International Journal of Management Science and

Engineering Management

ISSN: 1750-9653 (Print) 1750-9661 (Online) Journal homepage: http://www.tandfonline.com/loi/tmse20

Factors affecting cost estimate accuracy: Evidence

from Palestinian construction projects

Ibrahim Mahamid

To cite this article: Ibrahim Mahamid (2015) Factors affecting cost estimate accuracy: Evidence
from Palestinian construction projects, International Journal of Management Science and
Engineering Management, 10:2, 117-125, DOI: 10.1080/17509653.2014.925843

To link to this article: http://dx.doi.org/10.1080/17509653.2014.925843

Published online: 18 Jun 2014.

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 International Journal of Management Science and Engineering Management, 2015
Vol. 10, No. 2, 117–125, http://dx.doi.org/10.1080/17509653.2014.925843

Factors affecting cost estimate accuracy: Evidence from Palestinian construction projects
Ibrahim Mahamid*
Civil Engineering Department, Engineering Faculty, P.O. Box 2440, Hail University, Hail, Saudi Arabia
(Received 29 May 2013; final version received 6 January 2014)

Estimating the cost of construction projects with high accuracy at the early phase of project development is crucial for
project planning and financing. Construction clients require early and accurate cost advice prior to site acquisition and
commitment to build in order to enable them to take the correct decision concerning whether to construct the project or not.
However, many factors might affect the accuracy of a cost estimate. This study aims at identifying the factors affecting the
accuracy of cost estimating construction projects in the West Bank in Palestine. A survey of 60 contractors and 45
consultants from the West Bank in Palestine was performed. Forty-one factors are identified in the study. The study
investigates the impact of those factors measured by level of importance and ranked according to an importance index from
both the contractors’ and the consultants’ points of view. The degree of agreement between the participating parties on the
importance ranking of the factors affecting cost estimating accuracy in construction projects is presented. The findings
reveal that the top five affecting factors according to the surveyed contractors are: fluctuation in currency exchange rate;
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contract management; number of competitors; financial status of owners; and fluctuation of prices of materials. While the
top five factors according to the surveyed consultants are: the political situation; fluctuation of prices of materials; economic
instability; poor planning; and previous experience of the contractor.
Keywords: cost estimating; construction; importance index; accuracy; Palestine

