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Abstract
The problem of cost overrun in construction industry is common worldwide and the
construction industry in Jordan is no exception. The main objective of the study reported in
this paper was to identify the causes of cost overrun in construction projects in Jordan. A
comprehensive literature review from various sources was made to carry out the study. A
questionnaire survey was conducted to find the causes of cost overrun related to clients,
consultant, contractor, financial management, resources and external factors. More than 100
respondents participated in the survey. The survey identified 15 most important causes of cost
overrun from a list of 49 different causes. The most important causes were: Schedule delay
(time overrun), frequent design changes, changes and additional works at owner request,
mistakes and errors in design, inadequate planning and scheduling, inflation/ prices
fluctuation, change in the scope of work (by owner), incomplete drawings/ detailed design at
the time of tender, shortage of skilled site workers, construction mistakes and defective works.
In general the study revealed that all parties share responsibility for the cost overrun in the
construction projects in Jordan.
Keywords: Cost overrun, construction projects, importance index, causes of cost overrun,
management
JoCETM (2015) 25-33 © STM Journals 2015. All Rights Reserved Page 25
Cost overrun in Construction projects of Jordan Ghanim Bekr
the trade sector [4]. In 2012, the percentage of In a global study on cost overrun issues in
contribution of the Jordanian construction transport infrastructure projects covering 258
industry in the overall production is 13.35% of projects in 20 countries, it was concluded that
the total contribution to economic sectors [5]. 90% of projects face cost overrun and cost
performance has not improved over time, as it
Definition of Cost Overrun is the same order of magnitude as years ago
In general cost overrun which is also called [14].
cost escalation, cost increase, or budget
overrun is the excess of actual cost over the Cost overrun in construction projects can
budget. Cost overrun can simply defined as occur due to various causes. A number of
when the final cost of the project exceeds the researchers have investigated various causes of
original estimates [6]. Also is defined as the cost overrun in different countries. A study in
difference between the original cost estimate Ghana considered 26 factors that cause cost
of the project and actual construction cost on overrun in construction of ground water
completion of the work [7]. projects [15]. The overall ranking results from
the opinion of the three parties involved
Another definition of cost overrun given as the (Clients, contractors and consultants) indicated
change in contract amount divided by the that the most important cost overrun factors
original contract award amount. This are poor contractor’s management, monthly
calculation can be converted to a percentage payments difficulties, material procurement,
for ease of comparison [8]. poor technical performances and escalation of
material prices.
THE OBJECTIVE OF THE
RESEARCH In Nigeria, 42 cost overrun causes factors were
The main objective of this study is assessing investigated. It was found that lack of
and evaluating factors contributing to cost experience of contractors, fluctuation in the
overruns during the implementation phase of prices of materials, frequent design changes,
construction works in Jordan. These will be non economic stability and high interest rates
ranked in terms of occurrence, level of severity charged by banks on loans were dominant
and degree of importance. factors causing cost overrun [16]. In Kuwait, a
study carried about the private sectors
LITERATURE REVIEW residential projects. The study revealed that
There are many papers published and studies contractor related issues, material related
carried out in the subject of cost overruns in problems and financial constraints were major
building and civil engineering projects. These reasons of cost overrun [17]. In Malaysia, a
studies carried out internationally and in the study investigated large projects and found
developing countries. As long as Jordan is one that cash flow and financial difficulties faced
of the developing countries, more attention is by contractors, contractor's poor site
given to the research works in these countries. management and supervision, inadequate
Cost is considered as a prime factor for contractor experience, shortage of site
success of any project, in additional to time workers, incorrect planning and scheduling by
and quality. However, in previous projects contractor were most severe factors while
cost overrun was very phenomenon changes in scope of project and frequent
worldwide. One study carried out showed that design changes are least affecting factors on
only 16% of the projects could satisfy the construction cost [18].
