Cost Overruns and Failure in Project Management: Understanding The Roles of Key Stakeholders in Construction Projects

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Cost Overruns and Failure in Project Management: Understanding the Roles of

Key Stakeholders in Construction Projects
Article in Journal of Construction Engineering and Management · May 2013

DOI: 10.1061/(ASCE)CO.1943-7862.0000621
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Cost Overruns and Failure in Project
Management: Understanding the Roles
of Key Stakeholders in Construction Projects
Hemanta Doloi1
Downloaded from ascelibrary.org by University of Melbourne on 06/06/13. Copyright ASCE. For personal use only; all rights reserved.
Abstract: The subject of poor cost performance has been widely published in the mainstream project and construction management
literature. Nevertheless, the underlying responsibilities of the key stakeholders (clients, consultants, and contractors) in managing this chronic
problem in the Australian construction industry remain unclear. By performing an in-depth analysis of the roles and responsibilities of these
key stakeholders, this research is intended to unfold the industrywide perception of cost performance being heavily reliant on the contractor’s
performance alone. Based on a thorough literature review and relevant industry inputs, 73 attributes associated with cost performance
were identified for investigation. Based on the relative importance weighing technique on 48 selected attributes, planning and scheduling
deficiencies have the highest impact on cost performance from clients, consultants, and contractors’ perspectives. Confirmatory factor analy-
sis on the combined responses across all three groups suggests that robust control procedures and adequate programming, along with efficient
design and effective site management, are the most critical factors. These factors are primarily associated with the responsibilities of
contractors and consultants for managing cost overruns in projects. However, the client’s responsibility in facilitating effective management
of these factors within the project environment is crucial. Multivariate regression analysis performed on eight factors’ scores highlighted the
influence of five significant factors (p < 5%) on managing cost overruns. The findings are expected to abridge a significant knowledge gap by
shifting the priorities in cost estimation and management practices across all industry sectors. DOI: 10.1061/(ASCE)CO.1943-7862
.0000621. © 2013 American Society of Civil Engineers.
CE Database subject headings: Construction costs; Estimation; Project management.
Author keywords: Cost overrun; Cost estimation; Cost performance; Project management.
Introduction in most projects (Green 1989). In many instances, all of these

factors identified at an early stage of the construction process
The factors that influence cost during the conception and design are described as uncontrollable risks (Akinci and Fischer 1998).
phases within the construction process have been widely investi- Appropriate consideration of these uncontrollable risks during
gated, primarily based on the contractor’s cost-estimating practices the initial stage of the estimating phase significantly increases
(Akintoye 2000; Cheung et al. 2008). Hicks (1992) revealed that the chance of minimizing any mistakes over the course of the
regardless of management competence and the financial strength of construction phase. However, some of the key questions regarding
the contractor, accurate cost estimation at an early stage is the key responsibility, deliberation, and management of such risks in the
to avoid cost overrun in projects (Hicks 1992). Cost estimation is a construction supply chain remain unclear in the discipline domain.
technical process of predicting expenditure, and success depends Identification of the cost-related risks, underlying drivers, and
on accurate integration of project information, resources, and con- impediments for effective management must be assessed in the
trol over project implementation (Baloi and Price 2003). Factors contexts of three key stakeholders: clients, contractors, and
influencing cost performance based on initial estimates have been consultants.
widely published and primarily concern project complexity, tech- This research is intended to investigate the perceived under-
nology requirements, vagueness in scope, and the project team standing and importance of the key attributes among these three
requirements (Mansfield et al. 1994; Akintoye 2000; Frimpong key stakeholders’ groups with respect to achieving the target cost
et al. 2003; Love et al. 2005). Empirical evidence suggests that con- performance in projects. Estimation of project costs at the early
tractors’ efficiency in the estimating process and appropriate tender stages of the design process and the ability to manage these costs
pricing depicts the cost performance in construction projects throughout the construction phase is paramount to a project’s over-
(Skitmore and Wilcock 1994). Therefore, contractors’ ability in us- all success. Past research illustrates that construction cost overruns
ing sophisticated methods and their rationalizations at the tender and the subsequent poor cost performance are the attributes of the
development stage are considered crucial in achieving cost success lack of understanding among all participating teams across the
1
construction industry (Akintoye 2000; Frimpong et al. 2003).
Senior Lecturer, Faculty of Architecture, Building and Planning, Univ. However, an accurate understanding of the key attributes in the
of Melbourne, Victoria 3010, Australia. E-mail: hdoloi@unimelb.edu.au
context of the responsibility and management ability among clients
Note. This manuscript was submitted on November 13, 2009; approved
on June 6, 2012; published online on July 25, 2012. Discussion period open
and consultant contractors has not been explored. By identifying
until August 1, 2013; separate discussions must be submitted for individual the factors affecting cost overruns, this research highlights the
papers. This paper is part of the Journal of Construction Engineering and criticality for their effective management within the roles and
Management, Vol. 139, No. 3, March 1, 2013. © ASCE, ISSN 0733-9364/ responsibilities among clients, consultants, and contractors in
2013/3-267-279/$25.00. construction projects.
JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT © ASCE / MARCH 2013 / 267
J. Constr. Eng. Manage. 2013.139:267-279.