JEL Classification: L70; L74; L79; P47; M21

1. Introduction
The construction industry is considered the backbone of
any economy in the world as it takes a relatively high
percentage of the national labor workforce and its
contribution to gross domestic product (GDP) is also
high. Additionally, it plays a strategic role in both
developed and developing countries and this industry is
one of the largest in the world due to its responsibility for
creating the infrastructure for cities, towns, and countries.
However, it is becoming more complex because of the
many involved uncertainties during the life of a project
due to the sophistication of the construction process itself,
the large number of parties involved in the construction
process, and its sensitivity to external changes.
The construction industry is a major element of the
Palestinian economy. Construction activities account for
about 13.9% of all employed personel in Palestine and for
11.2% of value added to GDP in 2011. Furthermore, in the
first quarter of 2012 it contributed 10.3% of GDP (PCBS,
2012). Any improvement in the construction industry will
probably lead a clear improvement in the Palestinian
economy. An improvement in the construction industry
can be achieved by improving the construction project
management functions. One of the most important
construction management functions is the estimating
process (Abdal-Hadi, 2010). The success or failure of a
project is dependent on the accuracy of estimates.
Accurate estimates optimize good contracting (Ahuja,
Dozzi, & Abou Rizk, 1994). It is the process of calculating
*Email: imahamid@ymail.com or i.mahamid@uoh.ed.sa
q 2014 International Society of Management Science and Engineering Management
and analysing all the costs which will enter into a
particular job and arriving at a total. In nearly all contract
types, the preparation of a realistic cost estimate is a
necessary part of any construction operation (Holm,
Schaufelberger, Griffin, & Cole, 2005).
In Palestine, Mahamid and Bruland (2012) conducted
a study to investigate the statistical relationship between
the actual and the estimated cost of road construction
projects using data from Palestinian projects awarded over
the years 2004 to 2008. The study was based on a sample
of 169 road construction projects. The findings reveal that
100% of projects suffer from cost divergence; it is found
that 76% of projects have cost under estimation and 24%
have cost over estimation. The discrepancy between
estimated and actual cost has an average of 14.56%,
ranging from 2 39.3 to 98%. Mahamid (2014) conducted a
study which revealed that the average cost overrun in
building projects constructed in the West Bank in Palestine
is between 10 and 30% of the original estimated cost of a
project. The above examples demonstrate that the problem
of cost deviation in construction projects in Palestine is
alarming. Thus, the identification of factors affecting the
accuracy of cost estimates is highly important for
alleviating this problem in the future. This study presents
the findings of a survey aimed at identifying the most
important factors affecting cost estimating accuracy in
construction projects in the West Bank from both the
contractors’ and consultants’ points of view. It is hoped
that the findings will assist construction cost estimators in
Palestine and other developing countries in improving
their predictive ability of cost estimates by exploring
factors affecting estimate accuracy.
 118 I. Mahamid
2. Objectives
The main objectives of this paper include the following:
. to identify the factors affecting the accuracy of cost
estimating in construction projects in the West
Bank;
. to identify the importance of the factors affecting
cost estimating accuracy from both consultants’ and
contractors’ perspectives;
. to test the agreement on the ranking of the
importance of the factors affecting cost estimating
accuracy between contractors and consultants.
3. Literature review
A number of studies have been conducted to examine
factors affecting cost estimating accuracy in construction
projects. Ogwueleka (2011) investigated the critical
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success factors influencing project performance in Nigeria.
Based on the result, objective management, management
of design, technical factors, top management support and
risk management were selected as the most critical success
factors in project performance. Al-Zarooni and Abdou
(2000) conducted a survey to investigate variations in
UAE public projects’ estimates. They found variations
(positive or negative) between feasibility and contract
cost, ranging between 2 28.5 and þ 36%. They stated that
these variations could be explained by the fact that
feasibility estimates in government agencies are usually
budgeted using a Single Unit Estimating (cost per square
foot) basis, regardless of the nature of projects and their
associated risks or the construction complexity of each
building type. Enshassi, Mohamed, and Madi (2005)
identified the essential factors and their relative import-
ance that affect the accuracy of the cost estimation
of building contracts in the Gaza Strip. The results of
analysing 51 factors considered in a questionnaire survey
concluded that the main factors are: location of the project;
segmentation of the Gaza Strip and limitation of
movement between areas; the political situation; and the
financial status of the owner. Koleola and Henry (2008)
identified six important factors affecting the accuracy of a
pre-tender cost estimate in Nigerian construction projects.
These six factors are: the expertise of the consultants; the
quality of information and flow requirements; the project
team’s experience of the construction type; the tender
period and market condition; the extent of completion of
the pre-contract design; and the complexity of design and
construction.
Al-Juwairah (1997) conducted a study to identify the
most severe factors affecting construction costs in Saudi
Arabia. Forty-two factors were considered in the study.
He concluded that the most severe factors affecting
construction costs from the contractors’ perspective are: the
cost of materials; incorrect planning; contract management;
wrong estimation methods; and previous experience of the
contractor. Iyer and Jha (2005) presented the findings of a
questionnaire survey conducted on the factors affecting the
cost performance of Indian construction projects. Fifty-five
factors were identified. They concluded that the factors
affecting the cost performance of construction projects
most adversely in India are: conflict among project
participants; ignorance and lack of knowledge; the presence
of poor project-specific attributes; the non-existence of
cooperation; hostile socio-economic and climatic con-
ditions; reluctance to make timely decisions; aggressive
competition at the tender stage; and short bid preparation
times. Elinwa and Buba (1993) identified 31 factors that
may affect the construction cost. They concluded that the
cost of materials, fraudulent practices and kickbacks, and
the fluctuation of the prices of materials are three of the
most important factors leading to cost overrun in
construction projects in Nigeria. Azhar, Farooqui, and
Ahmed (2008) conducted a study in order to identify the
major factors affecting cost estimate accuracy in the
construction sector of Pakistan. Forty-two factors were
considered in the survey. They found that the top ten cost
overrun factors in construction industry in Pakistan are:
fluctuation in prices of raw materials; unstable cost of
manufactured materials; high cost of machinery; lowest
bidding procurement procedures; poor project (site)
management/poor cost control; delays between design
and procurement phases; incorrect/inappropriate methods
of cost estimation; additional work; improper planning; and
unsupportive government policies. Mahamid (2014)
conducted a study to identify the risk factors affecting
cost overrun in building construction projects in the West
Bank in Palestine from the contractors’ point of view. To do
so, 31 contractors working in building construction
completed a structured questionnaire survey. The results
indicated that the top five affecting factors are: fluctuation
in currency exchange rates; project financing; contract
management; level of competition; and cost of materials.
Abdul Rahman, Memon, and Abd. Karim (2013) conducted
a study in Malaysia aimed at identifying the causes of
significant cost overruns in construction projects. They
found that the top three most significant factors of cost
overrun are: fluctuation in the prices of materials; cash flow
and financial difficulties faced by contractors; and poor site
management and supervision. These factors belong to two
categories, i.e. contractor’s site management and financial
management.
In order to have a general view about the main factors
affecting cost estimating accuracy in construction projects,
the findings of the investigated previous studies are
summarized in Table 1.
4. Research methodology
Forty-one factors that might affect cost estimating
accuracy in construction projects were identified through
a literature review and discussion with local experts in the
construction industry. The factors were tabulated in a
questionnaire form. The questionnaire was developed in
order to evaluate the importance of the identified factors.
Contractor and consultant information (i.e. names, grade,
and address) was collected from the Palestinian Contrac-
tors Union (PCU). Data were gathered through a survey,
 International Journal of Management Science and Engineering Management 119

