Factors causing project cost overrun in construction sector: In case of Mekasha Ambaw Building Contractor
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Date
2020-06
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Addis Ababa University
Abstract
Cost is among the three project parameters and a project cost overrun is a situation when the
actual project cost exceeded the planned amount. There are many studies conducted to identify
the causes of cost overrun. The purpose of this study is to identify factors causing project cost
overrun in construction sector in case of Mekasha Ambaw building contractor. The study used a
descriptive research type and data collection technique used is quantitative. Both primary and
secondary data were used, primary data through structured an open ended and closed ended
Likert type questionnaire and secondary data from reports of previous studies and literatures.
The research adopted a purposive sampling technique and the sample size of 32 employees was
taken to distribute the questionnaire. The data obtained from the questionnaire was analyzed by
computing their frequency, severity and importance indexes by using SPSS version 20. The
findings from the analysis were ranked based on their level of importance index and the five
factors which have high level of importance index are unpredictable weather condition, lack of
coordination with sub-contractors, lack of experience of technical consultants, the rise of price
of materials and complexity of the construction project. The factors which have high frequency
index are poor quality management, the rise of price of materials, unpredictable weather
condition, lack of coordination with sub-contractors, lack of experience of technical consultants,
lack of training program and poor planning. Factors with high severity are wrong cost
estimation technique, lack of training program, lack of coordination, lack of experience of
technical consultants, lack of coordination with sub-contractors, unpredictable weather
condition, complexity of the construction project, poor communication with sub-contractors and
damage of materials. Finally based on these findings the researcher concluded that, the
company’s most significant factors causing the project cost overrun comes from the construction
phase of the project andthe three measurements, frequency, severity and importance are related
in that factors which have high frequency and severity indexes have high importance index, since
importance index is the product of the two. Finally it is concluded that, factors which are
significant to the company’s cost overrun are interrelated and had an impact on the project time
that the contractor cannot accomplish the project work within a specified time and the
contractor is obliged to incur additional cost beyond the initial contract amount due to the rise
of price of materials. In the recommendation part of the research, it is recommended to the
company that to employ experienced technical consultants in order to minimize the cost incurred
to rework of unsatisfactory work which is a result of poor quality management, to hire a person
who had better knowledge in the area of cost estimationand provide adequatetraining program
to improve the capacity and productivity of the labor force, to focus on factors which can be
minimized in order to minimize the effects of cost overrun factors that are beyond the company’s
control, to plan properly before the beginning of any activity and for the project manager to be
wise in his/her leadership style in order to create good coordination and communication with
sub-contractors and the employeesenvolved.Finally the government is recommended to solve the
problem of water and electricity fluctuations to minimize the problem of cost overrun.
Description
Keywords
Cost Overrun,, Construction Projects, Project cost