Literature Review variations, and design change. Whereas a reasonable agreement
among three groups was reported on these time related factors
Over the last few decades, there has been much research into the and their links to overall project success, the findings failed to
factors that affect cost performance in the construction phase of establish any meaningful insights into the roles and responsibilities
projects. Usually the vast majority of cost overruns occur during of the three groups and their underlying impacts on the overall cost
the construction phase, in which many unforeseen factors are con- performance of the project.
ceived over the conception/design stages (Chan and Kumaraswamy Based on data collected from 84 contractors firms in the United
1997). Attributes such as poor site management and supervision, Kingdom, Akintoye (2000) reported the primary factors relevant to
low speed of decision-making and client-initiated variations have cost estimating practice as project complexity, scale and scope of
reportedly been some of the most significant causes of cost over- construction, market conditions, methods of construction, site con-
runs in the construction phase of projects (Trost and Oberlender straints, client’s financial position, buildability, and location of the
2003; Iyer and Jha 2005). These factors primarily relate to the project. However, an investigation on how such factors would be
project manager, given that project management involves managing perceived by clients and consultants, and their potential impacts on
resources such as workers, machine, money, materials, and meth- overall cost performance of projects, was not performed. This re-
ods during this period (Frimpong et al. 2003). However, precise search was therefore insufficiently comprehensive. Investigating
understanding of these factors and protocols of responsibility shar- the causes of substantial cost variations relative to the initial con-
ing for effective management among the key stakeholders is not tract and excessive cost overruns in Nigerian construction projects,
widespread. Although tools and techniques implemented to control Mansfield et al. (1994) revealed that poor project management
these factors is perceived to play an important role, understanding during the construction phase produces not only the deficiencies
the root cause of these factors and their potential impacts in man- in the projects’ plan and cost control, but also jeopardizes the target
aging them from the perspectives of clients, consultants, and con- outcomes expected by clients, contractors, and consultants in the
tractors is the key for achieving success in cost performance. overall development process. Although the technical ability of
Despite the fact that factors associated with cost management project managers is an important element to the project’s success,
are reasonably understood, improvement of construction industry the contribution of contractors and consultants in the process of
practices in terms of responsibility sharing and deliberations among cost monitoring and controlling is equally important in achieving
the project’s participants is not particularly evident. In the United overall success in projects (Iyer and Jha 2005).
Kingdom, Green (1989) conducted six case studies of tendering In an attempt to establishing a predictive model for early cost
practices for establishing the reasons for disregarding the best prac- estimation, Trost and Oberlender (2003) collected quantitative data
tices among the industry. Green (1989) concluded that whereas the across 45 potential drivers on 67 completed construction projects
rationality for estimating is justified across the firms, a range of across the world. Based on factor analysis and regression modeling,
uncertainties associated with the wider environmental issues prevail basic process design and site requirement was concluded to be the
over the tendering process. In an attempt to understand the rationale most significant factor that impacts estimate accuracy. Although
of estimating indirect costs for construction work, Tah et al. (1994) this finding is an important first step in that it reveals the signifi-
investigated the current practices towards quantification and allo- cance of early cost estimation, the exclusion of building and infra-
cation of general overheads, risk contingencies, and profit margin structure sector in the data collection process rendered the research
across seven firms. The research revealed that the approach for such constrictive in the context of cost performance across construction
estimation is ad-hoc and based on past experience alone (Tah et al. projects. Addressing the risk issues that affect cost performance at
1994). Whereas more sophisticated and reflective approaches to- a project level, Baloi and Price (2003) examined the normative and
wards subjective practices were suggested in published research, behavioral perspectives based on an existing literature search and
the relationships between subjective practices and overall cost discussion with construction contractors. A lack of mechanized
performance were not clearly highlighted (Enshassi et al. 2009; support, such as a decision support system and contractors’ expe-
Akintoye 2000). In the United Kingdom, Skitmore and Wilcock rience, were reported to be the key causes for failure in cost per-
(1994) surveyed nine smaller builders involved in all types of build- formance in most projects. However, the roles of clients and
ing projects to ascertain the pricing mechanism in preparing a bill consultants were not included in the cost performance analysis,
of quantities for competitive tender. The bulk of the items were and thus such findings are not broadly useful.
priced by experience, except a small percentage of specialized Based on the case study data on completed projects in Ghana,
items, which were priced by the prescribed detailed methods. Frimpong et al. (2003) identified five key factors that impact
However, the research asserted that the combination of both the project cost performance. These factors are monthly payment
subjective and prescribed methods is the most efficient manner difficulties from agencies, poor contractor management, material
in which achieving accurate tender prices for estimators in a procurement, poor technical performance, and escalation of
time-constrained environment can be achieved. Incorporating the materials prices. Although a general consensus of the impacts of
statistically significant variability of the estimates in the program these factors on cost performance was found among clients, con-
evaluation and review technique (PERT) can enhance the reliability tractors, and clients, a significant contrast was highlighted on the
of the subjective estimates. However, exclusion of cost perfor- issues reported previously (Baloi and Price 2003; Skitmore and
mance in relation to such assertions rendered this research insuffi- Wilcock 1994).
ciently comprehensive. Based on an investigation of the transport infrastructure across
Chan and Kumaraswamy (1997) reported five principal causes 258 rail, bridge, tunnel, and road projects in Denmark, Flyvbjerg
of time overruns perceived among clients, contractors, and consul- et al. (2004) highlighted three key factors that affect cost overruns.
tants in Hong Kong construction projects. A questionnaire survey Flyvbjerg et al. (2004) asserted that a longer project imple-
was designed comprising 83 delay factors across eight categories mentation phase, larger project size, and public ownership factors
and distributed to 400 local firms involved in construction activ- are highly susceptible to cost overruns. However, relationships
ities. Based on a 37% response, the five most significant sources between clients, contractors, and consultants in addressing these
of delay were poor site management and supervision, unforeseen factors and minimizing the impact of cost overruns were excluded
ground conditions, low speed in decision-making, client-initiated in the investigation. Cheung et al. (2008) investigated the attitude of
268 / JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT © ASCE / MARCH 2013

clients and estimators towards estimating errors in the estimating • Investigate the influencing factors on cost performance based on
practice in the Hong Kong construction industry. Based on a ques- multivariate regression analysis, and
tionnaire survey conducted among 45 estimators, 33 clients, and • Analyze the management of the influencing factors in relation
regression modeling, tolerances in overestimations among both with the roles and responsibilities of the consultants, contactors,
parties were highlighted. Although both estimators and clients and client in the project.
are reasonably satisfied with overestimations, the underlying The first objective is important for clients, consultants, and con-
causes of such practices and strategies for mitigation were not tractors to understand and attend to the underlying attributes that
revealed. impact cost success. By establishing the relative positioning of
As evident from the previously discussed research, the field of the attributes in the order of their significance, the second objective
cost management and underlying attributes in cost estimation is attempts to create a better understanding of the clustered effects
reasonably well developed (Bowen and Edwards 1998). However, (e.g., factors) of these attributes on project cost performance. The
it is unclear how each of the attributes relate to the clients, con- factors are then analyzed in the context of effective management
sultants, and contractors, and how the attributes effect successful among the clients, consultants, and contractors in the optimal project
cost performance. Currently, no research has been found in the delivery process. The second objective is particularly important
public domain that focuses on the entire project development for all three parties to prioritize, specifically, the factors in terms
phase, using the perceptions of clients, consultants, and contrac- of their criticality for developing contractual arrangements and
tors, and how it impacts cost performance (Fortune 2006). There assume responsibilities, to obtain the desired outcomes. The third
is a need to re-think and re-engineer the existing or normal cost objective is intended to validate the factors in terms of their relevancy
estimating process, incorporating emergent diversity and complex- and underlying influence on cost performance in projects. Finally,
ity, especially in the project delivery approach. The findings of through the fourth objective, the resulting factors are analyzed with
this research should benefit the construction community by high- reference to the roles and responsibilities of all three key stakehold-
lighting the key factors that impact costs and the associated ers with respect to cost management processes and their effective
responsibilities for effective management among the key project development and implementation in the construction projects. By
participants. Additionally, the results will provide guidance for increasing the discipline-specific knowledge in meeting the require-
further research in developing practical steps that can be imple- ments and expectations of clients, consultants, and contractors, it
mented to reduce cost overruns during the entire development may be possible to accurately highlight the advantages and disad-
process. vantages of the cost management approach and clarify the perceived
viewpoints within the construction industry.
The research uses a carefully designed questionnaire to collect
Methodology and Approach the perceived opinions of the most possible causes of cost overruns
among the three key stakeholder groups. To capture the most rel-
Cost performance of projects and the management of cost overruns evant attributes in the questionnaire that impact the cost perfor-
is an ongoing topic of investigation in many countries. There has mance in projects, an extensive literature search was conducted.
been much research into the generic causes of cost performance A listing of the attributes that are directly or indirectly associated
issues over the design and construction aspects of projects with project cost performance was developed under seven broad
(Skitmore and Wilcock 1994; Cheung et al. 2008). However, no headings, as shown in Table 1. To validate the selected attributes
or little research has been reported in the context of understanding in an Australian context, a number of feedback sessions were also
the root causes, tackling mechanisms, and stakeholders’ respon- conducted among five senior industry professionals who represent
sibilities in addressing this chronic issue of cost overrun in most all three categories in the Australian construction industry.
projects. Furthermore, the area-specific study of the factors that The final questionnaire, consisting of 73 key attributes, was then
affect cost performance in projects renders past findings insuffi- distributed to over 160 selected professionals, targeting a good mix
ciently comprehensive in relation with Australian industry practice of construction contractors, consultants, and clients primarily in-
(Love et al. 2005). Focusing on Australian construction projects, volved in medium- to large-scale construction projects. Of the pos-
this research is therefore intended to examine the root causes sible 73 attributes, 48 attributes had a sizeable correlation with one
behind the poor cost performance from the perspectives of the another and were considered appropriate for further investigation
three key participants and management responsibilities commensu- (Doloi 2008; Field 2005; Chan and Kumaraswamy 1997). The re-
rate to the contractual roles of these participants across the entire spondents were asked to provide their objective opinions on the
development process. impacts of all the attributes on cost performance in one of their past
The research is intended to expand current understanding of or current projects on a five-point Likert scale (5 = strongly agree,
cost performance issues and management methods through a ques- 4 = agree, 3 = neutral, 2 = disagree, and 1 = strongly disagree). To
tionnaire survey. The questionnaire was designed to capture the measure the perceived agreement of the respondents’ groups on the
current construction industry experiences among clients, consul- criticality of the attributes that impact project cost performance, two
tants, and contractors. Over 160 construction clients, consultants, hypotheses were developed, as follows:
and contractors were selected on the basis of their diverse back- • Null hypothesis (H0 ): none of the groups are in agreement with
grounds, professional experiences, and current participation in the ranking of any attribute, and
the industry. • Alternative hypothesis (H1 ): all three groups are in agreement
The objective of this research is to identify the most critical with the ranking of any attribute.
factors that impact cost performance across the design consultants, The previous hypotheses have been discussed in the context of
contactors, and client perspectives by the following: results and findings in the following sections. Given that there con-
• Ranking the most critical attributes based on the relative impor- tinues to be considerable cost overrun issues among a majority of
tance weight (RIW), construction projects, the contributions made in this research are
• Reduce the influencing attributes into factor groups, identifying highly relevant for understanding the client’s, consultant’s, and
the latent properties of each factor and their effective manage- contractor’s roles in relation to achieving target cost performance
ment based on factor analysis, and overall project success.

