Causes and Effects of Cost Overrun On Public Building Construction Projects In Ethiopia

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Addis Ababa University


Many projects experience cost overrun and thereby exceed initial contract amount. In Ethiopia, the number of public building construction projects is increasing from time to time. However, it becomes difficult to complete projects in the allocated cost and time. Taking into account the scarce financial resources of the country, cost overrun is one of the major problems in Ethiopia. Therefore, this research was carried out to dig-out information on the factors that cause cost overrun during construction and their effects on public building construction projects in Ethiopia. Questionnaire survey together with desk study was used to collect data on cost overrun. A total of 42 questionnaires from clients, consultants and contractors were collected and a desk study of 70 completed public building construction projects in Ethiopia were investigated and analyzed using both descriptive and inferential statistics. From the results it was found that 67 out of 70 public building construction projects suffered cost overrun. The rate of cost overrun ranges from a minimum of 0% to the maximum of 126% of the contract amount for individual projects. In this research it was found that the rate of cost overrun decreases with the increase in contract amount. Respondents identified 39 causes of cost overrun for Ethiopian case. The most important causes of cost overrun were found to be inflation or increase in the cost of construction materials, poor planning and coordination, change orders due to enhancement required by clients, excess quantity during construction. Spearman rank order correlation analysis was used to evaluate whether consensus of opinions exists between groups of respondents (client versus consultant, client versus contractor and consultant versus contractor). From the analysis of the results it was found that consensus of opinion exists between respondents on the factors that cause cost overrun and on their rate of occurrence. The most common effects of cost overrun identified by this research were delay, supplementary agreement, adversarial relations among stakeholders, and budget shortfall of project owners. It is hoped that these findings will guide efforts to improve the performance of the construction industry in the future. Key words: cost overrun, cause, effect, rate, public buildings.



Cost Overrun; Cause;Effect; Rate; Public Buildings.