Delay and Cost Overrun in Infrastructure Projects in ... - Science Direct

Available online at www.sciencedirect.com

ScienceDirect Procedia Engineering 182 (2017) 18 – 24

7th International Conference on Engineering, Project, and Production Management

Delay and Cost Overrun in Infrastructure Projects in Jordan Nabil Al-Hazim, Zaydoun Abu Salem, Hesham Ahmad* Department of Civil and Infrastructure Engineering, Al-Zaytoonah University of Jordan, Amman, Jordan, P.O. Box: 130 Amman 11733 Jordan

Abstract The aim of this study is to investigate the factors that may cause overrun of the planned cost, allocated resources and scheduled time of infrastructure engineering projects in Jordan. To achieve the goal of this study, final reports of a sample of 40 public infrastructure projects implemented during the period from 2000 to 2008 were collected and analysed. The final reports were collected from the Ministry of Public Works and Housing (MPWH) of Jordan, which administers the public infrastructure projects in the capital Amman. The analysis showed that delay and cost overrun of infrastructure projects were caused by 20 factors according to the records in the collected final reports of projects. The results showed that Terrain and Weather conditions are the top factors causing completion delay and cost overrun in infrastructure projects in Jordan. © Published by Elsevier Ltd. This © 2016 2016The TheAuthors. Authors. Published by Elsevier Ltd.is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility ofthe organizing committee of EPPM2016. Peer-review under responsibility of the organizing committee of EPPM2016

Keywords: project management; infrastructure projects; delay and cost overrun; planning and scheduling

1. Introduction A cost overrun is known as budget overrun or cost increase. It involves unexpected excess cost occurred due to underestimation of the expected budget of the infrastructure projects. Thus, it is important to study these cost overruns factors and to avoid them for maximum benefits and returns from infrastructure construction project. Most infrastructure projects in Jordan are characterized by overrun in cost and time. Problem of cost overrun is critical and needs to be studied and alleviated. In the future recommendations should be developed to overcome these critical factors for future infrastructure projects.

* Corresponding author. Tel.: +9-626-429-1511; fax: +9-626-429-1432. E-mail address: [email protected]

1877-7058 © 2016 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license

(http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of the organizing committee of EPPM2016

doi:10.1016/j.proeng.2017.03.105

Nabil Al-Hazim et al. / Procedia Engineering 182 (2017) 18 – 24

For this reason, final repots collected from the Ministry of Public Works and Housing (MPWH) in Jordan were analyzed and examined for several infrastructure projects in Jordan over the years 2000-2008. The actual causes for cost and time overrun recorded in the final reports of these projects were identified. Data were ranked based on their significance and the critical factors influencing cost and time overrun were identified. 2. Literature Review Some researchers have studied the reasons of and the factors affecting cost overrun and time delay in construction projects. However, there is a lack of studies concerned with the cost overrun and time delay in the implementation of infrastructure projects in Jordan. This study aims at investigating the most important factors that can be the reasons behind cost overrun and time delay of infrastructure projects in Jordan by analyzing the final reports of these projects. Mahamid [1] studied the factors affecting the schedule and budget of the construction projects. He conducted a field survey including 40 consultants in Palestine. The top affecting factors in the consultants’ opinions are materials price instability, size of contract and incomplete drawings. The researcher stated that about all the projects suffering from cost diverge. Also it was found from the study that about 76% of projects have cost over estimation while 24% have cost underestimation. The difference between actual cost and estimated cost of construction projects has an average of about 15%. However, in another study by Mahamid [2] the top factors affecting time overrun in infrastructure projects in Palestine were studied. The study showed that major factors delaying the studied projects include: financial problems of the contractor, delay of payments from the owners. Also, the study referred to the special political situation in the area of study and its significant influence on projects. Other important factors that may delay completion of projects such as poor communication among parties, lack of efficient machineries and tools and high competition among bidders, showed significant effect on projects’ schedules. In a study by Alhomidan [3], a survey of contractors’ viewpoint was conducted to investigate the top causes of cost overrun at the infrastructure projects in Saudi Arabia. A list of 41 factors of cost overrun causes was considered. Among these factors, it was concluded that according to opinions of the responding contractors the top causes of cost overrun in infrastructure projects in Saudi Arabia are internal administrative problems, delay of payments, poor communication between construction parties and delays in decision-making. In other studies conducted in several countries, various results were obtained. For example, in Hong Kong Chan et al. [4] studied the causes of delays in construction projects. It was indicated that five causes are the main causes for projects delay. These include: poor supervision and management of construction sites, unpredictable ground conditions of the project sites, slow processes by decision-makers of the projects, and variation orders especially those presented by clients. Another study example in India by Singh [5] concluded that the main causes responsible for delays of construction projects in India include: the lack of efficient project plans, contracts and implementation processes and procedures. An investigation of 31 variables by Alghbari et al. [6] was conducted on construction projects in Malaysia. The study showed that the most important causes of delay for the projects in Malaysia are related to financial aspects. The second and third most common factors causing delay of projects connected with coordination and materials problems, respectively. However, another study in Malaysia by Sambasivan and Soon [7] found that the most important causes of delay in construction industry are related to contractors and resources. Lack of proper contractor’s project planning and site management, lack of adequate experience, improper coordination with subcontractors and other parties and making mistakes in implementation of the construction stages are major factors that affect the projects’ completion duration. Other factors related to the construction resources include the insufficient financial resources from the client and shortage of materials, labors and equipment. Rathi et al. [8] studied different literatures related to cost overruns and its causes found that inaccurate estimates and design changes at the time of construction are the most important factor directly affects the cost. The study also found it is necessary that the project management team have a good forecasting technique to know the future business environment. This will help the owner or agency to take decision regarding procurement of materials. Vidalis and Najafi [9] found that the factors causing cost and time overrun in Florida Department of Transportation highway projects are plans modifications, changed conditions and lack of project coordination. Amandin et al. [10] in their study on Construction Projects concluded that when project costs are efficiently monitored while the other conditions kept constant, as construction project periods increase, a proportionate increase in their costs or value is

