project, the gross area or number of service units. 2.1.2 Cost management in the conceptual and schematic design stage It is the stage where the main concept is outlined and developed into detailed design including the building’s different systems. Cost management efforts through this stage aims to define a cost plan for the design, which is an estimate based on the approved design concept. Furthermore as the design develops and includes more systems and disciplines in details the cost plan is developed and divided into cost targets for every discipline in the building as a cost limit for such discipline; and therefore the cost plan is considered as a baseline to check whether the developed design is within the agreed cost framework. Cost estimating is one of the most essential tools to control cost as the design develops; unlike previously conducted estimates; estimates through this stage relies on more accurate data in the form of quantities and specifications where prices are based on historical data, trade specialists, sub-contractors, vendors quotations or cost book. Another essential tool of cost management is value engineering that helps in assessing design outcomes and eliminating unnecessary costs through defining the required function and comparing different alternatives to achieve better value design. 2.1.3 Cost management in the detailed design and construction document stage It is the final stage of the design process that incorporates various tasks: completing final layouts that coordinate in details all elements and components of the building; obtaining the client’s approval; applying for statutory approvals and preparing detailed drawings and specifications needed for the tender documents. The cost management through this stage aims to ensure the alignment of disciplines costs and the relevant cost targets defined in the cost plan for such disciplines through performing accurate cost estimations that tries to depict the contractors offer during tender. Value engineering and life cycles costing are considered as helpful tools in addressing the spotted variances and proposing modifications to maintain the cost plan. Additionally the appropriateness of tender documents and the selected procurement method affects the ability of the design to meet its objectives during construction. Design coordination within design documents, specifying method, risk allocation between the owner and contractor and the procurement method for selecting the contractor are of the main important arrangements to ensure minimizing of cost overruns during construction. 2.2 International Studies The previous review of cost management principles during design was essential to understand the causes of cost overrun discussed in many international studies. Twelve studies were incorporated in this research to assemble a list of cost overrun causes. Kaming et al. (1997) classified the severity and 139
  3. 3. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION frequency of ten main causes of cost overrun in developing countries’ construction projects. Jackson (2002) identified causes of cost overrun in the UK. Koushki et al. (2005) identified causes of time delay and cost overruns in residential construction projects in Kuwait. Le-Hoai et al. (2008) classified the severity and frequency of factors of delay and cost overruns in Vietnamese construction industry. Azhar et al. (2008) categorized the severity of selected forty two cause of cost overrun in the construction sector of Pakistan. Apolot et al. (2009) ranked twenty two time delay factors and cost overrun causes in Uganda’s public sector projects. Ameh et al. (2010) indicated the importance of significant factors that cause cost overruns in Nigerian telecommunication projects. Bubshait & Al-Juwairah (2002) measured the severity of factors affecting the construction costs in Saudi Arabia. Chang (2002) identify reasons of cost and schedule increase based on four completed construction projects in the US. Durdyev et al.