Table 1. Summary of the Literature Review Related to Project Cost Performance
Key attributes highlighted Authors
Project related: Scale and scope of project, location of project, tender period and market condition, extent of Flyvbjerg et al. (2004); Chan and
completion of precontract design, project organization, size of project team, type of structure, project duration, Kumaraswamy (1997); Trost and
unexpected geological conditions, inclement weather Oberlender (2003)
Contract related: Poor contract management, design changes within development period, consultation with design Akintoye (2000); Flyvbjerg et al.
team and clients in design phase, negotiations and obtaining of contracts, complexity of design and construction, (2004); Baloi and Price (2003); Doloi
project team’s experience in development stages, contractor’s deficiencies in planning and scheduling at tender (2009); Cheung et al. (2006); Green
stage, form of procurement and contractual agreements, inaccurate estimates (1989); Skitmore and Wilcock (1994)
Project management team related: Capability of the firm’s construction team, planning and scheduling Hicks (1992); Mansfield et al. (1994);
deficiencies, buildability (including on-site prefabrication), anticipated frequency of construction variations, delays Chan and Kumaraswamy (1997)
in work approval waiting for information, cash flow during construction, contractor’s financial difficulties,
financing and payment of completed projects
Quality related: Inadequate insurance covers, mistakes and discrepancies in construction documentations, Iyer and Jha (2005); Cheung et al.
inspection and testing of completed projects, late delivery of materials and equipments, shortage of materials and (2008); Tah et al. (1994); Skitmore
equipment parts, imported materials and plant parts, frequent breakdown of construction equipment, poor site and Wilcock (1994); Love et al.
management and supervision, inadequate management skills, improper control over site resource allocations, (2005)
deficiencies in cost estimates prepared, methods/techniques of construction
Planning related: Effective monitoring and feedback process, positive attitudes of project manager (PM) and Baloi and Price (2003); Frimpong
project teams, effective monitoring and feedback by PM, early selection of PM with proven track record, scope and et al. (2003); Enshassi et al. (2009);
nature of work defined in tender, understanding of responsibilities by all teams, leaderships quality of PM, Akintoye (2000); Mansfield et al.
coordinating ability and rapport of PM with owners representatives, coordinating ability and report of PM with (1994); Iyer and Jha (2005)
other contractors on-site, regular budget update, staff training in the skill areas relevant to project, construction
control and status meetings
Market related: Nonadherence to contract conditions, mistakes during construction, labor and management Trost and Oberlender (2003); Cheung
relations, shortage of materials in current market, fraudulent practices and kickbacks, lead times for delivery of et al. (2006); Iyer and Jha (2005);
materials, shortage of materials, price fluctuations, difficulties in obtaining materials at current price, escalation of Chan and Kumaraswamy (1997)
material prices, availability and supplies of labor and materials
Contractor related: Inadequate contractor experience, necessary variation of projects, client-initiated variations, Baloi and Price (2003); Frimpong
lack of communication between client and contractor, low speed at decision-making involving all project teams, et al. (2003); Iyer and Jha (2005);
delay in subcontractor projects, low labor productivity, unrealistic contract duration imposed by client, shortening Doloi (2009)
of contract periods, poor procurement programming of materials
Data Collection Process (AIA). The clients firms were identified primarily from property
development companies available from both contractors’ websites
A total of 160 questionnaire surveys were distributed to the and the Australian Property Institute (API).
selected clients, contractors, and consultants within the Australian A total of 94 responses were received, which consisted of 24
Construction Industry, comprising residential, commercial, and in- clients, 29 consultants, and 41 contractors. The response rate of
dustrial buildings. Selection of those firms and individuals from approximately 25% of clients, 31% of consultants, and 44% of con-
the contractor, client, or consultant background was critical to the
tractors from the overall respondents was deemed acceptable for
success of this research. Given that the target outcome of this
this study (Flyvbjerg et al. 2004; Doloi 2008). Table 2 shows the
research entirely relies on the representative population sample,
profile of the respondents in terms of their experience and the size
a simple random sampling was adopted to provide a broad spec-
trum of the three key groups in both government and private or- of the projects.
ganizations within the industry (Akintoye 2003). The selection of As seen in Table 2, among 94 respondents across the clients,
the firms/individuals had therefore been selected from industry contractors, and consultants, 46% had a minimum of 10 years
body websites. The contractors were primarily sourced from experience in the construction industry. As seen in the last
the Master Builders of Australia (MBA) website. The consultants column, 59% respondents were involved in project in the range
were sourced from specific industry websites, which include quan- of $75–$150 million, with 11% over $150 million. These statistics
tity surveyors from the Australian Institute of Quantity Surveyors provide the basis that the research feedback has been based on
(AIQS) and architects from the Australian Institute of Architects medium- to large-scale construction projects.
Table 2. Summary of Respondents’ Profiles

Respondents Experience Respondents Typical project budget Respondents
Field of work (%) (years) (%) (in millions of dollars) (%)
Clients 25 <1 2 <5 2
Consultants 31 1–5 16 5–25 8
Contractors 44 5–10 36 25–75 20
>10 46 75–150 59
>150 11

Data Analysis and Results third-ranked attribute, effective monitoring and feedback in
overall and consultants’ categories, postulate the adequacy of
The author’s research primarily utilized two separate methods to project management practices for achieving cost success. Given
analyze the respondents’ data to identify the critical attributes that the contractor’s motive is primarily driven by the earliest com-
among all three categories that affect cost performance. The first pletion and site-level management of construction activities, the
is a descriptive approach with direct interpretation of the survey monitoring and feedback process is neglected, and hence the jus-
results to identify the most critical attribute based on the RIW tification for its listing at sixth position in the contractors’ category.
(Frimpong et al. 2003). The RIW score is a useful measure of This is certainly the result of contractors being unaware about their
the relative positioning of a particular attribute perceived by the roles and responsibilities in monitoring, controlling, and feedback
respondents on the raw dataset (Chan and Kumaraswamy 1997). processes in the construction phase of the project.
The RIW for each attribute is calculated by summing the weights Although past research has reported many underlying factors
assigned to it by each respondent. Although the RIW score does not that impact cost performance in projects, the revelation of the
represent the statistically significant measurement of any instance, impacts of planning and controlling is an important shift that
the score provides a good indication on the relative merit of an
has resulted from the author’s study. Whereas project planning is