Table 1. Main factors affecting cost estimating accuracy as presented in the investigated studies.

Managerial Financial Construction Construction External

Author factors factors items factors parties factors factors
Ogwueleka (2011) U
Al-Zarooni and Abdou (2000) U
Enshassi et al. (2005) U U
Koleola and Henry (2008) U U
Al-Juwairah (1997) U U U U
Iyer and Jha (2005) U U U
Elinwa and Buba (1993) U U
Azhar et al. (2008) U U U
Mahamid (2014) U U U
Abdul Rahman et al. (2013) U U

analysed by using an importance index, taking in the views
of both contractors and consultants. Agreement on the
ranking of the importance of the factors affecting cost
estimating accuracy between contractors and consultants
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In Equation (1), the multiplication by 100 is to obtain
the importance index as a percentage, and the division by
five is because the impact level of the identified factors
was categorized on a five-point scale. Accordingly, if all

was also tested. participants answer one factor to be of ‘very low

5. Questionnaire design
The questionnaire was divided into two main parts. Part I
related to general information about the company. Both
contractors and consultants were further requested to
answer questions pertaining to their experience in the
construction industry. Part II included a list of the
identified factors affecting cost estimating accuracy. These
factors were combined into five groups: cost estimating
influence’, then the importance index is 20, meaning that
this factor is low relevant to the problem of cost estimating
and the last in rank. On the other hand, if all answer ‘very
high influence’, then the importance index is 100, meaning
that this factor is very highly relevant and is the first in
rank. Table 2 shows the possible ranges for the importance
index and the corresponding impact level.
The group index was calculated by using the average
of the factors under each group such that:
X
n

