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|Title: ||RISK FACTORS LEADING TO COST OVERRUN IN ETHIOPIAN FEDERAL ROAD CONSTRUCTION PROJECTS AND ITS CONSEQUENCES|
|Authors: ||TURKEY, WAKJIRA|
|Advisors: ||Prof. Dr. -Ing. Abebe Dinku|
|Keywords: ||COST OVERRUN|
FEDERAL ROAD CONSTRUCTION
|Copyright: ||Sep-2011 |
|Date Added: ||11-May-2012 |
|Abstract: ||Infrastructure projects, such as road constructions, are one of the most important projects in
Ethiopia. Growth in this sector is critical for growth in national income as it is among the
largest sectors that generates employment within the country as well as a key driver for
economic development of Ethiopia. Like many other developing countries, Ethiopia is also
facing critical project management related problems among which cost overrun is quite
prominent. The assessment of the accomplishment of the 12 years Road Sector Development
Program (RSDP I, II and part of RSDP III) revealed this. There are several factors that are
contributing to these cost overruns. Hence, identification and analysis of these factors for
effective cost control in Ethiopian road infrastructure project needs to be done in order to
better support the economic development.
Accordingly, this research attempts to identify the extent of cost overrun, the major risk
factors leading to cost overrun and its consequential effects in the Ethiopian Federal road
construction sector; which can serve as the way forward for future work in coping with these
overruns. A thorough literature review and desk study was done, through which a number of
cost overrun risk factors were identified in global and local construction industry scenarios.
To obtain expert opinions from the sector, in total fifty four (54) factors and 16 possible
effects were identified and made part of the survey questionnaire and the survey was
conducted with stakeholders from contractors, client, construction professionals and
consultants. In addition other questions which enable to achieve the objectives of the research
were developed; and the research design was based on exploratory survey, desk study, and
descriptive approaches for open ended questions.
The result of the desk study indicated that out of 30 upgrading and rehabilitation road
construction projects investigated, 24 projects (80%) suffered cost overrun in their execution.
The average rate of cost overrun in these projects was 26.95% of the contract amount. And
100% of the respondents to the questionnaire have recognized cost overrun as one of the
major problems in Federal road construction projects.
Unexpected inflation/ material price escalation, delays on completion time, scope changes,
unstable cost of manufactured materials, inadequate site investigation and right of way
problems (access to site and quarry) are identified as major factors leading to cost overrun in
Risk Factors Leading to Cost Overrun in Ethiopian Federal Road Construction Projects & its Consequences
MSc Thesis by Turkey Wakjira
Ethiopian Federal road construction projects. Findings revealed that both internal and external
aspects of risk factors contribute to cost overruns in local road construction projects.
Consultants and clients/employers were identified to be more responsible in initiating most of
the factors. The study also identified: reduction in planned increase of road network, damage
professional relations, inability to secure project finance/securing it at higher costs, loss of
clients’ confidence in consultants, for professionals inability to deliver value to clients and
decreased rate of national growth as a major effects and client as the most affected contracting
party as a result of effects of cost overrun.
Results indicated that the majority of cost overrun risk factors (65%) lie in the medium
severity impact range, indicating that major attention should be paid to these factors as they
collectively cause considerable increase in the cost of the project initially estimated. It was
also found that the cost estimating practices in local road construction industry varies greatly
and needs standardization and proper database; this shows that the estimating practice itself is
contributory to the problem of cost overrun.
Major recommendations include: Establish consistent guidelines for price escalation
computation and forecasting, set adequate contract duration─ providing for potential delays,
stabilizing cost of materials, providing appropriate contingency allowances, more involved
cost estimation processes, careful project planning, proper documentation of cost escalation
trends in the sector and the country for better knowledge transfer, standardization of
estimating practices among stakeholders and institutional capacity building.|
|Appears in:||Thesis - Civil Engineering|
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