attribute based on the frequency of occurrence within the independ- a preconstruction activity in the planning phase, the bulk of the
ently collected sample. controlling occurs in the construction phase of projects. Being a
The second method, the factor analysis technique, was used to key stakeholder in the construction phase, contractors must be
reduce the attributes in the raw dataset into the meaningful groups capable of devising an accurate time schedule such that the result-
known as factors. By reducing a dataset from a group of interrelated ant baseline assists in progress monitoring, reporting, and control-
variables into a smaller set of factors, the factor analysis allows one ling towards meeting the targets in the project. Accurate planning
to explain the maximum amount of common variance with the requires accurate change control processes to be adopted by the
smallest number of explanatory concepts (Field 2005). Thus, the contractor within the project. Thus, as far as responsibility is con-
factors are useful explanatory concepts for analyzing the clustered cerned, accurate planning and controlling clearly lies with the con-
effects on cost performance and understanding the appropriate tractors involved in the project. This finding demonstrates that a
management for ensuring target outcomes in the projects (Iyer lack of required technical support and competency among the
and Jha 2005; Trost and Oberlender 2003). In addition, linear key stakeholder (the contractors) potentially leads to failure in
regression analysis based on the factor scores was performed to delivering modern projects.
investigate the collective strengths of the factors that influence Construction methods or technique (RIW ¼ 2.656) was the sec-
cost performance in a project. The Statistical Package for Social ond most significant attribute across all three categories. Given that
Sciences (SPSS) software package was used for both factor analy- the complexity of modern construction projects increases across all
sis and regression analysis. sectors, the requirement for the selection of appropriate construc-
tion methods becomes critical for contractors. Both clients and con-
Descriptive Analysis sultants have realized the benefits of using contemporary methods
Various methods can be used to rank and subsequently identify the and techniques, in addition to appropriate exploitation of modern
relative critical attributes out of a raw data analysis. According to equipment in construction projects.
numerous researchers, the mean and standard deviations are not The fourth significant attribute, complexity of design and con-
reliable statistics for assessing overall ranking of the attributes. struction (RIW ¼ 2.586), clearly postulates the increasing com-
However, RIW is one of the most widely used measures to deter- plexity of design projects and construction in modern projects
mine the relative significance of the attributes (Frimpong et al. that impact cost performance in overall projects. The consistent
2003). The RIW was evaluated using the following expression: ranking of this attribute by clients, consultants, and contractors
P5 at their fifth positions asserts the underlying challenges faced by
ai ni all three groups in successful delivery of projects. Whereas the
RIW ¼ Pi¼1 N × 100 ð1Þ
j¼1 xj
client’s motive of value for money exerts significant trust on
consultant’s performance in most modern projects, the contractor’s
in which xj = sum of the jth factor; j = factors 1, 2, 3, 4, : : : , N; performance is usually measured on the effectiveness of on-site
N = total number of attributes (48); ai is a constant that expresses construction with acceptable quality specification. However, a lack
the weight given to the ith response: i ¼ 1 (very high), 2 (high), 3 of contractor’s in-depth understanding of the project design and
(medium), 4 (low) and 5 (very low); and ni is the variable express- specifications often leads to inefficient construction and poor
ing the frequency of the ith response. on-site productivity in the project. This potentially triggers conflicts
Based on Eq. (1), the RIW for all the attributes were determined and disputes among all three parties, leading to additional costs in
first for client, consultant, and contractor categories separately, and the project. Such conflicting requirements certainly contribute to
then for overall samples. Table 3 shows the calculated RIWs and poor controlling of cost accounts and results in significant cost
rankings for 48 attributes in all four categories. The following sec- overruns.
tions discuss the significance of some of the key attributes across all The fifth attribute, improper control over site resources
three categories with respect to the overall relative rankings shown (RIW value ¼ 2.574), clearly indicates the contractor’s inability
in the first column. in handling construction resources and hence mismanagement of
As seen in Table 3, the overall ranking revealed that planning the scarce on-site resources in a project. In fact, the contractor
and scheduling deficiencies is one of the most significant attributes group has acknowledged it as a highly significant attribute by
(RIW ¼ 2.679) that influence cost performance in projects. assigning it as fourth ranking. The agreement of the level of sig-
Whereas both consultants and contractors share the same view- nificance by both consultants and clients has been found at sixth
point, clients ranked this attribute in third position. In contrast, and seventh levels, respectively. The sixth attribute, contractors
an effective monitoring and feedback process was perceived to deficiencies in realistic planning and scheduling at the tender stage,
be the most important factor from the client’s perspective, which which has been ranked at the third position by the contractors, high-
was ranked in the third position in the overall category. The lights a significant concern on contractors’ prequalification and

Table 3. Attributes That Influence Cost Performance
Overall Clients Consultants Contractors
RIW RIW RIW RIW
ID Attributes (%) Ranking (%) Ranking (%) Ranking (%) Ranking
C19 Planning and scheduling deficiencies 2.679 1 2.549 3 2.652 1 2.780 1
C15 Methods/techniques of construction 2.656 2 2.594 2 2.615 2 2.725 2
C44 Effective monitoring and feedback process 2.632 3 2.660 1 2.596 3 2.642 6
C14 Complexity of design and construction 2.586 4 2.505 5 2.559 5 2.656 5
C36 Improper control over site resource allocations 2.574 5 2.461 7 2.540 6 2.670 4
C10 Contractor’s deficiencies in planning and scheduling at 2.504 6 2.549 4 2.485 7 2.684 3
tender stage
C4 Extent of completion of precontract design 2.499 7 2.461 6 2.466 8 2.546 10
C28 Escalation of material prices 2.458 8 2.350 9 2.392 10 2.574 9
C31 Mistakes and discrepancies in construction documentations 2.429 9 2.394 8 2.411 9 2.615 7
C38 Client-initiated variations 2.429 10 2.239 18 2.336 12 2.422 14
C48 Staff training in the skill areas relevant to project 2.405 11 2.350 10 2.336 13 2.491 11
C22 Cash flow during construction 2.388 12 2.328 12 2.318 14 2.477 12
C11 Design changes within development period 2.301 13 2.017 27 2.151 21 2.587 8
C21 Delays in work approval waiting for information 2.266 14 2.217 19 2.207 18 2.340 17
C3 Tender period and market condition 2.236 15 1.884 35 2.299 15 2.078 26
C39 Lack of communication between client and contractor 2.236 16 2.283 16 2.225 17 2.078 28
C29 Unexpected geological conditions 2.155 17 2.305 14 2.244 16 2.064 29
C30 Inclement weather 2.143 18 1.906 33 2.207 19 2.216 22
C35 Poor site management and supervision 2.143 19 1.884 37 2.095 24 2.340 18
C7 Form of procurement and contractual arrangements 2.120 20 2.328 11 2.559 4 1.72 41
C9 Poor contract management 2.114 21 2.128 21 1.891 30 2.147 25
C37 Inadequate contractors experience 2.108 22 1.796 42 2.040 26 2.353 16
C1 Scale and scope of project 2.073 23 1.906 31 2.058 25 2.188 24
C41 Delay in subcontractor’s projects 2.050 24 2.039 26 2.373 11 1.885 36
C42 Lower labor productivity 2.050 25 2.106 24 2.132 22 1.954 33
C33 Labor and management relations 2.038 26 1.840 40 1.873 32 2.285 19
C20 Buildability (including on-site prefabrication) 2.027 27 1.884 36 1.836 35 2.257 20
C40 Low speed at decision-making, involving all project teams 2.027 28 2.039 25 2.021 28 2.023 30
C26 Frequent breakdown of construction equipments 2.015 29 1.530 46 1.854 33 2.436 13
C16 Availability and supplies of labor and materials 1.992 30 2.283 15 1.502 47 2.216 21
C13 Type of structure 1.945 31 2.106 23 1.724 43 2.009 31
C5 Project team’s experience in development stages 1.939 32 2.305 13 1.743 42 2.078 27
C12 Lack of communication between design team and clients 1.939 33 2.172 20 1.891 31 1.858 37
in design phase
C27 Lead times for delivery of materials 1.928 34 1.906 32 2.188 20 2.395 15
C43 Poor procurement programming of materials 1.904 35 1.862 39 1.799 39 1.885 35
C32 Nonadherence to contract conditions 1.893 36 1.751 43 1.762 41 2.009 32
C34 Fraudulent practices and kickbacks 1.870 37 1.330 48 1.854 34 2.216 23
C2 Location of project 1.817 38 1.884 34 1.799 36 1.789 39
C45 Understanding of responsibilities by all teams 1.817 39 2.128 22 1.520 46 1.844 38
C17 Capability of the firm’s construction team 1.776 40 1.951 28 1.799 37 1.652 42
C8 Deficiencies in cost estimates prepared 1.747 41 2.239 17 1.687 44 1.486 43
C6 Size of project team 1.736 42 1.463 47 1.762 40 1.885 34
C18 Project duration 1.689 43 1.951 29 2.021 27 1.280 44
C25 Inspection and testing of completed works 1.689 44 1.663 44 1.613 45 1.762 40
C47 Coordinating ability and rapport of PM with other 1.625 45 1.929 30 1.947 29 1.197 45
contractors on-site
C46 Coordinating ability and rapport of PM with owner’s 1.578 46 1.818 41 2.114 23 1.032 47
representatives
C24 Financing and payment of completed projects 1.462 47 1.596 45 1.799 38 1.129 46
C23 Contractor’s financial difficulties 1.310 48 1.862 38 1.409 48 0.895 48
technical competency required to achieve successful outcomes in a post-contract stages. However, the contractors’ raking of the same
project. The contractors’ inability to clear understand the project attribute at tenth position highlights a contrast with the traditional
scope at the tender stage significantly influences their effectiveness viewpoint that contractor’s success significantly relies on compre-
on resource allocation and management control, and thus affects the hensive design documentation at an early stage (Flyvbjerg et al.
cost performance in the construction stage. 2004). Although the literature review indicated a strong focus
Both client and consultant groups ranked the seventh attribute, on the comprehensive design prior to awarding of contracts, this
extent of completion of precontract design, at sixth and eighth rank- attribute has no significant impact on contractors’ cost management
ing, respectively. These rankings suggest that both client and con- ability in the construction phase of a project (Enshassi et al. 2009;
sultant groups emphasize significant completion of detailed design Trost and Oberlender 2003). This finding suggests that although
at the precontract stage to minimize potential alternations in complete drawings and specifications, detailed investigation of site

