54

CHAPTER 4

IDENTIFICATION AND EVALUATION OF FACTORS

AFFECTING COST OVERRUN IN INDIAN BUILDING
CONSTRUCTION PROJECTS

4.1 INTRODUCTION

Cost overrun identification is an integral part of overall cost

management framework of construction projects. Cost overrun associated with
government construction projects differ according to the country and the
specific sector in which they are implemented. In this chapter, the factors
affecting cost overrun are identified and evaluated . In this chapter the details
of questionnaire formulation is explained along with the details of the survey.
The analysis based on the responses obtained by administering the
questionnaire is also discussed. A case study analysis with respect to
significant factors and factor categories affecting cost overrun realisation and
impact for six building construction projects is also presented. Cost overrun in
building construction used in the context of this study, is the increase in the
cost of a project due to factors affecting the original cost estimate and final
cost of a project.
 55

4.2 IDENTIFICATION OF FACTORS AFFECTING COST

OVERRUN

One of the aims of this research is to identify factors affecting cost

overrun in building construction project in India. The process of identification
of factors affecting cost overrun was done in four stages (Table 4.1). A mixed
approach of interviews, questionnaire surveys and case studies was used for
the study (Thomas et al 2001; Akintoye et al 1998; Arndt and Maguire 1999;
Wang et al 2000; Jefferies and Gameson 2002).

Table 4.1 Process of identification of factors affecting cost overrun

Stage Process Details

1 Preparation of preliminary  Study of literature including research
list of factors and their papers and case study reports.
category  Unstructured interviews and discussions
with project participants,
consultant/experts for identification of
factors contributing to cost overrun and
their category
2 Identification of relative  Questionnaire survey among middle and
importance indices and senior level building construction project
factors ranking of factors participants for identifying relative
contributing to cost importance indices and ranking of factors
overrun contributing to cost overrun
3 Identification of significant  Questionnaire survey among middle and
factors contributing to cost senior level building construction project
overrun and case study participants for identifying significant
analysis factors contributing to cost overrun.
4 Case study analysis  Detailed case study of six Indian building
projects in terms of risk factor realisation
and impact for validating the survey results
4.3 PRELIMINARY LIST OF COST OVERRUN FACTOR
CATEGORIES AND FACTORS
 56

A preliminary list of cost overrun factors and factor categories

contributing to cost overrun associated with building construction projects in
general and unique to the Indian project environment was prepared based on
literature review (Chan et al 1996; Akinci et al 1998; Frimpong et al 2003; Lo
et al 2006; Okpala et al 1988; Abinu et al 2006; Kaming et al 1997; Cox
1997; Samuels et al 1996; Randolph et al 1987; Elinwa et al 1993; Wang
et al 2004; Charlesraj et al 2004; Xiao 2003; Maloney 2003; Rojas et al 2003;
Hassim et al 2003; Warszawski 1982; Farid et al 1985; Ahmed et al 1998;
Ioannou 1988; Parfitt et al 1993; Ioannou et al 1993; Thomas et al 1990;
Semple et al 1994; Frimpong et al 2001; Knight et al 2002; Assaf et al 1995;
Akinci et al 1998; Faniran et al 1998; Yates et al 1993; Abid Majid et al
1998; Abinu et al 2006; Zou et al 2007) interview with consultants/experts
and discussions with building project participants.

The preliminary list of cost overrun factors and their categories

prepared was further filtered through unstructured interviews with
consultants/experts, project participants. Building construction project
participants available in and around Chennai were consulted / interviewed for
consolidating the list of cost overrun factors. About 25 such locally available
building project participants were interviewed. These experts/participants
included Government officers, contractors and consultants.
 57

4.4 CLASSIFICATION OF CATEGORIES AND FACTORS

AFFECTING COST OVERRUN IN BUILDING
CONSTRUCTION PROJECTS

In the present research, 29 cost overrun factors falling under five

factor categories have been identified. The cost overrun factors relating to the
various participants and external factors involved in project execution have
been identified and categorised under five major categories is presented in
Table 4.2.

Table 4.2 Factors relating to categories causing cost overrun in Indian

building construction projects

Categories Risk factors contributing to causes of cost overrun

Client - Related Number of change/ extra work orders, slow decision
making, delay in contract award, delay in handing over of
site, Unrealistic schedule, Cash flow during construction
Architect-related Deficiencies in cost estimate and specification prepared,
Incomplete Architectural drawings, Delay in work
approval, Variation orders, Poor information and
dissemination, Inadequate supervision
Structural Engineer - Incomplete structural drawings, Structural design
related variations, Inadequate supervision, Late issuance of
instruction, Poor services and design information
Contractor - related Planning and scheduling deficiencies, Non-availability of
sufficient professionals and Managers, Non-availability of
sufficient amount of skilled labour, Financial difficulties,
Low bid, Lack of coordination between project
participants
External factors Bad weather, Strike, Productivity, Environmental impact,
Site conditions and Price fluctuations
 58

4.5 STAGES OF THE BUILDING PROJECT

Building construction project, generally passes through the

following stages.

Concept: User of the project feels the necessity of a facility and

expresses his requirement in terms of the use he intends to derive e.g. number
of beds in the hospital, number of class rooms/students for an educational,
institution; etc.

Preliminary Investigation: This comprises data collection,

exploring the possibilities of alternatives serving the intended purpose. This is
done by specialists like engineers and/or architects. This stage/phase ends
with the selection of the final proposal.

Detailed Investigation: This phase will cover data collection,

design, drawings and estimates of costs. Required data is collected for the
final proposal; the detailed drawings are prepared. Finally estimate of cost is
prepared so that the owner /user gets an idea of and arranges for the finances
for creating the structure. The outcome of this phase – drawings and
estimates-forms the basis of the next stage.

Construction: This is the most important phase. The structure

created on paper is transformed into reality on the site. This requires resources
like materials, (human effort), equipment/machinery, time all of which can be
expressed in terms of money.
 59

4.6 AGENCIES/ PARTICIPANTS ASSOCIATED WITH A

PROJECT

The agencies/participants associated with a building project can be

summarised as below:

Owner/user: The owner/user feels the necessity of the structure

and ultimately uses the structure. The owner/user can be a private individual a
private organisation, a public organisation. Sometimes the actual users are
suitably represented, e.g. P.W.D. represents the users of structures like roads,
irrigation project, etc.