(2012) evaluated factors of cost overruns in residential projects in Turkey based on their relative importance. Ali & Kamaruzzaman, (2010) identify factors of cost overrun in construction projects in Malysia 3. Experts Interviews Based on the previously held literature review and findings an expert interview is performed to adapt the selected causes according to the Egyptian construction industry. A varied sample including five representatives reflecting various backgrounds: architects, consultants, contractors and project managers experienced in construction each with minimum experience 20 years. The sample size in qualitative research methods could be figured through saturation were additional interviews do not produce new information or data (Guest et al. 2006) which was met through two additional interviews. The interview depended on a semi structured interview design where a set of question was addressed in addition to allowing probing when needed, the collected causes from literature review were assessed to three main questions “From your expert opinion: What would you like to omit or remove ? What would you like to change or modify? What would you like to add as a significant cause of cost overrun? During the interviews cost overrun causes selected from literature were generally considered appropriate to discuss the cost overrun causes related from the design and the later pre-construction phases in the Egyptian construction industry, however some descriptions where slightly modified in order to be more defined. Table (1) shows causes of cost overrun selected from literature after experts’ interviews adaptation to the Egyptian construction industry. 4. Questionnaire Survey A questionnaire survey was conducted to quantitatively evaluate the frequency of occurrence and the severity or impact of causes of cost overrun selected from literature and adapted through experts interviews. The questionnaire was divided into two parts: Part 1 – Participant’s personal information (e.g. Name, occupation, company name, organization type, experience, age and gender) : and Part 2 – Evaluation of causes according to Frequency and Impact, each cause was measured on a likert scale using four options: Always, Sometimes, Rarely and Never for Frequency and Extreme, Moderate, Little and no for Impact. A total of 115 survey questionnaire was distributed, 101 was completed successfully and involved in the study. Participants’ organizations were distributed as: 45 owner, 11 contractor, 33 architect and 12 project manager 5. Result Analysis 5.1 Analysis of overall results To identify the importance degree of each cause of cost overrun, an importance index was calculated based on the frequency index and impact index in a manner similar to Assaf et al. (1995). Frequency index is calculated according to the following equation: Where: F.I. = Frequency index; = Weight of response; = Frequency of response and i = Response category index. A response of “Always” was given a weight of 3; “Sometimes” was given a weight of 2; “Rarely” was given a weight of 1 and “Never” was given a weight of 0. For example if 100 responds was received for a certain cause where: 20 responds were “Always”; 65 responds were “Sometimes”; 10 responds were “Rarely” and 5 were “Never” then the frequency index for this cause would be calculated as the following equation: = 66.67 F.I= 140
  4. 4. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Impact index is calculated according to the following equation: Where: I.I. = Impact index; = Weight of response; = Frequency of response and i = Response category index. A response of “Extreme” was given a weight of 3; “Moderate” was given a weight of 2; “Little” was given a weight of 1 and “No” was given a weight of 0 and the index was calculated similar to the frequency index previously shown. The Importance Index was calculated through using a similar methodology to that used by Assaf and Hejji (2006): Importance index (IMP. I.) (%) = [F.I. (%) * I.I. (%)] The Importance indexes were calculated for the cost overrun causes where they were ranked accordingly as shown in chart (1). 5.2 Analysis of results by Project Parties In order to asses the cost overrun causes by each party independently, the contractors’, consultants’, owners’, and project managers’ data were separated and analyized seperatly. This helped in in identifing the degree of agreement between each party responses. The frequency index, impact index and importance index was calculated according to each party respons where causes were ranked accordingly as shown in table (2). The following are comments on the data shown in Table (2) and Chart (2): • “Occurrence of design variations, changes or additional work by owner or designer” is considered as the most important factor of cost overrun causes regarding the general overall results. Design changes and variation orders can affect the project’s estimated budget and time for construction due to reworks and delays and subsequent claims, and this could illustrate why the contractors’ relative importance of this cause is the lowest among the other parties. • “Unrealistic estimation of construction period” is the second most important factor of cost overrun causes according to the overall results. This cause recorded a high relative