19

20

Nabil Al-Hazim et al. / Procedia Engineering 182 (2017) 18 – 24

recorded. In addition, when construction projects’ expected or planned cost is increased, a simultaneous increase in their relative real cost must take place. However, though monitoring can efficiently reduce the project’s cost overruns, the longer construction projects delay become the higher cost overruns. A study by Al-Momani [11] investigated factors causing delay of public building construction projects in Jordan. The study investigated 130 projects constructed during the period from year 1990 to year 1997. The results showed that critical factors that may cause delay of building projects include: design and implementation changes, weather and site conditions and financial conditions. It can be seen from the review of the previous literature that different results were concluded in the different countries. Also variable such as the source of data, the number of studied projects, the execution time period of projects, type and size of projects may significantly affect the results. In this study, the results depend on the records of final reports of 40 public infrastructure projects. Future studies may use different sources that can be compared to the results of this study for more evaluation and validation. 3. Research Methodology About 20 major causes were identified as causes of cost and time overrun through review of related literature, discussion with practitioners and study of final reports of projects in the infrastructure sector. Final reports of40 infrastructure public projects in Jordan in the period of 2000-2008 were collected. The causes of projects’ delay were the actual causes which are documented through paper work and correspondences between the clients and the contractors. 4. Results and Discussion Table 1 shows the ranking for each factor arranged according to their importance while Fig. 1 shows the graphical representation. Table 1. Factors ranking arranged according to their importance. Ranked Factors 1. Terrain conditions 2. Weather conditions 3. Variation orders 4. Availability of labor 5. Mistakes in design 6. Planned cost for project construction 7. Market conditions (availability of resources) 8. Material price fluctuations 9. Planned time for project construction 10. Emergency works 11. quality of equipment and raw materials 12. Payment delay 13. Cost of variation orders 14. Government requirements 15. Rework from poor materials quality 16. Delay in decision 17. Management – labor relationship 18. Sequencing of work according to schedule 19. Poor project management 20. Delay in decision making

Importance 22.20% 15.30% 10.20% 7.70% 6.10% 5.90% 5.90% 4.60% 4.30% 3.20% 2.80% 2.20% 9% 1.40% 1.30% 1.00% 1.10% 0.50% 0.80% 1.10%

21

Nabil Al-Hazim et al. / Procedia Engineering 182 (2017) 18 – 24

Fig. 1. Factors ranking arranged according to their importance.

Table 2 shows the planned – actual time and cost for 14 sample projects. The average percentage overrun time is 226 and the average percentage overrun cost is 214. Table 2. Planned and actual time and cost for 14 sample projects. Project

Time planned (day)

Time (actual) (day)

Time overrun %

Cost planned (JD)

Cost actual (JD)

Cost overrun %

1

730

914

125

5069475

7687652

152

2

120

255

213

1998090

2018071

101

3

75

193

257

189010

199101

105

4

300

735

245

44990

284537

632

5

150

683

455

483226

1070629

222

6

365

789

216

2340525

8316524

355

7

900

1729

192

4937286

14561283

295

8

1000

1879

188

12124023

14829575

122

9

800

1470

184

6391068

7950420

124

10

720

880

122

6433491

11826868

184

11

700

1607

230

5980445

9572979

160

12

150

178

119

80900

181784

225

13

730

791

108

6907780

10418626

151

14

90

189

210

986557

1967515

199

Fig. 2 shows the planned and actual duration for 14 sample projects.

22

Nabil Al-Hazim et al. / Procedia Engineering 182 (2017) 18 – 24

Fig. 2. Planned and actual time for 14 sample projects.