Architect/Engineer: This agency is responsible for the second and

third phases viz. preliminary investigations, formulation of alternative
proposals and later on carry out detailed investigation, data collection, design,
drawings, estimation etc. Architects are generally concerned with buildings
and particularly in organising horizontal and vertical spaces. The other
activities may be carried out by different agencies like designers/consulting
engineers; estimators etc. This agency may comprise an individual or .an
organisation.

Constructor: This is the agency responsible for the final phase.

This agency should be capable of arranging for the procurement of the various
resources required for the construction phase. Above all it should be capable
of converting these resources" into the structure as per drawings in specified
time and cost frame.

The various phases/stages of a project and the agencies associated

with them are diagrammatically shown in Figure 4.1.
 60

CONCEPT
Necessity / Need

Owner / User

Preliminary Survey, data Collection preparing

alternative proposals

Engineers and/or Architect

Feed back

Study of the alternatives

Selecting final Proposal

Engineer and/or Architect

Detailed Survey Data Collection

Engineer

Feed back
Layout design, drawings & estimating

Design Engineers and estimators

CONSTRUCTION

Constructor/Contractor

Figure 4.1 Various phases of a project

 61

4.7 SURVEY RESEARCH

4.7.1 Questionnaire Survey Approach

Due to the non-availability of organised information relating to the

completed projects and including cost escalation of the project a mail
questionnaire survey approach was considered. In the area of construction
management, many researchers have used this approach (Kangari 1995;
Hartman and Snelgrove 1996; Chan et al 1997; Akintoye and Macleod 1997;
Knight et al 2002; Dawood et al 2002; Abinu et al 2006; Kaliba et al 2008). In
the survey research, factors affecting cost overrun in building construction
projects were identified.

4.7.2 Survey Questionnaire

The questionnaire for part-B of the (Questions B1-B29 and B30-

B31) survey was designed with the objective of identifying and evaluating the
factors contributing to cost overrun. . The preliminary questionnaire was
circulated among the twenty experienced locally available experts in the field.
Their suggestions with respect to contents, structure, format and sequencing
of the questions were incorporated in the final questionnaire.

The questionnaire contained questions relating to identification of

factors affecting cost overrun in building construction projects in India. The
questionnaire used in the survey is presented in Appendix 1. Questions were
relevant to the area of research. Questions B1 to B29 and B30 to B31 were
related to the causes of cost overrun in Indian building construction projects.

Questions for identification of factors affecting cost overrun: The

structured questionnaire were administered and the respondents were asked to
 62

indicate their response based on their experience in construction projects in

India.

4.7.3 Response - Questionnaire Survey

Survey was carried out among the two major participants of Indian
building construction projects - Government representatives (Clients), and
Contracting organisations (contractors). The survey was administrated during
the period June to December 2008. Only middle and top level officers who
are responsible for execution of projects and powers for strategic decision
making in their respective organisations with respect to building construction
projects are included in the sample. Out of 215 questionnaires administered,
119 responses were obtained. During visits to collect responses discussions/
unstructured interviews were also carried out with the above respondents.
The response rate of 56 percent is considered to be very good for this kind of
a mail survey. Though the total number of questionnaires sent and the
responses received were limited, the survey covered most of the known
strategic decision makers in the Indian building construction projects. The
reliability of the survey results is expected to be high because all the
respondents are top-level experienced management officials in their
organizations

4.7.4 Identification of Most Significant Factors Affecting Cost

Overrun

An all India questionnaire survey was conducted among two major

participants (Government representatives and consultants) of Indian building
construction projects to identify the most significant factors contributing to
cost overrun in Indian building construction projects. In the identification of
most significant factor contributing to cost overrun, 29 factors have been
formulated in the questionnaire, which was developed to sample the opinion
 63

of construction managers on the extent to which each of the factors were

contributing to overall cost overrun on a typical building project in which they
are involved. The respondents were asked to adopt weights to the factors 1
to 5, where, ‘1’ is the lowest score and ‘5’ is the highest score. The score
assigned to each factor by the respondents represents the extent to which the
factor contributes to overall cost overrun on a typical building project.
However, using the Statistical Package for Social Sciences (SPSS), the data
were subjected to statistical analysis for further insight.

Data analysis: Chan et al (1996) and Aibinu et al (2006) used the

‘relative importance index’ method to determine the relative importance of the
factors causing delays in construction projects. The same method was adopted
for analysis of the data collected from the survey, within various groups as
classified according to the role of the participants. The five point scale was
transferred to relative importance index for each factor. The factors were
ranked in order of importance based on the relative importance indices values.
These ranking made it possible to cross-compare the relative importance of
factors as perceived by the two group of respondents i.e. owner and
contractor. All the numerical scores of each of the identified factors were
transformed to relative importance indices to determine the relative ranking of
the factors. The relative importance index (RII) was evaluated using the
following expression:

Relative Importance Index =  

 W 
 (0 ≤ index ≥ 1)
A  N 
 
(4.1)

where, W = weightage given to each factor by the respondents and ranges

from 1 to 5, W = total score assigned to the factor by the respondents;

A = highest weight (i.e. 5 in this case); and N = total number of respondents.

 64

The factors were ranked in order of importance based on the relative

importance index values. The relative importance indices and ranking of the
29 cost overrun factors were done based on the perception analysis of client,
contractors and overall representatives of building construction projects in
India.

Results and discussion: The details of factor category, factor

name and factor label is presented in Table 4.3.