importance according to the contractors’ and the project managers’ results which reflects the project managers’ and contractor’ perception of the importance of accurate time estimation on the project budget due to the nature of their work. • “Inadequate design, design errors and mistakes, lack of details or contradiction in design and conflict between design documents (drawings and specifications)”ranked a high relative importance according to the contractors’ results unlike the other parties, showing a conflicting opinion with other parties as the design process is merely under their responsibility unlike with no contribution of the contractor in most of the cases. • “Lack of communication and coordination between design participants of different background”, recorded a much higher relative importance according to the owners’ and project managers’ results unlike the architects’ results The results shows a conflicting opinion between the design main participants as it is believed that it is the architect’s responsibility to assure the integration of the design. • “Lack of Designers understanding of cost and value and the subsequent cost implications of what included in the design” ranked a higher relative importance according to the architects’ and contractors’ results than the owners’ and project managers’ results. Again the results show conflicting opinions between design participants regarding what to be included in the design and ways of cost optimization that may be not agreed by owner or project manager. • Causes “Inadequate consideration of risks” and “Quantities taking off mistakes” recorded a higher importance regarding the project managers’ results than other parties reflecting the perception of the importance of considering the risks and the accurate real quantities of work; this is due to the nature of the project manager in a construction project. • “Lack of involving contractors or suppliers during in design” recorded a higher importance regarding the contractors’ results than other parties; this could be justified as many problems during construction could be avoided if contractor participation took place earlier during design. • “Selection of inappropriate big construction companies” recorded the lowest relative importance among the contractors’ results. Reflecting the contradiction in opinion as architects, owners and project managers may consider the added markups and profit may increase the cost of the building in an avoidable way if smaller contractor companies are selected. 141
  5. 5. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION 6. Degree of Agreement between Parties To quantitatively measure the agreement between parties the following two approaches are adopted: Pearson’s Correlation Coefficient in comparing values of Importance Index; and Rank Agreement Factor in comparing the Ranking 6.1 Pearson’s Correlation Coefficient (C.C.) The C.C. is described as the “product moment correlation coefficient” is one of the most reliable and common adopted statistical techniques to identify the correlation between two sets of data. The following formula is used to calculate the C.C. (probability, Statistics & Reliability; Ayyub, B.A. & McCuen, R.H. pp 279). The values of C.C. range from +1 which means “perfect correlation”, through 0 which means “no correlation’, to -1 which means “perfect negative correlation”. The results of correlation between the contractor and the architect- consultant was -0.0434, between the contractor and the owner was 0.0725, between the contractor and the project manager was 0.0490, between the architect - consultant and owner was 0.0659, between the architect – consultant and the project manager was 0.0424, between the owner and project manager was 0.1584. 6.2 Spearman Rank Correlation Coefficient Spearman Rank Correlation Coefficient was calculated based on the following formula (Assaf and Al-Hejji 2006): Spearman rank coefficient = 1Where “d” is the difference between ranks indicated by the two parties and “n” is the number of records. The values range from (+1) as perfect correlation, (0) no correlation and (-1) as negative correlation. The results of correlation between the contractor and the architect- consultant was 0.67, between the contractor and the owner was 0.6, between the contractor and the project manager was 0.63, between the architect - consultant and owner was -0.38, between the architect – consultant and the project manager was -0.34, between the owner and project manager was 0.99. 