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.

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Keywords

Cost Overrun,, Construction Projects, Project cost

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