Tale 4.3 Cost Overrun - Factor category, factor name and factor label

Factor
Factor Category Factor name
Label
Client - related Number of changes / extra work orders F01
Client - related Slow decision making F02
Client - related Delay in contract award F03
Client - related Delay in handing over of site F04
Client - related Unrealistic schedule F05
Client - related Cash flow during construction F06
Deficiencies in cost estimate and
Architect - related specification prepared F07
Architect - related Incomplete Architectural drawings F08
Architect - related Delay in work approval F09
Architect - related Variation orders F10
Architect - related Poor information and dissemination F11
Architect - related Inadequate supervision F12
Structural Engineer - related Incomplete structural drawings F13
Structural Engineer - related Structural design variations F14
Structural Engineer - related Inadequate supervision F15
 65

Tale 4.3 (Continued)

Factor
Factor Category Factor name
Label
Structural Engineer - related Late issuance of instruction F16
Structural Engineer - related Poor services and design information F17
Contractor - related Planning and scheduling deficiencies F18
Non-availability of sufficient
Contractor - related professionals and Managers F19
Non-availability of sufficient amount of
Contractor - related skilled labor F20
Contractor - related Financial difficulties F21
Contractor - related Low bid F22
Lack of coordination between project
Contractor - related F23
participants
External factor Bad weather F24
External factor Strike F25
External factor Productivity F26
External factor Environmental impact F27
External factor Site conditions F28
External factor Price escalation F29

The relative importance indices and rank of the 29 cost overrun

factors based on the perception of client representatives of building
construction projects in India is presented in Table 4.4.
 66

Table 4.4 Client responses to the ranking of significant factors causing

cost overrun in building projects (n=66)

Relative
Factor Factor
Factor Name Importance
No. rank
Index (RII)
F29 Price escalation 0.976 1
F22 Low bid 0.958 2
F21 Financial difficulties 0.930 3
F18 Planning and scheduling deficiencies 0.912 4
F02 Slow decision making 0.897 5
F20 Non-availability of sufficient amount of
skilled labour 0.888 6
F28 Site conditions 0.882 7
F01 Number of change / extra work orders 0.858 8
F03 Delay in contract award 0.845 9
F07 Deficiencies in cost estimate and
specification prepared 0.836 10
F08 Incomplete Architectural drawings 0.830 11
F14 Structural design variations 0.827 12
F13 Incomplete structural drawings 0.821 13
F19 Non-availability of sufficient professionals
and Managers 0.815 14
F26 Productivity 0.806 15
F09 Delay in work approval 0.797 16
F05 Unrealistic schedule 0.788 17
F10 Variation orders 0.782 18
F24 Bad weather 0.764 19
F23 Lack of coordination Between project
participants 0.758 20
F16 Late issuance of instruction 0.736 21
F04 Delay in handing over of site 0.727 22
F11 Poor information and dissemination 0.718 23
F17 Poor services and design information 0.694 24
F27 Environmental impact 0.688 25
F12 Inadequate supervision 0.667 26
F06 Cash flow during construction 0.636 27
F25 Strike 0.633 28
 67

F15 Inadequate supervision 0.555 29

The client representatives’ response to the relative importance
indices of the six most significant factors causing cost overrun in building
construction projects in India is presented in Figure 4.2.

1.00

0.976 Impact of cost overrun

0.98
Relative Importance Index(RII)

0.958
0.96

0.94 0.93

0.92 0.912

0.897
0.90 0.888

0.88

0.86

0.84
Price Low bid Financial Planning and Slow decision Non-
escalation difficulties scheduling making availability of
deficiencies sufficient
amount of
skilled labour

Figure 4.2 Most significant factors affecting cost overrun as perceived

by the client’s group

The relative importance indices and rank of the 29 cost overrun

factors based on the perception of contractor representatives of building
construction projects in India is presented in Table 4.5.
 68

Table 4.5 Contractor responses to the ranking of significant factors

causing cost overrun in building projects (n=53)

Relative
Factor Factor
Factor name Importance
No. Rank
Index
F29 Price escalation 0.981 1
F02 Slow decision making 0.966 2
F28 Site conditions 0.947 3
F20 Non-availability of sufficient amount of skilled labor 0.921 4
F01 Number of change / extra work orders 0.906 5
F07 Deficiencies in cost estimate and specification
prepared 0.898 6
F03 Delay in contract award 0.875 7
F22 Low bid 0.868 8
F08 Incomplete Architectural drawings 0.860 9
F05 Unrealistic schedule 0.857 10
F04 Delay in handing over of site 0.845 11
F13 Incomplete structural drawings 0.834 12
F18 Planning and scheduling deficiencies 0.819 13
F26 Productivity 0.811 14
F21 Financial difficulties 0.804 15
F19 Non-availability of sufficient professionals and
Managers 0.792 16
F06 Cash flow during construction 0.785 17
F14 Structural design variations 0.774 18
F09 Delay in work approval 0.766 19
F17 Poor services and design information 0.758 20
F11 Poor information and dissemination 0.747 21
F23 Lack of coordination Between project participants 0.736 22
F24 Bad weather 0.728 23
F10 Variation orders 0.717 24
F12 Inadequate supervision 0.709 25
F27 Environmental impact 0.698 26
F16 Late issuance of instruction 0.687 27
F15 Inadequate supervision 0.679 28
F25 Strike 0.672 29
 69

The Contractor representative’s response to the relative importance

indices of the six most significant factors causing cost overrun is presented in
Figure 4.3.

1.00
0.981
0.98 Impact of cost overrun
0.966
Relative Importance Index (RII)

0.96
0.947

0.94
0.921
0.92
0.906
0.898
0.90

0.88

0.86

0.84
Price Slow decision Site conditions Non- Client -number Deficiencies in
escalation making availability of of change and cost estimate
sufficient variation and
amount of orders specification
skilled labour prepared

Figure 4.3 Most significant factors affecting cost overrun as perceived

by the contractor’s group

The relative importance indices and rank of the 29 cost overrun

factors based on the perception of overall group (clients and contractors)
representatives of building construction projects in India is presented in
Table 4.6.
 70

Table 4.6 Overall group responses to the ranking of significant factors

causing cost overrun in Building projects (n=119)