6.3 Rank Agreement Factor (R.A.F.) The R.A.F is known as the average absolute difference in rank of the items (Baldwin et al. 1971). It is a method of quantifying the agreement between the parties result. Where “X” and “Y” are the ranks in a two party results, “N” is the number of records. Values of the R.A.F. Range from 0 which means “perfect agreement” to N/2 which means “perfect negative correlation, i.e. the highest agreement the lowest the R.A.F. The results of correlation between the contractor and the architect- consultant was 3.55, between the contractor and the owner was 3.94, between the contractor and the project manager was 3.81, between the architect - consultant and owner was 7.48, between the architect – consultant and the project manager was 7.36, between the owner and project manager was 0.13. The results showed that the highest agreement factor lies between the owners’ and the project managers’ results this is due to the contractual nature between them. The architects’ results degree of agreement with owners or project managers showed low correlation, this due to that both parties are mainly involved in the design stage and therefore it is likely to have opposite opinion regarding the importance of causes. On other hand it is not usual that the contractor to be involved during design stage and this shows why correlation levels of contractor with other parties could be considered as in between. 7. Conclusion The aim of the research was to identify cause of cost overrun related to the design stage in the Egyptian construction industry. A literature review was conducted to recognize the proper technique of managing cost during design stage and to identify causes of cost overrun that arise during the design stage and affect the project’s budget during the later stages. Seven semi-structured interviews were conducted to adapt the selected causes according to the Egyptian building projects. The resultant list of 16 cause of cost overrun was raised for a questionnaire to quantitatively evaluate their importance according to their frequency and impact. The survey overall results showed that the most important causes are Occurrence of design variations, changes or additional work by owner or designer; Unrealistic estimation of construction period; Lack of information and definitions of scope due to incomplete recognizing or badly developed client's needs and lack of involvement of the appropriate stake holders; Inadequate design, design errors and mistakes; 142
  6. 6. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION lack of details or contradiction in design and conflict between design documents (drawings and specifications); Lack of communication and coordination between design participants of different background. The results show that the topmost important five causes of cost overrun are almost agreed by all project parties however there are disagreement considering their ranking which extended to the rest of causes this is due to the attempt of each party to promote the importance of causes under other’s responsibility. A correlation of the responses of each party showed the architect – consultant and the owner or the project manager to have dissimilar opinions regarding cost overrun causes, while the contractor held an intermediate position. Further research can be conducted based on the findings of this paper. For example identifying causes of cost overrun related to design stage in other countries which may rise different due to geographical and socio-economic variations. Moreover, an advance research could suggest set of guide lines or recommendations to manage costs during design or a process plan for the functions to be incorporated within the design stage. References Ali, A. S., & Kamaruzzaman, S. N. (2010). Cost performance for building construction projects in Klang Valley. Journal of Building Performance , 1 (1), 110-118. Ameh, O. J., Soyingbe, A. A., & Odusami, K. T. (2010). Significant Factors Causing Cost Overruns in Telecommunication Projects in Nigeria. Journal of Construction in Developing Countries , 15 (2), 49-67. Apolot, R., Alinaitwe, H., & Tindiwensi, D. (2009). An Investigation into the Causes of Delay and Cost Overrun in Uganda's Public Sector Construction Projects. Second International Conference on Advances in Engineering and Technology, (pp. 305-311). Ashworth, A. (2004). Cost Studies of Buildings. Essex: Pearson Education Limited. Azhar, N., Farooqui, U. R., & Ahmed, M. S. (2008). Cost Overrun Factors In Construction Industry of Pakistan. Proceeding of first International Conference on Construction in Developing Countries (ICCIDE-1) (pp. 499-508). Karachi: First International Conference on Construction In Developing Countries. Baloyi, L., & Bekker, M. (2011). Causes of construction cost and time overruns: The 2010 FIFA World Cup Stadia in South Africa. Acta Structilia , 18 (1), 51-67. Barrie, D. S., & Paulson, J. B. (1992). Professional Construction Management. New York: McGraw-Hill. Brook, M. (2004). Estimating and Tendering for Construction Work. London: Elsevier ButterworthHeinemann. Bubshait, A. A., & Al-Juwairah, Y. A. (2002). Factors Contributing to Construction Costs in Saudi Arabia. Cost Engineering , 44 (5), 30-34. Chang, A. S.