dynamics, and a thorough understanding of the client’s require- in which n = number of attributes; and k = number of groups in the
ments of the project at the precontract design stage are some of sample. The value of W ranges between 0 and 1, with 1 correspond-
the important considerations, these attributes are not necessarily ing to a perfect measure of total agreement and 0 indicating
highly significant in terms of reducing cost overruns at the latter no agreement within the observed groups (Grzegorzewski 2006).
stages of projects. Employing Eqs. (2)–4 on the collected sample, Kendell’s coeffi-
The eighth attribute, escalation of material prices (RIW ¼ cient was 0.9068, which shows a significant agreement on the ranks
2.458), was equally important for both client and contractor groups among all three respondents’ groups.
at their ninth positions, which is also supported by the findings of Although the result of Kendell’s coefficient of concordance
Akintoye (2000). However, consultant’s perceived ranking at tenth depicts a considerable agreement on the ranking among all three
position in this attribute shows the resilience for not being respon- groups, attributable to the large number of attributes (e.g., n ¼ 48),
sible for achieving overall cost performance in projects. Similarly, further testing for validation is recommended. Thus, Eq. (5) was
the attribute mistakes and discrepancies in construction documen- adopted to employ the chi-square approximation of the sampling
tation at the ninth ranking (RIW ¼ 2.429) significantly impacts distribution of W, as follows:
contractor’s cost performance, at their seventh position in the list.

Both clients and consultants are nevertheless in agreement at their χ2 ¼ kðn − 1ÞW ð5Þ
eighth and ninth positions, respectively.
Among the middle order attributes, client-initiated variations Based on the Eq. (5), the calculated value of χ2 was 127.86.
scored tenth position in the overall ranking. This finding is similar Using the critical table for χ2 for n ¼ 48, degree of freedom
to the findings of Flyvbjerg et al. (2004) and Mansfield et al. ðn − 1Þ ¼ 47, and significance α ¼ 0.05, the value of χ2 was
(1994). Although the twelfth and fourteenth rankings of the calculated as follows:
client-initiated variation attribute by both consultants and contrac- 2ðn−1Þ 2ð47Þ
tors show a reasonable agreement with the overall ranking, client’s χ0.05 ¼ χ0.05 ¼ 63.996
eighteenth ranking does not support this as a perceived issue for
Given that the calculated value of χ2 was greater than the critical
managing project cost performance. The requirement for appropri- 2ðn−1Þ
value of χ0.05 , the null hypothesis (H0 ) as stated previously could
ate staff training for developing relevant skills required in the
not be accepted. However, the results support the alternative hy-
project and adequate cash flow during construction secured consis-
pothesis (H1 ) that clients, consultants, and contractors are all in
tent ranks among all three stakeholder groups. Although design
agreement with respect to how they rank the attributes. Fig. 1 shows
changes within the project development period has been perceived
the profiles of the top ten attributes as considered by the clients,
to be relatively less important by client and consultant groups, the
consultants, and contractors. Although the scale of the perceived
impact of this attribute was perceived to be relatively highly sig-
importance is relatively different with some degree of diversity,
nificant for contractors (RIW ¼ 2.587 and eighth ranking) with
the overall trend shows a high degree of agreement among all three
an overall ranking at thirteenth position.
groups of respondents.
Among the lowest order attributes, contactors’ financial diffi-
culty was the least significant among both consultant and contractor
groups, with a relatively higher weight by the client group. Although
the material-related attribute was asserted to be highly critical Factor Analysis
for impacting time and cost delays in past research (Frimpong et al.
Although relative importance weights provide some meaningful in-
2003; Enshassi et al. 2009), an equivalent attribute, lead times for
terpretation on the respondents’ perceptions, such measures are not
delivery of material, was found in the author’s research to be quite
quite convincing as an objective outcome for managing project cost
significant (overall ranking of 34, RIW ¼ 1.928). Similarly,
overruns. Factor analysis is appropriate to determine the multivari-
revelation of some of the key lower order attributes (procurement
ate relationships and the most critical factors among the entire
programming of materials, understanding of responsibilities by
attributes across all three categories (Doloi 2008). Although numer-
all teams, project location, project location, size of project
ous researchers have adopted factor analysis on similar attributes
team, and deficiencies in cost estimates) set a clear contrast to the
in various contexts, generic factors that impact cost performance
assertions made by past researchers in the field (Akintoye 2000;
in the contexts of client, consultant, and contractor perceptions
Frimpong et al. 2003; Enshassi et al. 2009).
and underlying management responsibilities remain unknown
Test of Commonality among the Respondents 2.9

2.8
To validate the degree of agreements between all three respondents’
groups with respect to the attribute ranking, Kendell’s coefficient 2.7
of concordance (W) was relevant for this study. This coefficient is 2.6
RIW (%)
expressed as follows: 2.5

2.4
12U − 3k2 nðn − 1Þ2
W¼ ð2Þ 2.3
k2 nðn − 1Þ 2.2
in which 2.1
X
n 2
U¼ R2j ð3Þ C19 C15 C44 C14 C36 C10 C4 C28 C31 C38
j¼1 Attributes
and Overall Clients Consultants Contractors
X
k
Fig. 1. Profiles of top ten attributes as considered by clients, consul-
Rj ¼ Rij ð4Þ
i¼1
tants, and contractors

