Determinants of Cost and Schedule Overrun on Private Projects Financed by Commercial Bank of Ethiopia
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Date
2017-06-12
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Addis Ababa University
Abstract
This study was conducted to assess determinant factors of cost and schedule overrun on private projects financed by CBE. In view of this, mixed research strategy with a descriptive research method was employed using a census type approach for collection of data. A total of 65 questionnaires were distributed to the whole populations of the study, credit performers of the bank, based on census inquiry. Out of which 56 responses were returned complete and hence were used as a source of primary data. Furthermore, In order to obtain more insight on the cases, the study used review of document on some of the loan files of the customers and also conducts an in-depth interview with credit approving members of the bank. The results of the study indicates shortage of foreign currency supply, Inconvenient terms and pre-condition for phase loan disbursement, Poor due diligence assessment to know the customer, under-financing, fund diversion for unintended purpose, lack of commitment by the project promoter, Improper planning on time estimation, management capacity problem to run the project, financial problems, un-planned and ambitious business expansion, lack of utilities, Inflation/exchange rate fluctuation, unavailability of necessary information to appraise the project feasibility, Political Factors, major disputes and negotiations with external organ, design/scope change due to external factors, contractual disputes with external organ, delay on land/site handover, regulatory changes and unforeseen ground condition during construction are the most determinants of project schedule overrun. As far as determinants of project cost overrun is concerned, the result shows that Incomplete and not well prepared feasibility study presented by the project promoter, unplanned expansion/Change order, lack of resource planning, delay from borrower side, underestimating the project complexity, Poor selection of consultant, lack of backup Plan, Incremental financial cost (volatility of foreign exchange and borrowing cost), difficulties to get prompt service from government office, Inadequate availability of skilled resource, unstable and unpredictable market situation in the country /Inflation and delay due to external factors are the most causes of project cost overrun. Therefore, on the basis of the findings, recommendations to concerned parties were provided to improve the performance of project cost and schedule.
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Keywords
Cost Overrun, Schedule Overrun, effects