three performance criteria: completing projects
on time, within the budged cost and quality A study on UK’s construction industry
standard [9]. Another study examined the identified 21 major factors causing cost
records of more than 4000 construction overrun. The most influencing factors are:
projects and found that projects are rarely Changes in design, risk and uncertainty
finished within the allocated budgets [10]. associated with the projects, inaccurate
Also, it was observed that cost overruns were evaluation of time and cost, poor performance
common place in construction industry of subcontractors and complexity of works
worldwide [11–13]. [19]. In another developed country (Canada), a
JoCETM (2015) 25-33 © STM Journals 2015. All Rights Reserved Page 26
Journal of Construction Engineering, Technology and Management
Volume 5, Issue 3
ISSN: 2249-4723(online), ISSN: 2347-7253(print)
study carried out which aimed to find the materials and equipments by contractors,
reasons for cost and scheduled overruns in oil fluctuation in the cost of building materials,
and gas megaprojects [20]. The authors' unsettlement of local currency and project
surveyed 87 international senior project material monopoly by some suppliers [25]. In
managers and the conclusion regarding the Malaysia and through questionnaire survey in
main reasons for cost overruns. The main different projects at Klang Valley, it was
reasons found are: the lack of knowledge of found that main factors that contribute to cost
the project and its complexity, inaccurate overruns include inaccurate/poor estimation of
estimation of costs, the absence of a plan that original cost, construction cost
copes with the changes in design and underestimation, poor planning, inadequate
execution requirements and the lack of project management, shortage of experience,
managerial strategies. poor contract management, increase of
project's costs due to inflation, high cost of
Another study examined the factors plant and equipment, increase in the prices of
influencing the cost overrun on high rise raw materials, unforeseen sites conditions
buildings in Indonesia. They found that the shortage of fund and defects in the design [26].
predominant factors influencing cost overrun Also in Malaysia, another study identified 58
are material cost increase of prices due to factors of cost overrun allocated on 8 groups.
inflation, inaccurate material estimating and
degree of project complexity [21]. Similarly, The study revealed that: Contractor's site
in Vietnam, a research found that the top five management, information and communication
significant factors causing cost overrun in as the most severe contributors of the subject.
large construction projects are: Inadequate site The financial management found to be the
management and supervision, lack of project least sever factor [27]. In Zambia, it was found
management support, owner’s financial that the major cause of cost overruns in road
difficulties and changes in design [22]. construction projects was the inclement
weather [28].
Another study in Botswana, ten projects was
investigated to assess their cost performance. RESEARCH METHODOLOGY
The study found that the factors affect severely A questionnaire survey has been designed on
cost overrun are variations, measurement of the basis of an extensive literature review of
provisional works, contractual claims and various causes of cost overrun. Questionnaires
fluctuation in the cost of labor and materials were used because of their convenience and
[23]. In Palestine, the research conducted to cost and time effectiveness when compared
investigate the statistical relationship between with face-to-face interviews given that the
actual and estimated cost of road construction population companies are scattered in various
projects using data from Palestinian road parts of Jordan.
construction projects awarded over the years
2004–2008. The study was based on a sample The questionnaire was carefully designed to
of 169 road construction projects. The findings avoid several shortcomings associated with
revealed that 100% of projects suffer from cost questionnaire surveys including poor response
diverge, it is found that 76% of projects have rates, and problems relating to question
cost under estimation and 24% have cost over construction and wording.
estimation.
Also it was designed so that it is easy to read
The discrepancy between estimated and actual and responses are easy to fill. The
cost has average of 14.56%, ranging from - questionnaire was divided into two parts. The
39.3% to 98% [24]. Also in Palestine, it was first included general information about the
found that the top five of 42 investigated respondents and their roles, experience, and
factors causing cost overrun in construction the types of construction they are involved in.
projects in Gaza strip were: Increments of The respondents were requested to indicate
materials prices due to continuous border their response to the frequency of occurrence
closure, delay in construction, supply of raw and degree of severity on 49 (the final list)
JoCETM (2015) 25-33 © STM Journals 2015. All Rights Reserved Page 27
Cost overrun in Construction projects of Jordan Ghanim Bekr
well-recognized construction cost overrun The population of the study was based on
factors. These causes were categorized into the construction parties (clients, contractors and
following six groups of factors: consultants) in projects located in the main
Group 1: Client- related factors (8 factors) cities of Jordan (Amman, Irbid, Zarqa and
Group 2: Consultant related group (7 factors) Aqaba). Prior to the final formulation of the
Group 3: Contractor related factors (9 factors) final form, a pilot survey was conducted. The
Group 4: Financial management related main purpose was to eliminate the less
factors (7 factors) important questions and to check the clarity
Group 5: Resources (labor, material and and feasibility assurance. The pilot study
equipment) related factors (11 factors) carried out through 9 engineers (three
Group 6: External factors (7 factors) representing each party- clients, consultants
and contractors) with experience of more than
The form was designed so for each cause or 20 years. The form was revised in accordance
effect on cost overrun , the respondent score of the notes received. The forms were
ranges from 1 to 5 depending on the frequency distributed to a wide range of engineering staff
of occurrence and the severity of the cause or representing parties involve in the construction
effect on cost overrun of project as 5 = very process (Clients, Consultants, and
high, 4 = high, 3 = medium, 2 = low and 1 = Contractors). Number of sets distributed and
very low. received is shown in Table (1).
