Comparison for components of cost overrun in construction

Abstract

Construction industry is considered as one of the most important industries in China. It is well known that most construction projects in China are exposed to cost overrun. From the literature review, forty-three general cost overrun factors in construction projects were obtained based on previous researches from many countries. The aim of this study is to evaluate the most important cost overrun factors that are specifically related to resources, namely labour, material, equipment and subcontractor. Two questionnaire surveys were used to achieve the objectives in this study. The first questionnaire was designed to determine the severity of cost overrun factors, and the second one was designed to obtain the proportions of cost components and top-ten factors cost for each component. Data from the questionnaires were analysed by using the relative importance index (RII) method and mean value method. The findings indicated that material cost is the highest, and subcontractor cost is the lowest, while equipment and labour cost are approximately the same. Low productivity of labour, lack of skilled labour, escalation of material prices, material quality issues, high cost of machineries and poor cash flow management are among the important factors for cost overrun. This study concludes factors that cause cost overrun in China are similar to those that can be found in other countries except for a few factors. These factors are rework due to error in construction, equipment breakdown, improper planning, project management and contract administration, high level of quality requirement, and project schedule changes. This study can be used as reference for the further studies to evaluate the causes of cost overrun in construction projects and minimise the associated risk