(Akintoye 2000). Thus, in this research, the result from an con- performance (Y 1 ). In this research, the factor scores, derived from
firmatory factor analysis establishes a benchmark on the cluster the eight factors listed in Table 4, were entered into the regression
of attributes into several critical factors that impart clear under- model as categorical variables for quantifying the impacts accord-
standing of the underlying impacts on cost performance and their ing to the following equation (Field 2005):
effective management across the industry.
Yi ¼ β 0 þ β 1 x1i þ β 2 x2i þ β 3 x3i þ · · · þβ j xji þ εi
As a first step to performing the factor analysis, the adequacy
of the survey data was examined by conducting the Kaiser-Meyer- in which Y is the value of dependent variables (cost performance);
Olkin (KMO) test and the Bartlett’s test of specificity (Zhang β 0 is a constant and the intercept at the y-axis; β 1 through β j =
2005). The KMO represents the ratio of the squared correlation estimated regression coefficients; x1 through xj are the values of
between variables to the squared partial correlation between vari- the independent or predictor variables; εi is an error term, which
ables. The KMO statistics vary between 0 and 1. A value close to 1 is a random variable with a mean of 0; i = index of the performance
indicates that patterns of correlations are relatively compact, and variable being predicted; and k = number of independent or pre-
consequently factor analysis should yield distinct and reliable fac- dictor variables.
tors. A recommended bare minimum value of KMO for a satisfac- Table 6 shows the results of the final regression model of the five
tory factor analysis is greater than 0.50 (Field 2005). In this factors (1, 3, 5, 2 and 4). The number of explanatory factors in the
analysis, of the possible 48 attributes, a total of 36 had a sizeable regression analysis must be diminished to minimize the impact of
correlation (correlations coefficients ranging from 0.6781–0.8752) weak predictive models (Doloi 2009; Ling et al. 2004). Given that
with one another, with a KMO value of 0.793. The remaining 12 the factors are derived using orthogonal rotation in Table 4, the
attributes had insignificant relationships with any other attributes estimated standard errors are essentially equal for all regression var-
and were thus excluded in the factor analysis. To test the null iables. The parameter estimates of regression coefficients for all
hypothesis that the correlation matrix is an identical matrix, prin- five factors (1, 3, 5, 2 and 4) are significant at p < 5%. The good-
cipal component analysis requires the probability associated with ness of fit for the model was measured by the coefficient of deter-
Bartlett’s test of sphericity to be less than the level of significance mination R2 and the adjusted coefficient of determination R2 ,
(Zhang 2005). The Bartlett’s test of sphericity was 986.456 with an which were used to select the reduced models. The value of R2 will
associated probability of 0.0000 (less than 0.001), which satisfies change rapidly with the addition of new attributes into the model,
this requirement. The details of factor analysis are well documented whereas R2 takes the generalization capability of the model into
in the literature, including Field (2005) and Doloi (2008). They are
therefore not discussed in this manuscript. consideration. R2 and R2 should be very close to accept the model
Principal components analysis was adopted to reduce the highly (Field 2005), and thus the following reduced model is acceptable.
correlated project attributes into a smaller number of key factors of The finding of the regression analysis clearly supports the argument
the overall cost overrun issues. As previously noted, principal com- that the bulk of control of cost overrun depends on the contractors’
ponent analysis was performed on the selected 36 attributes and a ability in efficient planning, monitoring, and site management in
projects. Although consultants’ and clients’ responsibilities lie in
total of eight factors were extracted with eigenvalues greater than 1.
providing efficient design over the planning and design stages,
Table 4 depicts these eight components (factors) that cumulatively
the client plays a significant role in providing effective communi-
explain a total of 85.4% of the variance, and the other components,
cation protocol in the project. These findings validate the relevancy
which accounted for a total less than 14.6%, were dropped. Each of
and strengths of the factors in terms of their collective influence on
the attributes had higher weights towards one factor, with a loading
project cost performance.
greater than 0.6. However, loadings of the two attributes under
Cost performance ¼ 0.786 þ 0.307 ðaccurate project planning
factors 6 and 8 were slightly below 0.6 but above 0.55. The reli-
and monitoringÞ þ 0.266 ðeffective site managementÞ þ 0.231
ability of the attributes under all the eight factors was evaluated by
ðcontractors’ efficiencyÞ þ 0.146 ðdesign efficiencyÞ þ 0.094
determining Cronbach alpha (α) values (Field 2005). The overall
ðcommunicationÞ.
Cronbach alpha value was 0.863, which is above the acceptable
limit of 0.70 for a satisfactory level of reliability in the given data-
set. In addition, the Cronbach alpha values for the attributes under Discussion of Critical Factors
each factor in Table 4 were determined, and are presented in
Table 5. Based on the cluster of the attributes under each factor, Table 4 shows eight critical factors extracted from a total of 36
the representative names of the factors were assigned, depicting selected attributes based on the responses received from clients,
the nature of the underlying issues associated with cost perfor- consultants and contractors in the overall sample. The factors are
mance in projects. An interpretation of these factors is pre- (1) accurate project planning and monitoring, (2) design efficiency,
sented next. (3) effective site management, (4) communication, (5) contactors’
efficiency, (6) project characteristics, (7) due diligence, and
(8) market competition.
Regression Analysis The first factor, accurate project planning and monitoring,
which explains a total variance of 23.9%, significantly emphasizes
Although factor analysis allows one to group the major attributes the technical competency of the project team in terms of clear
into meaningful factors, the degree of impacts of these factors in understanding of the project scope, development of appropriate
relation to predicting cost performance remains obscure (Doloi statement of work, realistic estimation of activity duration, and
2009). In this section, the multivariate regression technique was baseline planning for controlling and monitoring over the execution
applied to investigate the relationship between the factors and stage of the project. Selection of contemporary methods and tech-
the success of achieving cost performance. niques that commensurate the complexity of on-site construction
In a regression model, the dependent variables are a linear activities is of utmost importance in managing project cost over-
combination of the independent or explanatory variables. The in- runs. The project manager’s efficiency in monitoring and control-
dependent variables are the attributes, which contribute to the ling the baseline project depends on effective reporting and
cost overruns, and the dependent variable is the resulting cost feedback processes. This finding depicts a clear shift of emphasize

Table 4. Overall Rotated Factor Loadings
Factor loading Variance
explained
Factors/attributes 1 2 3 4 5 6 7 8 (%)
Factor 1: accurate project planning and monitoring 23.9
C19. Planning and scheduling deficiencies 0.859
C15. Methods/techniques of construction 0.784
C14. Complexity of design and construction 0.73
C10. Contractor’s deficiencies in planning and scheduling at tender stage 0.721
C44. Effective monitoring and feedback process 0.698
Factor 2: design efficiency 15.4
C4. Extent of completion of precontract design 0.876
C31. Mistakes and discrepancies in construction documentations 0.807
C38. Client-initiated variations 0.798

C11. Design changes within development period 0.719
C20. Buildability (including on-site prefabrication) 0.701
Factor 3: effective site management 10.8
C36. Improper control over site resource allocations 0.828
C28. Escalation of material prices 0.842
C22. Cash flow during construction 0.797
C42. Lower labor productivity 0.708
C21. Delays in work approval waiting for information 0.689
Factor 4: communication 9.2
C39. Lack of communication between client and contractor 0.788
C35. Poor site management and supervision 0.776
C9. Poor contract management 0.764
C12. Lack of communication between design team and clients in design phase 0.718
Factor 5: contractor’s efficiency 7.6
C37. Inadequate contractor’s experience 0.873
C40. Low speed at decision-making, involving all project teams 0.759
C5. Project team’s experience in development stages 0.743
C8. Deficiencies in cost estimates prepared 0.688
C23. Contractor’s financial difficulties 0.675
Factor 6: project characteristics 7.3
C1. Scale and scope of project 0.796
C13. Type of structure 0.694
C2. Location of project 0.648
C29. Unexpected geological conditions 0.598
Factor 7: due diligence 6.9
C45. Understanding responsibilities by all teams 0.877
C33. Labor and management relations 0.782
C32. Nonadherence to contract conditions 0.689
Factor 8: market competition 4.3
C8. Tender period and market condition 0.806
C43. Poor procurement programming of materials 0.717
C27. Lead times for delivery of materials 0.638
C41. Delay in subcontractor’s work 0.573
Total variance explained (%) 85.4
Table 5. Reliability Analysis of some of the critical factors revealed by past research, such as
Attributes Cronbach’s alpha (Cα )
project complexity (Akintoye 2000), increment of material
prices (Enshassi et al. 2009), and contractor’s financial difficulty
All attributes in Table 3 0.863 (Frimpong et al. 2003). However, this finding supports the assertion
Attributes in factor 1 0.904
that large cost overruns are typically seen as signs of inefficiency in
Attributes in factor 3 0.911 most public sector projects (Flyvbjerg et al. 2004). Supporting the
Attributes in factor 4 0.946 findings reported in the Descriptive Analysis section, the first factor
Attributes in factor 5 0.898 being project planning and monitoring clearly highlights the con-
Attributes in factor 6 0.879 tractor’s roles and responsibilities of in the project.
Attributes in factor 7 0.863 The second factor, design efficiency, with a total variance of
15.4%, encompasses the significance of the extent of completion