Relative
Factor Factor
Factor Name Importance
No rank
Index
F29 Price escalation 0.978 1
F02 Slow decision making 0.928 2
F28 Site conditions 0.911 3
F22 Low bid 0.918 4
F20 Non-availability of sufficient amount of skilled
labor 0.903 5
F01 Number of change / extra work orders 0.879 6
F21 Financial difficulties 0.874 7
F18 Planning and scheduling deficiencies 0.871 8
F07 Deficiencies in cost estimate and specification
prepared 0.864 9
F03 Delay in contract award 0.859 10
F08 Incomplete Architectural drawings 0.844 11
F13 Incomplete structural drawings 0.827 12
F26 Productivity 0.808 13
F19 Non-availability of sufficient professionals and
Managers 0.805 14
F14 Structural design variations 0.803 15
F09 Delay in work approval 0.783 16
F05 Unrealistic schedule 0.818 17
F04 Delay in handing over of site 0.780 18
F10 Variation orders 0.753 19
F24 Bad weather 0.748 20
F23 Lack of coordination Between project participants 0.748 21
F11 Poor information and dissemination 0.731 22
F17 Poor services and design information 0.723 23
F16 Late issuance of instruction 0.714 24
F06 Cash flow during construction 0.703 25
F27 Environmental impact 0.692 26
F12 Inadequate supervision 0.686 27
F25 Strike 0.650 28
F15 Inadequate supervision 0.610 29
 71

The relative importance indices of the six most significant factors

causing cost overrun according to overall group representatives in building
construction projects in India is presented in Figure 4.4.

1
0.978
0.98 Impact of cost overrun
0.928
Relative Importance Index (RII)

0.96
0.911
0.94

0.92 0.918
0.903
0.9
0.879
0.88

0.86

0.84

0.82
price escalation slow decision Site conditions Low bid Non-availability Client - number
making of sufficient of change and
amount of variation order
skilled labour

Figure 4.4 Most significant factors affecting cost overrun as perceived

by the overall group

The relative importance indices and rank of the 29 cost overrun

factors based on the perception of clients, contractors and overall group
representatives of building construction projects in India is presented in
Table 4.7.
 72

Table 4.7 Clients, Contractors and overall responses to the ranking of

significant factors causing cost overrun in building
construction projects in India

Clients Contractor
response Overall
response
(n=119)
Factor Name (n=66) (n=53)
Factor Factor Factor
RII RII RII
rank rank rank
Price fluctuations 0.976 1 0.981 1 0.978 1
Low bid by the contractor 0.958 2 0.868 8 0.918 4
Financial difficulties by the
0.930 3 0.804 15 0.874 7
contractor
Planning and scheduling
0.912 4 0.819 13 0.871 8
deficiencies by the contractor
Slow decision making by the
0.897 5 0.966 2 0.928 2
clients
Non-availability of sufficient
0.888 6 0.921 4 0.903 5
amount of skilled labour
Site conditions 0.882 7 0.947 3 0.911 3
Number of change / extra work
0.858 8 0.906 5 0.879 6
orders by the clients
Delay in contract award by the
0.845 9 0.875 7 0.859 10
client
Deficiencies in cost estimate
and specification prepared by 0.836 10 0.898 6 0.864 9
the Architect
Incomplete Architectural
0.830 11 0.860 9 0.844 11
drawings
Structural design variations 0.827 12 0.774 18 0.803 16
Incomplete structural drawings 0.821 13 0.834 12 0.827 12
Non-availability of sufficient
0.815 14 0.792 16 0.805 15
professionals and Managers
Productivity 0.806 15 0.811 14 0.808 14
 73

Table 4.7 (Continued)

Clients Contractor
response Overall
response
(n=119)
Factor Name (n=66) (n=53)
Factor Factor Factor
RII RII RII
rank rank rank
Delay in work approval by the
0.797 16 0.766 19 0.783 17
architect
Unrealistic schedule given by
0.788 17 0.857 10 0.818 13
the client
Variation orders by the
0.782 18 0.717 24 0.753 19
architect
Bad weather 0.764 19 0.728 23 0.748 20
Lack of coordination Between
project participants by the 0.758 20 0.736 22 0.748 21
contractors
Late issuance of instruction by
0.736 21 0.687 27 0.714 24
the structural Engineer
Delay in handing over of site
0.727 22 0.845 11 0.780 18
by the client
Poor information and
0.718 23 0.747 21 0.731 22
dissemination by the architect
Poor services and design
information by the structural 0.694 24 0.758 20 0.723 23
engineer
Environmental impact 0.688 25 0.698 26 0.692 26
Inadequate supervision by the
0.667 26 0.709 25 0.686 27
architect
Cash flow during construction
0.636 27 0.785 17 0.703 25
by the contractor
Strike 0.633 28 0.672 29 0.650 28
Inadequate supervision by the
0.555 29 0.679 28 0.610 29
structural Engineer
Note: RII – Relative Importance Index
 74

The relative importance indices of the six most significant factors

causing cost overrun as perceived by the client’s, contractor’s and overall
group in building construction projects in India is presented in Figure 4.5.

Clients Contractors Overall

1.20

1.00
Relative Importance Index(RII)

0.80

0.60

0.40

0.20

0.00
Price Low bid by the Financial Planning and Slow decision Non-availability
fluctuations contractor difficulties by scheduling making by the of sufficient
the contractor deficiencies by clients amount of
the contractor skilled labour

Figure 4.5 Significant factors affecting cost overrun as perceived by the

client’s, contractors and overall group

4.7.5 Identification of most significant factor category affecting cost

overrun

The five factor category (Client-related, Architect-related,

Structural Engineer-related, Contractor-related and External factor) were
formulated in the questionnaire, which was developed to sample the opinion
of construction managers on the extent to which each of the factor category
contributing to overall cost overrun. Pairwise comparison scale for each set
 75

of major factor category for cost overrun through Analytic Hierarchy process
(AHP) questionnaires were used and respondents were asked to indicate their
responses. The responses received from the respondent were evaluated
through Analytic Hierarchy process (AHP) software to evaluate the
differences in perceptions among client and contractor representatives. As a
general rule (Saisana 2005), AHP responses with inconsistency ratios greater
than 0.15 have not been considered in the analysis. Using the Statistical
Package for Social Sciences (SPSS), the data were subjected to statistical
analysis

The relative weightage of the six significant cost overrun factor

categories as perceived by the client’s representatives is presented in Table
and Figure 4.6.

0.40 0.374

0.35 Causes of cost overrun

0.30
AHP - Weightage

0.25 0.226

0.20
0.153
0.139
0.15
0.108
0.10

0.05

0.00
Client related Architect related Structural Contractor External factor
factors factors Engineer related related factors
factors

Figure 4.6 Significant factor category affecting cost overrun as perceive

by the client’s group
 76

As perceived by the clients’s group, two most significant factors

contributing to cost overrun are contractor -related followed by external
factors. The Structural Engineer – related factor was the least cause of cost
overrun among the factor category.