factors; construction items, construction parties; environ- Group importance indexð%Þ ¼ X i =n; ð2Þ
i¼1
mental; and financing factors. For each factor, a question
was asked: ‘What is the impact level of this factor on cost where Xi is the importance index of factor i under the
estimating accuracy in construction projects?’ The impact group and n is the number of factors under the group.
level was categorized on a five-point scale as follows: very
high, high, moderate, low, and very low (on a five to one
point scale).
6.2 Spearman’s rank correlation
The correlation is used to measure the degree of
correspondence between two lists of ranks of the sample
6. Data analysis
observation. This test is used to find and compare how well
The information collected from the questionnaire was the contractors and consultants agree on the importance of
analysed statistically using Excel statistical tools. the factors affecting cost estimating accuracy in construc-
The statistical methods used for calculating and presenting tion projects. A perfect positive correlation (rs ¼ þ 1)
the survey results are discussed below. means that the two samples rank each object identically,
while a perfect negative correlation (rs ¼ 2 1) means that
the ranks of the two samples have an exactly inverse
6.1 Ranking relationship. Values of rs between 2 1 and þ 1 denote less
than perfect correlation. The following formula is used for
The suggested factors are ranked by the measurement of
the importance index from both the contractors’ and the
consultants’ points of view. The following formula is used Table 2. Importance index range and the corresponding impact
to calculate the importance index: level.
X
Importance index ð%Þ ¼ aðn=NÞ £ 100=5; ð1Þ Range (%) Impact level
0 – 20 very low
where a is a constant expressing the weighting given to 20 – 40 low
each response (ranging from one for very low up to five for 40 – 60 moderate
60 – 80 high
very high), n is the frequency of the responses, and N is the
80 – 100 very high
total number of responses.
 120 I. Mahamid

the calculation of the Spearman rank correlation: Table 3. Summary of sample size calculation trials.
 X d2  Population I (contractors) Population II (consultants)
rs ¼ 1 – 6 £ ; ð3Þ
ðn 3 2 nÞ n0 173 92
n1 162 88
where rs is the Spearman rank correlation coefficient n2 84 45
(the agreement between contractors and consultants), d is n3 56 30
the difference between ranks on one variable and ranks on n4 42 22
n5 33 17
the other variable, and n is the number of factors. n6 27 14
n7 23 12
n8 20 11

7. Research findings and results

7.1 General characteristics of respondents
The target populations in this study are the total number of
construction contractors who have valid registration by the
Palestinian Contractors Union, and the total number
of construction consultants who have a valid membership
of the engineering association in the West Bank. Records
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top three affecting factors under this group are: fluctuation
of prices of materials; long period between design and
time of tendering; and cost of labor. The consultants
indicate that the top three affecting factors are: fluctuation
of prices of materials; wrong estimation method; and
bureaucracy in the tendering method.

indicated 173 registered contractors (grades 1, 2, and 3) The table shows that the ranking of factors from both
and 92 consultants (grade 1) with valid membership. The the contractors’ and the consultants’ points of view are
following formula was used to determine the sample size quite similar. But there is significant difference between
of participants (Emory, 1980): their ranking of ‘wrong estimation method’, which scores
ts2  ts2 
rank 7 from the contractors’ point of view and rank 2 from
n¼ = 1þ =N ; ð4Þ the consultants’ point of view.
d d