Table 6. Results of Multivariate Regression Analysis
Variable β coefficient Standard error t-value Significance (p) R2 =adjusted R2
Cost performance
Constant 0.786 0.0113 2.420 0.0001 0.668=0.576
Factor 1 (accurate project planning 0.307 0.0116 2.623 0.0003 F ¼ 7.299
and monitoring)
Factor 3 (effective site management) 0.266 0.0116 1.674 0.0122 p ¼ 0.0001
Factor 5 (contractor’s efficiency) 0.231 0.0116 1.306 0.0235 Dublin-Watson ¼ 1.987
Factor 2 (design efficiency) 0.146 0.0116 1.569 0.0370
Factor 4 (communication) 0.094 0.0116 1.476 0.0423
Note: Variables are significant at p < 0.05.
of precontract design, mistakes, and discrepancies in design over the design phase can easily hinder the contractor’s capacity to
documentation, client initiated variations, design changes, and keep on the construction schedule and meet the target construction.
buildability issues in the construction phase of the project. Clarity Thus, establishment of an appropriate communication protocol is
of the design at the pretender stage allows contractors to realisti- the responsibility of all three parties in the project. Similarly, poor
cally estimate the costs of construction and hence possibilities for supervisory support and inadequate contract management among
less variation in subsequent project phases. Mistakes and discrep- the subcontractors can potentially lead to disputes and conflicts that
ancy in design documentation naturally trigger the variations and affect construction activities on-site. Although the importance of
hence are a major source of cost increases for both clients and con- effective communication was one of the underlying factors among
tractors (Akinci and Fischer 1998). The significance of client- clients, contractors, and consultants, the significance of the four
initiated variations, design changes, and complexity in on-site underlying attributes has been revealed by past research (Cheung
construction over cost overrun has been supported by research et al. 2008; Frimpong et al. 2003). Being one of the key stakehold-
(Akintoye 2000; Iyer and Jha 2005). Given that the consultants’ ers, the client plays a significant role in maintaining an effective
competence in design efficiency also depends on clients’ consistent communication protocol within the project. The client’s respon-
inputs (e.g., client-initiated variations) on design selection, effec- sibility in effective communication and its influence in achieving
tive management of this factor clearly relies on the joint respon- successful project outcomes have also been reported in past
sibility of both clients and consultants in the project. The research (Doloi et al. 2011; Cheung et al. 2006; Bresnen and
consultants’ ability t understand the client’s expectations and pro- Marshall 2000).
vide a clear design at the pretender stage plays a significant role in The fifth factor, contractor’s efficiency, which explains a total
achieving efficient design outcomes. variation of 7.6%, has traditionally been perceived as one of
The third factor, termed effective site management, with a total the least important considerations that impact cost performance
variance of 10.8%, refers to the influence of site-level management in projects. Although contractor efficiency was revealed to be an
issues over cost overrun (resource utilization, material pricing, cash important factor in the contractor preselection process in the tender
flow, labor productivity, and delays in decision-making). Appropri- phase, a lack of relevant expertise on the part of the contractor,
ate allocation of resources and their optimized utilizations by the technical competency in cost estimation, capacity for speedy
on-site contractor are perceived to have significant influence on decision-making, and sound cash flow position were some of the
construction cost. Control of material price escalation depends key attributes that contributed to the contractor’s inefficiency in
on effective management of a procurement schedule and provision achieving cost success in projects. Although maintaining an
for relevant contractual arrangements among the suppliers. Con- efficient work standard is a contractor’s responsibility over the con-
tractors’ financial position and their ability to maintain a seamless struction phase, the responsibility for selecting the right contractors
cash flow during the construction phase have significant influence lies with the client in most projects.
on on-site cost performance. Both poor labor productivity and The sixth factor, associated with project characteristics, with a
delay in the approval process are the key reasons for construction total variance of 7.3%, was only marginally significant over cost
delay, leading to overall cost overrun in projects (Doloi 2009). This overrun, as perceived by all three respondent groups. Past research
finding supports the generally accepted view that poor management has revealed that cost overrun is directly related to project scale
control significantly impacts the contractor’s ability to overcome and complexity (Akintoye 2000; Frimpong et al. 2003). However,
the unforeseeable challenges in site-related construction activities the findings of the author’s research lead to the conclusion that
and results in additional costs to the project budget (Akintoye 2000; these two attributes do not necessarily directly contribute to project
Akinci and Fischer 1998; Mansfield et al. 1994). Through proactive cost performance. In contrast, management of larger project scopes
planning and good development of management competencies, the and complexities can be considered as the subsets of the technical
contractor is generally the appropriate party for providing effective competency of the project team, which can easily be addressed
site management practices on-site. However, given that proactive through factors such as accurate project planning and monitoring,
decision approval by the clients significantly empowers the con- effective site management, and communications. Although the bulk
tractor’s management ability, the overall site is well managed with of the responsibilities associated with management of this factor lie
a shared responsibility between both parties. with the contractors, both clients and consultants are equally
The fourth factor, communication, with a total variance of 9.2%, responsible for maintaining effective communication protocols in
was significant in terms of transparency and clarity of communi- the project.
cations between all parties and enabling seamless coordination and The factor due diligence, comprising three underlying attributes,
integration for performing their roles and responsibilities in the was critical and at the seventh position, with a total variance of
project. Lack of communication between clients and contractors 6.9%. Precise understanding of the responsibilities and contractual
over the construction phase and between clients and the designer obligations by all teams in a project significantly contributes to