The perception analysis of contractor representative’s response to

the relative weightage of significant factor category causing cost overrun is
presented in Figure 4.7.

0.30
0.274
Causes of cost overrun
0.25
0.23
0.216

0.20 0.188
AHP - Weightage

0.15

0.10 0.092

0.05

0.00
Client related Architect related Structural Engineer Contractor related External factor
factors factors related factors factors

Figure 4.7 Significant factor category affecting cost overrun as

perceived by the contractor’s group

As perceived by the contractors group, two most significant factors

contributing to cost overrun are contractor -related followed by external
factors. The client–related factor was the third most significant factor
categories (among six factor categories identified) causing cost overrun.
 77

The perception analysis of overall representative’s response to the

relative weightage of significant factor category causing cost overrun is
presented in Figure 4.8.

0.35
0.31
0.30 Causes of cost overrun

0.25
0.221
AHP - Weightage

0.207
0.20
0.161
0.15

0.101
0.10

0.05

0.00
Client related Architect related Structural Engineer Contractor related External factor
factors factors related factors factors

Figure 4.8 Significant factor category affecting cost overrun as

perceived by the overall group

As perceived by the overall group, two most significant factors

contributing to cost overrun are contractor-related factor followed by the
external factors. The Structural Engineer – related factor was the least causes
of cost overrun among the factor categories identified.

The relative weight of six significant factor categories affecting

cost overrun in building construction projects in India as perceived by the
clients, contractors and overall group representatives are presented in Figure
4.9.
 78

Client's group Contractor's group Overall group

0.40

0.35

0.30
AHP -Weightage

0.25

0.20

0.15

0.10

0.05

0.00
Client related Architect related Structural Contractor External factor
factors factors Engineer related related factors
factors

Figure 4.9 Significant factor categories affecting cost overrun as

perceived by the clients, contractor and overall group

4.8 STATISTICAL ANALYSIS - CAUSES OF COST OVERRUN

In responses of owner and contractor representatives in regard to

causes of cost overrun in building construction projects (B1 to B29) were
analysed. The statistical analysis include t-test, one way analysis of variance
(ANOVA). In order to evaluate the differences in perceptions among client
and contractor representatives t- test was performed and is also presented in
Table 4.8.
 79

Table 4.8 T-test: Responses to Causes of cost overrun in building

construction project, their mean, standard deviation,
T-value and P – value

95%
Confidence
Organization Standard Mean T-
Factor N Mean Interval for P-Value
Status Deviation Difference Value
Mean
Difference
Owner 66 4.29 0.74
B1 -0.24 -0.49 0.01 -1.87 0.05**
Contractor 53 4.53 0.64
Owner 66 4.48 0.77
B2 -0.35 -0.57 -0.12 -2.99 0.00***
Contractor 53 4.83 0.38
Owner 66 4.23 0.76
B3 -0.15 -0.40 0.10 -1.20 0.23
Contractor 53 4.38 0.56
Owner 66 3.64 0.94
B4 -0.59 -0.89 -0.29 -3.96 0.00***
Contractor 53 4.23 0.61
Owner 66 3.94 0.97
B5 -0.34 -0.64 -0.04 -2.27 0.03**
Contractor 53 4.28 0.57
Owner 66 3.18 1.19
B6 -0.74 -1.10 -0.39 -4.16 0.00***
Contractor 53 3.92 0.58
Owner 66 4.18 0.80
B7 -0.31 -0.57 -0.04 -2.32 0.02**
Contractor 53 4.49 0.61
Owner 66 4.14 0.91
B8 -0.17 -0.45 0.11 -1.17 0.25
Contractor 53 4.30 0.54
Owner 66 3.98 0.97
B9 0.15 -0.14 0.45 1.04 0.30
Contractor 53 3.83 0.55
Owner 66 3.91 0.76
B10 0.32 0.06 0.59 2.45 0.02**
Contractor 53 3.58 0.66
Owner 66 3.59 0.76
B11 -0.14 -0.38 0.09 -1.20 0.23
Contractor 53 3.74 0.49
Owner 66 3.33 0.64
B12 -0.21 -0.43 0.00 -1.99 0.05**
Contractor 53 3.55 0.50
Owner 66 4.11 0.68
B13 -0.06 -0.28 0.15 -0.59 0.55
Contractor 53 4.17 0.43
Owner 66 4.14 0.74
B14 0.27 0.03 0.51 2.19 0.03**
Contractor 53 3.87 0.56
Owner 66 2.77 0.97
B15 -0.62 -0.91 -0.33 -4.24 0.00***
Contractor 53 3.40 0.49
Owner 66 3.68 0.66
B16 0.25 0.03 0.47 2.21 0.03
Contractor 53 3.43 0.54
 80

Table 4.8 (Continued)

95%
Confidence
Organization Standard Mean T-
Factor N Mean Interval for P-Value
Status Deviation Difference Value
Mean
Difference
Owner 66 3.47 0.59
B17 -0.32 -0.53 -0.12 -3.11 0.00***
Contractor 53 3.79 0.53
Owner 66 4.56 0.56
B18 0.47 0.26 0.68 4.39 0.00***
Contractor 53 4.09 0.60
Owner 66 4.08 0.81
B19 0.11 -0.13 0.36 0.92 0.36
Contractor 53 3.96 0.44
Owner 66 4.44 0.59
B20 -0.16 -0.36 0.04 -1.63 0.11
Contractor 53 4.60 0.49
Owner 66 4.65 0.54
B21 0.63 0.42 0.85 5.87 0.00***
Contractor 53 4.02 0.64
Owner 66 4.79 0.45
B22 0.45 0.28 0.62 5.27 0.00***
Contractor 53 4.34 0.48
Owner 66 3.79 0.73
B23 0.11 -0.14 0.36 0.86 0.39
Contractor 53 3.68 0.61
Owner 66 3.82 0.76
B24 0.18 -0.07 0.42 1.44 0.15
Contractor 53 3.64 0.52
Owner 66 3.17 0.54
B25 -0.19 -0.39 0.00 -1.95 0.05
Contractor 53 3.36 0.52
Owner 66 4.03 0.66
B26 -0.03 -0.29 0.23 -0.20 0.84
Contractor 53 4.06 0.77
Owner 66 3.44 0.68
B27 -0.05 -0.28 0.18 -0.45 0.66
Contractor 53 3.49 0.54
Owner 66 4.41 0.61
B28 -0.33 -0.53 -0.12 -3.18 0.00***
Contractor 53 4.74 0.49
Owner 66 4.88 0.33
B29 -0.03 -0.14 0.09 -0.46 0.64
Contractor 53 4.91 0.30
$ Please refer to Question No. B1 to B29 of the questionnaire (Appendix A) for Causes of
cost overrun
# T test of Ho: Significant mean difference between clients and contractors
Ha: No significant mean difference between Clients and contractors
*** Significance at 99% level
** Significant at 95% level
* Significance at 90% level
 81