where n is the sample size, N is the sample of population, t

is the abscissa of the normal curve that cuts off an area of 7.2.2 Factors related to construction items
a ¼ 0.01 at the tails (t ¼ 2), d is the expected error in the Table 5 shows the importance index and ranking of factors
estimate (d ¼ 0.01), and s is the maximum standard related to construction items. Seven factors are identified
deviation in the proportion of the estimation, where s ¼ P under this group. The contractors input indicates that the
£ q (at P ¼ 0.5 and q ¼ 1 2 P ¼ 0.5). top three affecting factors under this group are: contract
After applying the formula, stop when the difference management; frequent changes in design; and duration of
between n and n 2 1 is insignificant Table 3 shows the contract period. The consultants indicate that the top three
sample size trial calculation results and indicates that the affecting factors are: contract management; duration of
sample size represents the total population if the research contract period; and frequent changes in design.
analyses at least 23 contractors and 14 consultants. The table shows that the ranking of factors from both
However, for more accurate results, the questionnaire was the contractors’ and the consultants’ points of view are
sent out to a total of 70 contractors and 50 consultants, quite similar.
asking their contribution in ranking the identified 41
factors in terms of importance using an ordinal scale.
Simple random sampling was used to select the Table 4. Ranking of cost estimating factors.
participants from available lists. A total of 60 contractors
Contractors’ Consultants’
and 45 consultants filled in the questionnaire. The results view view
indicate that the participants have an average of more than
10 years experience in construction projects. Factor IMP.I Rank IMP.I Rank
Cost of insurance 50,00 9 44,23 10
Transportation cost 49,19 10 50,96 7
Bureaucracy in tendering 62,90 4 63,46 3
7.2 Factors ranking method
The importance index for each identified factor under each Cost of labor 63,71 3 59,62 5
Cost of machinery 61,29 5 54,81 6
group is calculated according to Equation (1).
Fluctuation of prices 83,06 1 81,73 1
of materials
High interest rates by bankers 57,26 6 44,23 9
High machinery maintenance 54,84 8 44,23 8
7.2.1 Cost estimating factors cost
Table 4 shows the importance index and ranking of cost Long period between design 68,55 2 60,58 4
estimating factors from both the contractors’ and the and time of tendering
Waste on site 36,29 11 32,69 11
consultants’ points of view. Eleven factors are identified Wrong estimation method 55,65 7 65,38 2
under this group. The contractors’ input indicates that the
 International Journal of Management Science and Engineering Management 121

Table 5. Ranking of factors related to construction items. Table 7. Ranking of environmental factors.

Contractors’ Consultants’ Contractors’ Consultants’

view view view view
Factor IMP.I Rank IMP.I Rank Factor IMP.I Rank IMP.I Rank
Fraudulent practices 50,00 7 54,81 6 The political situation 81,45 3 87,50 1
and kickbacks Awarding the contract to the 82,26 2 75,00 4
Additional work 50,81 6 54,81 7 lowest bidder
Contract management 85,48 1 74,04 1 Manipulation of suppliers 67,74 7 76,92 3
Contractual procedure 56,45 4 59,62 5 Absence of construction-cost data 67,74 8 58,65 11
Duration of contract period 63,71 3 68,27 2 Economic instability 79,03 4 80,77 2
Frequent changes in design 82,26 2 66,35 3 Effects of weather 60,48 9 58,65 9
Lack of adequate manpower 55,65 5 64,42 4 Government policies 60,48 10 54,81 13
Inadequate production of raw 69,35 6 69,23 6
materials by the country
Monopoly 48,39 13 55,77 12
7.2.3 Factors related to construction parties Number of competitors 83,87 1 73,08 5
Table 6 illustrates the importance index and ranking of Number of projects going at 70,16 5 63,46 8
factors related to construction parties. Six factors are the same time
identified under this group. The contractors’ input indicates Poor productivity 58,87 11 58,65 10
Project location 58,87 12 65,38 7
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that the top three affecting factors under this group are:
previous experience of the contractor; poor planning; and
the relationship between managers and labor.
The consultants indicate that the top three affecting factors
are: poor planning; previous experience of the contractor;
and lack of coordination between designers and contractors.
7.2.4 Environmental factors
Table 7 illustrates the importance index and ranking of
environmental factors. Fourteen factors are identified
under this group. The contractors’ input indicates that the
top three affecting factors under this group are: number of
competitors; awarding the contract to the lowest bidder;
and the political situation. The consultants indicate that the
top three affecting factors are: the political situation;
economic instability; and manipulation of suppliers.
The table shows that the ranking of factors from both
the contractors’ and the consultants’ points of view are
quite similar. But there is significant difference between
their ranking of the following factors:
. manipulation of suppliers, scoring rank 7 from
contractors and 3 from consultants;
. project location, scoring rank 12 from contractors
and 7 from consultants.
Social and cultural impacts 44,35 14 48,08 14
7.2.5 Financing factors
Table 8 illustrates the importance index and ranking of
financing factors. Three factors are identified under this
group. The contractors’ input indicates that the most
affecting factor under this group is fluctuation in the
currency exchange rate, followed by the financial status of
the owner, and the financial status of the contractor,
respectively. The consultants indicate that the top
affecting factor is the financial status of the contractor,
followed by the financial status of the owner, and
fluctuation in the currency exchange rate, respectively.
7.2.6 Overall ranking
The importance index and ranking of all 41 factors
investigated that might affect the accuracy of construction
cost estimating in the West Bank from both the
contractors’ and the consultants’ points of view are listed
in Table 9.
The results show that there are eight factors with
importance index above 80% from the contractors’ point
of view, namely:

. fluctuation in the currency exchange rate;

Table 6. Ranking of factors related to construction parties. . contract management;
Contractors’ Consultants’
view view Table 8. Ranking of financing factors.
Factor IMP.I Rank IMP.I Rank Contractors’ Consultants’
view view
Disputes on site 62,90 6 63,46 4
Lack of coordination between 69,35 4 67,31 3 Factor IMP.I Rank IMP.I Rank
designers and contractors
Poor financial control on site 69,35 5 62,50 6 Fluctuation in the currency 86,29 1 73,08 3
Poor planning 77,42 2 80,77 1 exchange rate
Previous experience of the 79,84 1 78,85 2 Financial status of the 79,84 3 77,88 1
contractor contractor
Relationship between 75,81 3 62,50 5 Financial status of the 83,87 2 75,96 2
managers and labor owner
 122 I. Mahamid

Table 9. Overall factors ranking. . the political situation;

. fluctuation of prices of materials;
Contractors’ Consultants’ . economic instability;
view view
. poor planning.
Factor IMP.I Rank IMP.I Rank
Fluctuation in the 86,29 1 73,08 11
Waste on site is the factor with the minimum importance
currency exchange rate index, having values of 36.29 and 32.69% from
Contract management 85,48 2 74,04 10 contractors and consultants, respectively.
Number of competitors 83,87 3 73,08 12
Financial status of the owner 83,87 4 75,96 8
Fluctuation of prices of materials 83,06 5 81,73 2
Frequent changes in design 82,26 6 66,35 16 7.2.7 Top ten affecting factors
Awarding the contract to 82,26 7 75,00 9 Table 10 illustrates the ranking of the top ten factors
the lowest bidder affecting the accuracy of construction cost estimating in
The political situation 81,45 8 87,50 1
Previous experience of the 79,84 9 78,85 5 the West Bank and their related groups from
contractor the contractors’ point of view. The results indicate the
Financial status of the contractor 79,84 10 77,88 6 following:
Economic instability 79,03 11 80,77 3
Poor planning 77,42 12 80,77 4 . one factor is related to tge cost estimating group;
Relationship between managers 75,81 13 62,50 23
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and labor . two factors are related to the construction items