Fig. 3 shows the planned and actual cost for 14 sample projects.

Fig. 3. Planned and actual cost for 14 sample projects.

Fig. 4 shows the cost overrun for 14 sample projects.

Fig. 4. Cost overrun for 14 sample projects.

Nabil Al-Hazim et al. / Procedia Engineering 182 (2017) 18 – 24

Fig. 5 shows the time overrun for 14 sample projects.

Fig. 5. Time overrun for 14 sample projects.

The most important reason that leads to cost and time overrun was terrain conditions that are occurred in 22.20% of the studied projects. These conditions include difficulties in reaching the work site, difficulties of the work type, land acquisition issues, delay in relocating utilities, and the lack of civil services near the work site which were not included in the work plan and cost studies. The second main reason in cost and time overrun was weather conditions that occurred in 15.3% of the projects of the study sample. Those two reasons were the main reasons that led to cost and time overrun. Other factors that caused cost and time overrun are: new variation orders (10.2% of the sample), cost of variation orders (1.9%), mistakes in design (6.1%), emergency working (3.2%), poor scheduling of time (5.9%), and poor planning of cost (4.3%) for the infrastructure projects. 5. Conclusion Most infrastructure projects in Jordan are characterized by delay and overrun in cost. Many documents and final reports for several projects were analyzed. The results show that the most critical factors are: Terrain conditions, weather conditions, variation orders, and unavailability of labors. A very big discrepancy between estimated and final cost ranging from 101% to 600% with an average of 214%. On the other hand, the delay of time ranges from 125% to 455% with an average of 226%. In order to validate these findings, further research is recommended with projects from different geographical locations and owners. Moreover, it is recommended that other factors should to be identified that contribute to the cost and schedule overruns in public construction projects. Finally, the authors recommend that in the planning stage of any construction project, larger efforts should be exerted on the planning preparation, scheduling and cost evaluation to reduce the risk of delay and cost overrun of the project implementation. Similarly, during the construction stage of projects careful organization and management processes should be applied to fulfill the requirements of the projects’ plans. Successful management of construction projects may need to adopt procedures to avoid problems and to adopt contingency plans to reduce the effects of problems when they occurred.

23

24

Nabil Al-Hazim et al. / Procedia Engineering 182 (2017) 18 – 24

Acknowledgements 7th International Conference on Engineering, Project, and Production Management (EPPM2016) was financed in the framework of the contract no. 712/P-DUN/2016 by the Ministry of Science and Higher Education from the funds earmarked for the public understanding of science initiatives. 7th International Conference on Engineering, Project, and Production Management (EPPM2016) finansowana w ramach umowy 712/P-DUN/2016 ze środków Ministra Nauki i Szkolnictwa Wyższego przeznaczonych na działalność upowszechniającą naukę. 7th International Conference on Engineering, Project, and Production Management (EPPM2016) was co-organised by the Agency for Restructuring and Modernisation of Agriculture (Poland).

References [1] Mahamid I. Cost overrun causes in infrastructure projects, “consultants perspective”. 2nd International conference on construction and project management, IPEDR 2011;15. [2] Mahamid I. Common risks affecting time overrun in infrastructure projects in Palestine: Contractors’ perspective. Journal of Construction Engineering 2013;13(2):45–53. [3] Alhomidan A. Factors affecting cost overrun in infrastructure projects in Saudi Arabia. International Journal of Civil & Environmental Engineering IJEE-IJENS 2015;4:35–42. [4] Chan DW, Kumaraswamy MM. A comparative study of causes of time overruns in Hong Kong construction projects. International Journal of Project Management 1997;15(1):55–63. [5] Singh R. Cost and time overruns in infrastructure projects: extent, causes and remedies, http://www.econdse.org/faculty/ram/ram.htm (retrieved 15.04.2016). [6] Alghbari W, Kadir M, Salim A. Ernawati. The significant factors causing delay of building construction projects in Malaysia. Journal of Engineering, Construction and Architectural Management 2007;14(2):192–206. [7] Sambasivan M, Soon Y. Causes and effects of delays in Malaysian construction industry. International Journal of Project Management 2007;25(5):517–526. [8] Rathi AS, Khandve PV. Study of Factors Influencing Cost Overruns. International Journal of Science and Research (IJSR) 2013;5(3):334– 336. [9] Vidalis SM, Najafi FT. Cost and time overrun in highway construction. 4th transportation specialty conference of the Canadian society for civil engineering; 2002. [10] Musirikare MA, Kule JW. Project Delays on Cost Overrun Risks: A Study of Gasabo District Construction Projects Kigali, Rwanda. ABC Journal of Advanced Research 2016;5(1):21–34. [11] Al-Momani A. Construction delay: A quantitative analysis. International Journal of Project Management 2000;18(1):51–59.