In order to evaluate the differences in perceptions among client and

contractor representatives ANOVA was performed and is also shown in
Tables 4.9 and 4.10.

Table 4.9 ANOVA – Clients Responses to Causes of cost overrun in

building construction project

Escalatio Standard ANOVA ANOVA

Factor N Mean
n Cause Deviation F-Value P-Value
CPWD 32 4.25 0.80
B1 MES 17 4.41 0.62 0.32 0.73
TNPWD 17 4.24 0.75
CPWD 32 4.25 0.88
B2 MES 17 4.47 0.72 5.04 0.01**
TNPWD 17 4.94 0.24
CPWD 32 4.38 0.79
B3 MES 17 4.18 0.81 1.42 0.25
TNPWD 17 4.00 0.61
CPWD 32 3.69 0.90
B4 MES 17 4.06 0.97 4.89 0.01**
TNPWD 17 3.12 0.78
CPWD 32 3.59 1.07
B5 MES 17 3.71 0.59 13.00 0.00***
TNPWD 17 4.82 0.39
CPWD 32 2.69 1.28
B6 MES 17 3.65 1.00 6.24 0.00***
TNPWD 17 3.65 0.79
CPWD 32 4.13 0.98
B7 MES 17 4.18 0.73 0.24 0.79
TNPWD 17 4.29 0.47
CPWD 32 4.59 0.67
B8 MES 17 3.53 0.94 11.15 0.00***
TNPWD 17 3.88 0.86
CPWD 32 4.22 0.83
B9 MES 17 4.12 0.86 4.51 0.02**
TNPWD 17 3.41 1.12
 82

Table 4.9 (Continued)

Escalatio Standard ANOVA ANOVA

Factor N Mean
n Cause Deviation F-Value P-Value
CPWD 32 3.94 0.76
B10 MES 17 3.88 0.99 0.04 0.96
TNPWD 17 3.88 0.49
CPWD 32 3.72 0.73
B11 MES 17 3.76 0.75 3.67 0.03**
TNPWD 17 3.18 0.73
CPWD 32 3.47 0.72
B12 MES 17 3.35 0.61 2.38 0.10*
TNPWD 17 3.06 0.43
CPWD 32 4.09 0.69
B13 MES 17 4.18 0.81 0.13 0.88
TNPWD 17 4.06 0.56
CPWD 32 4.09 0.73
B14 MES 17 4.00 0.71 1.07 0.35
TNPWD 17 4.35 0.79
CPWD 32 2.75 0.88
B15 MES 17 3.12 1.32 1.95 0.15
TNPWD 17 2.47 0.62
CPWD 32 3.91 0.73
B16 MES 17 3.29 0.47 5.47 0.01**
TNPWD 17 3.65 0.49
CPWD 32 3.59 0.61
B17 MES 17 3.59 0.51 4.56 0.01**
TNPWD 17 3.12 0.49
CPWD 32 4.69 0.54
B18 MES 17 4.59 0.51 2.95 0.06
TNPWD 17 4.29 0.59
CPWD 32 4.06 0.80
B19 MES 17 4.24 0.90 0.56 0.57
TNPWD 17 3.94 0.75
CPWD 32 4.28 0.58
B20 MES 17 4.35 0.61 5.75 0.01**
TNPWD 17 4.82 0.39
 83

Table 4.9 (Continued)

Escalatio Standard ANOVA ANOVA

Factor N Mean
n Cause Deviation F-Value P-Value
CPWD 32 4.50 0.62
B21 MES 17 4.71 0.47 3.08 0.05*8
TNPWD 17 4.88 0.33
CPWD 32 4.75 0.51
B22 MES 17 4.94 0.24 1.41 0.25
TNPWD 17 4.71 0.47
CPWD 32 3.88 0.79
B23 MES 17 3.94 0.75 2.27 0.11
TNPWD 17 3.47 0.51
CPWD 32 3.78 0.71
B24 MES 17 3.59 0.94 2.20 0.12
TNPWD 17 4.12 0.60
CPWD 32 3.25 0.72
B25 MES 17 3.18 0.39 1.19 0.31
TNPWD 17 3.00 0.00
CPWD 32 3.91 0.69
B26 MES 17 4.00 0.61 2.03 0.14
TNPWD 17 4.29 0.59
CPWD 32 3.53 0.80
B27 MES 17 3.47 0.62 1.07 0.35
TNPWD 17 3.24 0.44
CPWD 32 4.44 0.67
B28 MES 17 4.35 0.61 0.11 0.90
TNPWD 17 4.41 0.51
CPWD 32 4.88 0.34
B29 MES 17 5.00 0.00 2.26 0.11
TNPWD 17 4.76 0.44

$ Please refer to Question No. B1 to B29 of the questionnaire (Appendix 1) for causes of
cost overrun

# ANOVA test of Ho : Significant mean difference between clients and contractors

Ha : No Significant mean difference between clients and contractors
*** Significance at 100% level ** Significant at 95% level * Significance at 90% level.
 84