Number of projects going at 70,16 14 63,46 20 group;
the same time . one factor is related to the construction parties
Lack of coordination between 69,35 15 67,31 15 group;
designers and contractors . three factors are related to the environmental group;
Poor financial control on site 69,35 16 62,50 24
Inadequate production of 69,35 17 69,23 13 . three factors are related to the financing group.
raw materials by the country
Long period between design and 68,55 18 60,58 25 Table 11 illustrates the ranking of the top ten factors
time of tendering affecting the accuracy of construction cost estimating in
Manipulation of suppliers 67,74 19 76,92 7 the West Bank and their related groups from the
Absence of construction-cost 67,74 20 58,65 28
data consultants’ point of view. The results indicate the
Cost of labor 63,71 21 59,62 26 following:
Duration of contract period 63,71 22 68,27 14
Bureaucracy in tendering method 62,90 23 63,46 21 . one factor is related to the cost estimating group;
Disputes on site 62,90 24 63,46 22 . one factor is related to the construction items group;
Cost of machinery 61,29 25 54,81 32
Effects of weather 60,48 26 58,65 29 . two factors are related to the construction parties
Government policies 60,48 27 54,81 33 group;
Poor productivity 58,87 28 58,65 30 . four factors are related to the environmental group;
Project location 58,87 29 65,38 17 . two factors are related to the financing group.
High interest rates by bankers 57,26 30 44,23 38 Tables 10 and 11 show that there are seven
Contractual procedure 56,45 31 59,62 27
Wrong estimation method 55,65 32 65,38 18 factors out of the top ten affecting factors are
Lack of adequate manpower 55,65 33 64,42 19
High machinery maintenance 54,84 34 44,23 39 Table 10. Top ten factors and their related groups from the
cost contractors’ point of view.
Additional work 50,81 35 54,81 34
Cost of insurance 50,00 36 44,23 40 Contractors’ view
Fraudulent practices and 50,00 37 54,81 35
kickbacks Factor IMP.I Rank Related group
Transportation cost 49,19 38 50,96 36
Monopoly 48,39 39 55,77 31 Fluctuation in the 86,29 1 Financing
Social and cultural impacts 44,35 40 48,08 37 currency exchange rate
Waste on site 36,29 41 32,69 41 Contract management 85,48 2 Construction items
Number of competitors 83,87 3 Environment
Financial status of 83,87 4 Financing
the owner
. number of competitors; Fluctuation of prices 83,06 5 Cost estimating
. financial status of the owner; of materials
. Frequent changes in design 82,26 6 Construction items
fluctuation of prices of materials;
Awarding the contract 82,26 7 Environmet
. frequent changes in design; to the lowest bidder
. awarding the contract to the lowest bidder; The political situation 81,45 8 Environment
. the political situation. Previous experience 79,84 9 Construction parties
of the contractor
Financial status of the 79,84 10 Financing
The consultants’ responses identify four factors with
contractor
importance index above 80%, namely:
 International Journal of Management Science and Engineering Management 123

Table 11. Top ten factors and their related groups from the Table 12. Main groups ranking from both the contractors’ and
consultants’ point of view. the consultants’ points of view.

Consultants’ view Contractors’ Consultants’

view view
Factor IMP.I Rank Related group
Group IMP.I Rank IMP.I Rank
The political situation 87,50 1 Environment
Fluctuation of prices 81,73 2 Cost estimating Financing 83,33 1 75,64 1
of materials Construction parties 72,45 2 69,23 2
Economic instability 80,77 3 Environment Environmental 66,65 3 66,14 3
Poor planning 80,77 4 Construction parties Construction items 63,48 4 63,19 4
Previous experience 78,85 5 Construction parties Cost estimating factors 58,43 5 54,72 5
of the contractor
Financial status of 77,88 6 Financing
the contractor 1. The political situation
Manipulation of suppliers 76,92 7 Environment
The political situation in the West Bank is described as
Financial status of 75,96 8 Financing
the owner unstable because of occupation and of peace process
Awarding the contract 75,00 9 Environment setbacks. Some results of the political situation in the
to the lowest bidder West Bank are: segmentation of the West Bank into
Contract management 74,04 10 Construction items several parts by Israeli check points and limitation of
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movement between these parts; high costs of materials;