-T. (2002). Reasons for Cost and Schedule Increase for Engineering Design Projects. Journal of Management in Engineering , 18 (1), 29-36. Chappell, D., & Willis, A. (2005). The Architect in Practice. Oxford: Blackwell Publishing Ltd. Clark, F. D., & Lorenzoni, A. B. (2003). Applied Cost Engineering. New York: Marcel Dekker, Inc. Dell’Isola, M. D. (2002). Architect’s Essentials of Cost Management. New York: John Wiley & Sons, Inc. Durdyev, S., Ismail, S., & Abu Bakar, N. (2012). Factors causing cost overrun in construction of residential projects; case study of Turkey. International Journal of Science and Management , 1 (1), 3-12. Emmitt, S., & Yeomans, D. (2008). Specifying Buildings: A Design Management perspective. London: Butterworth-Heinemann . Fisk, E. R. (2000). Construction Project Adminstration. Ohio: Prentice Hall. Flanagan, R., & Norman, G. (1999). Risk management and construction. Somerset: Blackwell Science. Flanagan, R., & Tate, B. (1997). Cost Control in Building Design . Oxford: Wiley-Blackwell . Gould, F. E. (1997). Managing the construction process :estimating, scheduling and project control. New jersy: Prentice-Hall, Inc. Gray, C., & Hughes, W. (2001). Building Design Management. Oxford: Butterworth - Heinemann. Holm, L. (2005). Construction Cost Estimating : Process and practice. London: Pearson Education, Inc. Holroyd, T. M. (2000). Principles Of Estimating. London: Thomas Telford. 143
  7. 7. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Jackson, S. (2002). Project cost overrun and cost management. Proceedings of Association of Researchers in Construction Management 18th Annual ARCOM Conference. Newcastle: Northumber University. Jaggar, D., Ross, A., Smith, J., & Love, P. (2002). Building Design Cost Management. Oxford: Blackwell Science Ltd. Kaming, P. F., Olomolaiye, P. O., Holt, G. D., & Harris, F. C. (1997). Factors influencing construction time and cost overruns on high-rise projects in Indonesia. Construction Management and Economics (15), 83-94. Koushki, P A; Al-Rashid, K; Kartam, N. (2005, March). Delays and cost increase in the construction private resedential projects in Kwait. 23 (3), pp. 285-294. Le-Hoai, L., Lee, Y. D., & Lee, J. Y. (2008). Dealy and Cost Overruns in Vietnam Large Construction Projects: A Comparisom with Other Selected Countries. KSCE Journal of Civil Engineering , 12 (6), 367-377. Morton, R., & Jagger, D. (1995). Design and the Economics of Building. London: E&FN SPON. Parker, D. E., & Dell'Isola, A. J. (1991). Project Budgeting for Buildings. New York: Van Nostrand Reinhold. PMI. (2008). A Guide to the Project Management Body of Knowledge (Fourth ed.). Sylva: PMI Publishing. Potts, K. (2008). Construction Cost Management. New York: Taylor and Francis. Regener, J. R., Rosen, H. J., Wegant, R. S., & Kalin, M. (2010). Construction Specifications Writing: Principles and Procedures. London: John Wiley & Sons. RIBA. (2007). Outline Plan of Work. London: Royal Institute of British Architects. Schutte, S. D., & Liska, R. W. (1994). Building Construction Estimating. Singapore: Mcgraw-Hill, Inc. Seeley, I. H. (1996). Building Economics (Fourth ed.). London: Macmillan Press LTD. Smith, J., & Jagger, D. (2007). Building Cost Planning for the Design Team (2nd ed.). Oxford: Elsevier. Sundaram, V. (2008). Essentials of Design Phase Cost Management and Budget Control. Cost Engineering , 50 (2), 24-28. Tichacek, R. L. (2006). Effective Cost Management - Back to Basics. Cost Engineering , 48 (3), 27-33. Twyford, J. (2002). Design and Construction: Building in Value. (R. Best, & G. De Valence, Eds.) Oxford: Butter-worth Heinemann. Wideman, R. M. (1992). Project and program risk management: a guide to managing project risks and opportunities. Pennsylvania: PMI. Woodward, J. (1997). Construction project Management. london: Thomas Telford Publishing. Figure (1): Design cost management concept map. Adapted from Smith and love (2000) No. Causes of Cost Overrun 1 Lack of information and definitions of scope due to incomplete recognizing or badly developed client's needs and lack of involvement of the appropriate stake holders 144