reducing conflicts and disputes and hence successfully meeting contractors and consultants in the cost controlling and monitoring
the target. Similarly, a positive relationship between laborers and process, the author’s research further highlighted the potential
management is highly significant for promoting a conducive work- influence of both parties in the technical planning of the project.
ing environment, which potentially contributes toward high pro- Implementing appropriate construction methods and effective
ductivity in projects. The link between construction productivity reporting and monitoring procedures among the project parties,
and cost performance has been reported in numerous research re- a common standard can be established for managing on-site con-
ports, including Doloi (2009) and Chan and Kumarswamy (1997). struction projects, which potentially reduces numerous mistakes
The eighth factor, termed market condition, with a total variance and errors in the downstream construction phase. Programming
of only 4.3%, revealed that competition in the marketplace is com- and sequencing of work during the on-site construction stages must
paratively a weaker determinant with respect to project cost perfor- be regularly updated and forecasted to limit changes of delays and
mance. With appropriate planning and programming in projects, all subsequent cost overruns throughout the project. Design efficiency
the underlying attributes associated with market conditions can in terms of extent and clarity of precontract design at the initial
easily be controlled proactively. Shortage of materials and lead time stage of project creation is highly necessary to produce realistic
for delivery should not be seen as the primary causes for delay in a project time and cost plans. Failure to provide a complete detailed
subcontractor’s work. In contrast, these attributes are the result of scope and design for the project will result in discrepancies in
poor procurement planning and weaker control in executing pro- contract documentation and the likelihood of mistakes during con-
curement schedule in most projects. The extent of the tender period struction. The shift of emphasis to the previously noted technical
and tender conditions in the marketplace are not determinants of the issues in achieving cost performance in Australian construction
contactor’s inability to control costs on-site. Avoidance of over- projects is clearly a key contribution to new knowledge in the cur-
commitments and effective management of resources are somewhat rent construction engineering and management literature.
closely related to contractor’s competence and thus both of these The contractor’s ability in effective site management is a vital
attributes are critical for managing costs in projects (Akinci and requirement for controlling project costs. An experienced contrac-
Fischer 1996; Hicks 1992; Akintoye 2000; Mansfield et al. 1994). tor with a sound workforce and cash flow during construction
This finding shows a clear contrast between the past understanding can provide a significant expertise to better control the project. This
of the market dynamism being an independent phenomenon finding is similar to the assertions in Frimpong et al. (2003).
(Akintoye 2000; Bowen and Edwards 1998) and the management Coordination between all project participants is one of the most
opportunity of the fluctuating market conditions with contractors important factors to achieve successful project outcomes. Commu-
being proactive in the project development environment. nication and personal rapport between all project participants can
lead to a reduction in unnecessary paper work and therefore greatly
reduce the time and overall project costs.
Conclusions and Further Research The contractor’s inefficiency in terms of relevant project expe-
rience and cost estimation process potentially affects the overall
Focusing on the three major industry groups (consultant, client, project cost performance. Furthermore, the contractor’s financial
and contractor), this research investigated the critical factors that hardships and hence delays in the subcontractor’s payments can
affect cost performance across both the preconstruction and possibility affect overall financial control. The contractor’s leader-
construction phases of projects. Based on descriptive analysis, ship skills and ability to coordinate numerous activities on-site have
48 selected attributes associated with project cost performance were a significant impact on project cost performance. A good upfront
ranked using the relative performance index as perceived by clients, understanding of the contractors on the project design and on-site
consultants, and contractors in Australian construction projects. constructability issues potentially enhances the probability of
By performing confirmatory factor analysis, 36 attributes of the achieving positive project cost performance. The revelation that
48 selected attributes were further reduced to eight key factors the scale, scope, and structure of the project are less likely to impact
for an investigation of their quantitative impacts on project cost project cost performance is in contradiction with the findings of
performance. The influence of these eight key factors on cost some past research, including Akintoye (2000), Frimpong et al.
performance was further validated using regression analysis. Based (2003), and Flyvbjerg et al. (2004).
on multivariate regression analysis, five of the eight key factors Based on the reliability of the dataset and robustness of
were further highlighted as highly significant. The five significant the analysis methodology, the author’s research revealed some
factors were accurate project planning and monitoring, effective degree of clear contrast on the most significant factors from pre-
site management, contractors’ efficiency, design efficiency, and viously published research, and provides an opportunity for under-
communication. The roles and responsibilities of the clients, standing the perceived shift of industry practices in construction
consultants, and contractors were then analyzed in relation to the projects. Although factors such as project size, type, and complex-
factors for devising appropriate management strategies and reduc- ity (Akintoye 2000; Baloi and Price 2003), financial difficulty
ing project cost overruns. (Frimpong et al. 2003), inaccurate cost estimation (Akinci and
One of the key findings, that project planning and control mea- Fischer 1998), contractual arrangements (Mansfield et al. 1994),
sures play a significant role in overall project cost performance, and length of construction (Flyvbjerg et al. 2004) have significant
shows a clear shift of the industry-wide perception of cost perfor- effects on cost performance in most projects, the findings of this
mance being heavily reliant on the competency of contracting par- research highlight a new emphasis on well-developed technical
ties alone. The emphasis on the technical planning and controlling skills as the key in controlling cost overruns in modern projects.
skills of the contracting parties for effective management of cost This is perhaps attributable to the shift in the contractor’s roles
performance clearly adds a new dimension to the current body and responsibilities associated with the ever-increasing non-
of knowledge in the field, in which the contractor’s performance traditional procurement routes selected in projects. Given that
in terms of financial strengths, relevant experience, firm size, and the contractors are engaged with stringent contractual terms, they
so on was reported to be closely linked with achieving cost targets are increasingly responsible for their own profits or losses in
in most projects (Iyer and Jha 2005; Chan and Kumaraswamy modern projects. Thus, the lack of the contactor’s ability in accurate
1997). Although Iyer and Jha (2005) asserted the importance of planning and efficient control process is one of the most significant

Table 7. Potential Checklists for Addressing Cost Overruns in Projects
Checklist
Factors Clients Consultants Contractors
Accurate project Clear scope definition Appropriate requirement analysis Clear understanding of the project scope
planning and Clear quality specifications Simplification of the design complexity Understanding the design
monitoring Establishment of a clear change Consideration of buildability and requirements Construction methods and techniques
request and feedback protocol of specialized resources
Avoid change of scope and Establishment of a clear change request Details of resources required
variations and feedback protocols
Agreement on appropriate project Accurate work flow planning
budget and delivery timeframe
Development of accurate schedule
Clear process of project control
Clear change request protocol

Monitoring and status reporting protocols
Design efficiency Early engagement of consultants for Detailed and error-free design Assessment of design, buildability,
development of precontract design and resource requirements
Accurate construction documentation Design simplification Accurate construction planning
Buildability analysis Agreed communication and feedback
protocols
Rigorous liaising with clients and
design updates
Accurate project documentation
Effective site Clear contract documentation and Error free design Clear construction documentations
management administration
On-time approval and invoice payments Efficient design supervision Proper control over site resource allocation
Nondisruptive cash flow Clear project documentation Efficient site management and supervision
Appropriate mechanisms for early price Clear project and quality specifications Efficient monitoring of labor productivity
lock-in for construction materials
Nonconformance compliance protocols Efficient progress reporting protocol
Nondisruptive cash flow
Accurate risk management plan and
controlling process
Communication Establishment of a clear communication Establishment of a clear communication Establishment of a clear communication
protocol protocol protocol
Effective use communication media Effective use communication media Efficient site management and supervision
Participation in regular site meetings Proper control over subcontractors and
effective contract administration
Contractor’s Accurate understanding of technical Efficient decision-making and communication Relevant experience and availability of
efficiency issues associated with the project technical expertise
Selection of contractors with relevant Accurate understanding of technical Accurate estimation by exhausting
technical expertise issues associated with the project appropriate tools, techniques, and processes
Efficient decision-making and Frequent communications with client Efficient decision-making and
communication and contractors on design-related issues communication
Availability of funds
Project Size and complexity of the project Project design and structures Accurate site assessment
characteristics Selection of project location Clear assessment of the geological Accurate understanding of design and
conditions specifications
Assessment of site accessibility and Clear understanding of site, accessibility, Accurate assessment of site accessibility,
sharing appropriate resistibility and buildability issues management of site-related risks, and safety
issues
Due diligence Exercise responsibility Exercise responsibility Understanding of the local authorities and
regulations
Appropriate and clear contractual Follow contractual agreements Conducive labor relations
agreements with all parties
Follow contractual agreements
Market Acquire relevant knowledge on the market Selection of appropriate design Careful assessment of marking conditions
competition conditions and competitions
Appropriate tender process Use of materials based on market conditions, Careful procurement planning
including supply and demand analysis
Selection of appropriate procurement Integration of lead time in procurement
routes planning
Careful selection of subcontractors
Early engagement of subcontractors and
efficient contract administration

factors in medium- to large-scale (ranging from $75 million Cheung, F. K. T., Wong, M. W. L., and Skitmore, M. (2008). “A study of
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Cost Overruns and Failure in Project Management: Understanding the Roles of

Article in Journal of Construction Engineering and Management · May 2013

CMRL project View project

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Introduction in most projects (Green 1989). In many instances, all of these

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Table 2. Summary of Respondents’ Profiles

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has resulted from the author’s study. Whereas project planning is

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contractor’s cost performance, at their seventh position in the list.

Test of Commonality among the Respondents 2.9

expressed as follows: 2.5

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C38. Client-initiated variations 0.798

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Clear change request protocol

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runs in projects. Although the checklist is predominately developed

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