Table 4.10 ANOVA – Contractors Responses to causes of cost overrun

in building construction project

Escalation Standard ANOVA ANOVA

Factor N Mean
Cause Deviation F-Value P-Value
CPWD 19 4.53 0.77
B1 MES 17 4.65 0.49 0.57 0.57
TNPWD 17 4.41 0.62
CPWD 19 4.74 0.45
B2 MES 17 4.82 0.39 1.32 0.28
TNPWD 17 4.94 0.24
CPWD 19 4.26 0.56
B3 MES 17 4.53 0.51 1.03 0.36
TNPWD 17 4.35 0.61
CPWD 19 4.21 0.54
B4 MES 17 4.35 0.70 0.64 0.53
TNPWD 17 4.12 0.60
CPWD 19 4.26 0.65
B5 MES 17 4.18 0.53 0.74 0.48
TNPWD 17 4.41 0.51
CPWD 19 3.68 0.67
B6 MES 17 4.29 0.47 6.37 0.00***
TNPWD 17 3.82 0.39
CPWD 19 4.63 0.50
B7 MES 17 4.53 0.51 1.46 0.24
TNPWD 17 4.29 0.77
CPWD 19 4.58 0.51
B8 MES 17 4.06 0.56 5.02 0.01**
TNPWD 17 4.24 0.44
CPWD 19 3.95 0.71
B9 MES 17 3.59 0.51 2.62 0.08*
TNPWD 17 3.94 0.24
CPWD 19 3.63 0.68
B10 MES 17 3.59 0.71 0.10 0.90
TNPWD 17 3.53 0.62
CPWD 19 3.89 0.32
B11 MES 17 3.53 0.62 2.75 0.07*
TNPWD 17 3.76 0.44
 85

Table 4.10 (Continued)

Escalation Standard ANOVA ANOVA

Factor N Mean
Cause Deviation F-Value P-Value
CPWD 19 3.21 0.42
B12 MES 17 3.88 0.33 11.32 0.00***
TNPWD 17 3.59 0.51
CPWD 19 4.16 0.37
B13 MES 17 4.00 0.35 3.16 0.05**
TNPWD 17 4.35 0.49
CPWD 19 4.00 0.75
B14 MES 17 3.71 0.47 1.28 0.29
TNPWD 17 3.88 0.33
CPWD 19 3.47 0.51
B15 MES 17 3.35 0.49 0.36 0.70
TNPWD 17 3.35 0.49
CPWD 19 3.37 0.60
B16 MES 17 3.41 0.51 0.41 0.66
TNPWD 17 3.53 0.51
CPWD 19 3.95 0.40
B17 MES 17 3.59 0.51 2.18 0.12
TNPWD 17 3.82 0.64
CPWD 19 3.84 0.76
B18 MES 17 4.29 0.47 3.03 0.05**
TNPWD 17 4.18 0.39
CPWD 19 4.16 0.50
B19 MES 17 3.82 0.39 3.32 0.04**
TNPWD 17 3.88 0.33
CPWD 19 4.58 0.51
B20 MES 17 4.59 0.51 0.09 0.91
TNPWD 17 4.65 0.49
CPWD 19 4.00 0.67
B21 MES 17 4.00 0.61 0.05 0.95
TNPWD 17 4.06 0.66
CPWD 19 4.37 0.50
B22 MES 17 4.29 0.47 0.11 0.89
TNPWD 17 4.35 0.49
 86

Table 4.10 (Continued)

Escalation Standard ANOVA ANOVA

Factor N Mean
Cause Deviation F-Value P-Value
CPWD 19 3.47 0.61
B23 MES 17 3.71 0.69 2.10 0.13
TNPWD 17 3.88 0.49
CPWD 19 3.58 0.61
B24 MES 17 3.59 0.51 0.69 0.51
TNPWD 17 3.76 0.44
CPWD 19 3.47 0.61
B25 MES 17 3.29 0.47 0.71 0.50
TNPWD 17 3.29 0.47
CPWD 19 4.37 0.76
B26 MES 17 3.88 0.86 2.58 0.09*
TNPWD 17 3.88 0.60
CPWD 19 3.58 0.61
B27 MES 17 3.35 0.49 0.84 0.44
TNPWD 17 3.53 0.51
CPWD 19 4.95 0.23
B28 MES 17 4.71 0.47 3.71 0.03**
TNPWD 17 4.53 0.62
CPWD 19 4.95 0.23
B29 MES 17 4.94 0.24 0.97 0.39
TNPWD 17 4.82 0.39

$ Please refer to Question No. B1 to B29 of the questionnaire (Appendix 1) for causes of
cost overrun.

# ANOVA test of Ho : Significant mean difference between clients and contractors

Ha : No significant mean difference between clients and contractors

*** Significance at 99% level ** Significant at 95% level * Significance at 90% level
 87

Kendall Coefficient of Concordance Test

Kendall coefficient of concordance (W) was used to test the null

hypothesis (Ho) that the 119 sets of rankings are independent or unrelated at
95% confidence level. When the number of variables, N=29 is an approximate
test is based on chi-square distribution with (N-1) degrees of freedom used
this test to prioritize time influencing factors in building projects. Nkado
(1995) used this test to prioritize time influencing factors in building projects.
The test is given by

Chi square (2) = m(N-1)W

(4.2)

where m= number of respondents; and N=number of factors being considered.

Table 4.11 presents the concordance analysis result.

Table 4.11 Kendall coefficient of concordance test

N W Chi square DF Significance

66 0.312 576.49 28 0.000
53 0.410 608.96 28 0.000
119 0.316 1054.38 28 0.000

Concordance analysis results show that the statistic, W is very

significant. We may conclude with confidence that the agreement among the
119 respondents is higher than it would be by chance has their rankings been
random or independent. This implies that there is a good degree of
consistency among the respondents in prioritizing the causes of cost overruns.
 88

4.9 CASE STUDY APPROACH – IDENTIFICATION OF MOST

SIGNIFICANT FACTORS AFFECTING COST OVERRUN

A detailed case study analysis of six building construction projects

were carried out to validate the survey findings on most significant factors
contributing to cost overrun. The case study research includes interviews,
discussions with construction managers, detailed study of project documents
and contracts. One of the main objectives was to check how far the most
significant factors identified through the survey research have adversely
affected the respective projects. A brief overview of the building construction
projects studied, overall impact of six most significant factors causing cost
overrun in each project and comparison of most significant factors impact
with results of the survey analysis are present in Tables 4.12 and 4.13
respectively.
 89