JoCETM (2015) 25-33 © STM Journals 2015. All Rights Reserved Page 28
Journal of Construction Engineering, Technology and Management
Volume 5, Issue 3
ISSN: 2249-4723(online), ISSN: 2347-7253(print)
10– 20 years. The study covered both public Causes of Cost Overrun
and private sector projects. The participating Forty nine causes of cost overrun have been
clients included government ministries identified. Hierarchical assessment of these
(Health, Youth and Sport, Municipalities, factors was carried out to determine the factors
Housing and Public Works, Justice, etc.). based on level of significant. It was assessed
Contracting companies, in general, included based on Frequency Index, Severity Index and
only high classified ones. Types of projects the then the Importance Index for each group of
participants are involved in are: Hospitals, factors i.e. the client related factors, consultant
sport facilities, public buildings, water supply, related factors, contractor related factors,
water treatment plants, housing complexes etc. financial management related factors,
resources related factors, and external factors.
The majority of the respondents are Civil These are calculated for the three groups of
Engineers in additional to Architectural, respondents (Client, consultant and
Electrical, Mechanical Engineers… etc. Most contractor). The significant factors considered
of the respondents hold a bachelor degree with for each group are those with Importance
minor proportion with postgraduate Index above the average of I.I. of the group.
qualification. Table 2 summarizes the results of the survey.
JoCETM (2015) 25-33 © STM Journals 2015. All Rights Reserved Page 29
Cost overrun in Construction projects of Jordan Ghanim Bekr
Below is a general discussion of the results: difficulties ranked 11th and contractual
1. There are 8 client-related factors claims related to extension of time and
considered in this study. Three of them are cost.
among the top 15. These are changes and 5. Eleven factors related to resources and
additional works at owner request ranked their cost and availability are considered.
3rd, change the scope of work carried out Only two of them are among the top 15
by owner ranked 7th and bureaucracy in shown in table (3). These are shortage of
tendering method ranked 15th. skilled site workers ranked 9th and late
2. In this study, there are seven causes of cost delivery of material and equipment ranked
overrun related to consultant. Three of 14th.
these factors are among the top 15 (table 6. The group of external factors contained
3). These are frequent design changes seven factors. This group was considered
ranked 2nd, mistakes and errors in design by the three parties with low ranking.
ranked 4th and incomplete Therefore, none of these factors is among
drawings/detailed design at the time of the top 15 shown in table (3).
tender ranked 8th.
3. This study considered 9 contractor-related CONCLUSIONS
causes of cost overrun. Four of these Cost overrun is a severe problem faced by the
factors are among the top 15 (table 3). construction projects in Jordan. This is
These are schedule delay (time overrun) revealed from various factors which had been
ranked 1st, inadequate planning scheduling identified in this research. A total of 106
ranked 5th, construction mistakes and samples were analyzed statistically using
defective work ranked 10th and inaccurate Frequency Index, Severity Index and
time and cost estimates ranked 12th. Importance Index on 49 causative factors of
4. The study considered seven factors related cost overrun. The most significant factors
to financial management. From table (3), it related to each group are presented in table (2)
can be seen that three of them are within above. In additional, the 15 most significant
the top 15. These are: Inflation/prices factors causing cost overrun in Jordanian
fluctuation ranked 6th, monthly payments construction industry are shown in table (3).
JoCETM (2015) 25-33 © STM Journals 2015. All Rights Reserved Page 30
Journal of Construction Engineering, Technology and Management
Volume 5, Issue 3
ISSN: 2249-4723(online), ISSN: 2347-7253(print)
JoCETM (2015) 25-33 © STM Journals 2015. All Rights Reserved Page 31
Cost overrun in Construction projects of Jordan Ghanim Bekr
JoCETM (2015) 25-33 © STM Journals 2015. All Rights Reserved Page 32
Journal of Construction Engineering, Technology and Management
Volume 5, Issue 3
ISSN: 2249-4723(online), ISSN: 2347-7253(print)
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