  8. 8. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION 2 Inadequate design, design errors and mistakes, lack of details or contradiction in design and conflict between design documents (drawings and specifications) 3 Occurrence of design variations, changes or additional work by owner or designer 4 Selection of inappropriate designer according to the project's complexity and specialty 5 Not allocating sufficient resources and time to develop appropriate design 6 Lack of Designers understanding of cost and value and the subsequent cost implications of what included in the design 7 Lack of value management and Buildability consideration 8 Lack of communication and coordination between design participants 9 Lack of involving special trades contractors or suppliers during the design development 10 Occurrence of mistakes in quantities taking off 11 Unavailability of construction cost data to develop a realistic cost estimate 12 Unrealistic estimation of construction period 13 Inadequate consideration of risks regarding site location and the unavailability of building materials, environmental concerns, weather, market trends, financing burdens, bonds and insurance costs, statutory constrains and other unforeseen risks 14 Selection of inappropriate contract type or the inappropriate allocation of risks in contract 15 Adopting Tight bidding conditions during tender regarding bonds, insurances or certificates required 16 Selection of inappropriate big construction companies presented tender price of different background with high mark-up and profits added to the Table (1): Selected causes of cost overrun from literature and after experts’ interviews adaptation for questionnaire evaluation. 145
  9. 9. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Overall results No. Causes Rank Rel. Imp. Owners’ Rank Rel. Imp. Architects’ Rank Rel. Imp. Contractors’ Rank Rel. Imp. Project Managers’ Rel. Rank Imp. 3 Design changes and variations 1 100.00% 2 97.50% 1 100.00% 4 90.51% 3 12 Unrealistic estimation of construction period 2 97.48% 4 86.67% 2 89.57% 2 100.00% 1 1 Lack of scope definition 3 95.76% 3 93.33% 3 85.91% 1 100.00% 4 2 Inadequate design, design errors and mistakes 4 90.92% 5 79.44% 4 84.76% 3 95.83% 5 8 Lack of communication and coordination 5 85.27% 1 100.00% 7 68.80% 5 88.34% 2 7 Lack of value management and Buildability consideration 6 79.52% 6 76.39% 5 80.60% 7 73.84% 8 6 Lack of Designers understanding of cost and value in design 7 77.75% 8 66.67% 6 75.10% 6 81.22% 9 13 Inadequate consideration of risks 8 71.48% 7 68.61% 8 68.00% 11 65.96% 7 10 Quantities taking off mistakes 9 65.91% 13 52.78% 12 58.67% 9 66.74% 6 11 Unavailability of cost data 10 65.68% 9 63.33% 10 60.34% 10 66.35% 10 9 Lack of involving contractors or suppliers during in design 11 63.37% 12 54.31% 13 57.48% 8 68.46% 11 5 Not allocating sufficient resources and time to develop appropriate design 12 60.66% 10 57.50% 9 66.00% 13 50.28% 13 4 Selection of inappropriate designer 13 57.26% 14 46.94% 11 58.80% 12 54.15% 14 16 Selection of inappropriate big construction companies 14 52.80% 11 55.56% 14 56.51% 16 39.45% 12 14 Selection of inappropriate contract type 15 46.49% 15 44.86% 16 42.06% 14 47.96% 16 15 Adopting Tight bidding conditions 16 45.70% 16 28.89% 15 47.33% 15 43.04% 15 96.88% 100.00% 93.75% 84.13% 99.16% 69.11% Table (2): Ranking and relative importance according to the questionnaire overall results and each party’s results 146 65.63% 78.13% 80.17% 64.90% 57.09% 54.09% 51.92% 54.81% 44.95% 50.24%
  10. 10. 40.0 40% 30.0 30% 20.0 20% 10.0 10% 0.0 0% to the questionnaire overall results. Chart (2): Overall and different parties’ relative importance of causes 147 60.0 50.0 Adopting Tight bidding conditions Imp. Index % Selection of inappropriate contract type 61% Selection of inappropriate big construction companies 63% Selection of inappropriate designer 66% 66% Not allocating sufficient resources for design I.I Lack of involving contractors or suppliers during in design F.I Unavailability of cost data 70.0 Quantities taking off mistakes 91% Inadequate consideration of risks 80.0 Lack of Designers understanding of cost and value in design 96% Lack of value management and Buildability consideration Lack of communication and coordination 100% 97% Inadequate design, design errors and mistakes Lack of of scope definition 90.0 Unrealistic estimation of construction period Design changes and variations WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION 100.0 Rel. Imp. % 100% 85% 80% 78% 90% 71% 80% 70% 57% 53% 60% 46% 46% 50% Chart (1): Frequency index, impact index, importance index and relative importance of cost overrun cause according

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