Table 4.12 Building construction projects in India – Impact of cost

overrun

Project
Building construction projects
details

Constructio
Constructio Construction Construction
n of Constructio Constructio
Project n of of of residential
international n of Hostel n of office
name educational educational hostel
terminal building-II Building
building-I building-II building-I
building
Type of
Item–rate Item-rate Item-rate Item-rate Lumsum Item-rate
contract
Form of
CPWD CPWD CPWD CPWD CPWD TNPWD
contract
ECPT 152.47 88.83 -- 10.44 436.30 55.00
Agreement
value in 153.19
70.99 80.40 10.59 457.30 43.47
(Rs.
Million)
Final
85.44 84.80 18.70 494.0 32.20
value
Tendered 0.47% 12.25%
1.36% below
percentag above the below the -- -- --
the ECPT
e estimate cost ECPT
Period of
10 months 12 months 8 months 12 months 15 months 17 months
completion
Date of
31.10-2005 16.8.2004 25.6.2007 30.1.2004 01.07.2004 20.11.2006
starting
Date of
completion
31.08.2006 15.8.2005 24.2.2009 29.1.2005 30.09.2005 19.04.2008
as per
agreement
Actual 06.07.2007
date of 28.12.2006 24.2.2009 15.4.2005 29.9.2006 09.07.2008
completion

Time delay 10 months 4 months 2 months 2 months

12 months
in 12 Months
5 days 13 days delay 15 days 20 days
completion

TNPWD: Tamil Nadu Public Works Department CPWD: Central Public Works Department
ECPT: Estimate Cost Put to Tender
 90

Table 4.13 Most significant factors realisation and impact in Indian

building constriction projects – Comparison

Most
significant
Cost Building construction projects
overrun
factors
Constructio Construction
Constructio Construction
n of of Construction Construction
Project n of of residential
internationa Engineering of Hostel of office
name educational hostel
l terminal Design Building Building
Building building
building Building
Type of
Item–rate Item-rate Item-rate Item-rate Lumsum Item-rate
contract
Form of
CPWD CPWD CPWD CPWD CPWD TNPWD
contract
Overall impact of Most Significant Cost Overrun Factors
price 35 to 40 % 10 to 15% 20 to 25%
25% loss 15 to 20% 25% loss
escalation loss loss
slow
10 to 15% 10 to 15%
decision 5 to 10% marginal 10% 5 to 10%
loss loss
making
Site
yes yes yes Yes No yes
conditions
Low bid No High impact Marginal High impact Marginal High impact
Non-
availability
of
High Marginal Medium
sufficient High impact marginal No
impact impact impact
amount of
skilled
labour
Client -
number of
change Yes
and Yes (0.070
(Extra items Yes
variation Yes extra, excess
order – 0.59 (0.50 extra Yes Yes
– 0.47,
Deviated – items) deviated 1.9)
(Amount
in 1.2)
Rs.Million
)
 91

SUMMARY

In Indian Building construction projects, five significant factor

categories, along with twenty nine significant factors have been short listed
through preliminary studies. All India survey (in two stages) among two
major participants of Indian building construction projects (Government
representatives and contractors) was carried out for identification of
significant factors affecting cost overrun. Identification of most significant
factor contributing to cost overrun, 29 factors have been formulated in the
questionnaire, which was developed to sample the opinion of construction
managers on the extent to which each of the factors were contributing to
overall cost overrun on a typical building project in which they are involved.
The relative importance index method was adopted for analysis of the data
collected from the questionnaire survey, within various groups as classified
according to the role of the participants involved in the Indian building
construction industry. The five point scale was transferred to relative
importance index for each factor. The factors were ranked in order of
importance based on the relative importance indices values. These ranking
made it possible to cross-compare the relative importance of factors as
perceived by the two group of respondents i.e. owner and contractor. All the
numerical scores of each of the identified factors were transformed to relative
importance indices to determine the relative ranking of the factors.

The perception analysis of clients representatives, six most

significant factors affecting cost overrun in building construction projects are
Price escalation, Low bid, Financial difficulties, Planning and scheduling
deficiencies, Slow decision making Non-availability of sufficient amount of
skilled labour. The six most significant factors causing cost overrun as
perceived by the contractors representatives are Price escalation, Slow
decision making, Site conditions, Non-availability of sufficient amount of
 92

skilled labour, Number of changes / extra work orders, Deficiencies in cost

estimate and specification prepared. The overall ranking indicates that both
the groups felt that six most significant factors that can cause cost overrun in
building construction projects in India are price escalation, slow decision
making, site conditions, low bid, non-availability of sufficient amount of
skilled labour, client - number of change and variation order.

The five factor categories were formulated in the questionnaire,

which was developed to sample the opinion of construction managers on the
extent to which each of the factor category contributing to overall cost
overrun on a typical building construction project in which they are involved.
Pairwise comparison scale for each set of major factor category for cost
overrun through Analytic Hierarchy process (AHP) questionnaires was used.
The responses received from the respondent were evaluated through Analytic
Hierarchy process (AHP) software to evaluate the differences in perceptions
among client and contractor representatives.

Based on the perception analysis, descending order of significant

factor categories affecting cost overrun are: 1) Contractor – related factors,
2) External factors, 3) Client – related factors, 4) Architect – related factors,
and 5) Structural Engineer – related factors. The structural engineer-related
factor was the least cause of cost overrun in building construction projects.
There is a high degree of agreement on significant cost overrun factors among
various respondents for most of the cost overrun factor categories and cost
overrun factors in Indian building construction projects. There was a
significant difference in relative importance indices weightages between the
Government representatives (Clients) and the contractors with respect to
factors.
 93

There was a fair degree of agreement between survey based factors

affecting cost overrun and the actual cost overrun impact in building
construction projects examined through the case studies. A majority of the
cost overrun factors, which affected the above projects, fall under the
contractor – related, external factor and Client – related categories. Planning
Engineer and Construction Manager of the project should ensure the effective
planning, implementation and monitoring considering the effect of factors
contributing to cost overrun. Construction organizations and project
participants can make use of these factors to effectively plan and monitor their
respective projects to minimize cost overrun.