common between the contractors and the consult-
ants, namely:
. the political situation;
. awarding the contract to the lowest bidder;
. contract management;
. fluctuation of prices of materials;
. financial status of the contractor;
. previous experience of the contractor;
. financial status of the owner.
7.3 Groups ranking
The factors affecting cost estimating accuracy in
construction projects are combined into five groups. The
ranking of these groups based on their degree of
importance by contractors and consultants is presented in
Table 12.
The table shows that the groups have the same ranking
from both contractors and consultants: the financing group
has the top rank and the cost estimating group has the
bottom rank.
7.4 Spearman correlation
Spearman’s correlation is used to compare how well the
contractors and consultants agree on the importance of the
factors affecting cost estimating accuracy in construction
projects. Equation (3) is used for this purpose. The result
shows that there is a relatively good agreement between
contractors and consultants of 0.83. Due to the relative
agreement between the two parties in ranking of the
identified factors, the results of this study can be
considered to be reliable.
lack of resources; limitations on material import;
delay; and monopoly. These results usually lead to
higher cost. This factor is mentioned in very little of
the literature investigated. This result is in line with
Enshassi et al. (2005) in that the political situation is
one of the most severe causes affecting cost overrun in
construction projects.
2. Previous experience of the contractor
It is an established fact of the learning effect that if you
perform the same task or project more than once, on
subsequent occasions you will control it better, take less
time, and the cost will be lower. One of the main
problems that the Palestinian construction sector suffers
from is the absence of skilled engineers, managers, and
estimators, who are leaving to work abroad, mainly in the
Arab Gulf, because of the better chances they are offered
there and also because of the difficult political situation
in Palestine. Regarding laborers, most of them prefer to
work in Israel because of the higher salaries they are
offered compared with what they are paid in the West
Bank. This situation leads most construction companies
to depend on staff having low experience, which affects
the performance of the project. This result is supported
by Koleolea et al. (2008) and Al-Juwairah (1997).
3. Awarding the contract to the lowest bidder
Owners award contracts to the lowest bidders to execute
their projects, but generally the lowest bidders are poorly
qualified contractors who are short on resources and low
on capabilities. This leads to low performance and to
delay in completion of the work, which accordingly
increases the cost. Therefore, prequalification standards
and awarding policy should be improved in order to
control this problem. This result is in line with Azhar
et al. (2008).

8. Discussion 4. Contract management

The top factors which are common between contractors Contract management is one of the vital elements for
and consultants are discussed in the following paragraphs. a successful project. It is the process of system-
 124 I. Mahamid
atically and efficiently managing contract creation,
execution, and analysis for the purpose of maximiz-
ing financial and operational performance and
minimizing risk. As most of the involved parties in
construction projects in the West Bank are of low
experience as discussed above, this leads to general
weakness in contract management, which leads to
disputes on site between construction parties, which
affect the cost performance. This result is supported
by Mahamid (2014) and Al-Juwairah (1997)
5. Fluctuation of material prices
Much of the literature investigated shows that
fluctuation of the price of materials is one of the
main factors affecting construction cost overrun. This
has many causes, e.g. inflation, supply and demand,
monopoly, and the political situation. The construc-
tion sector in Palestine depends on importing the
construction materials from abroad, but because of
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problems on Palestinian boarders, material delivery
may be prevented or delayed. This issue leads to
material shortages in the local market and causes
price fluctuation. This result is supported by Elinwa
and Buba (1993), Abdul Rahman et al. (2013),
Mahamid (2014), and Azhar et al. (2008).
6. Financial status of the contractors and owner
Construction work involves high daily expenses and
most of the contractors cannot fulfil these expenses
when payments are delayed. Owing delayed
payments by the owner, work progress can be
delayed because there is inadequate cash flow to
support the construction expenses of the contractor.
The problem is particularly acute for those
contractors who are not financially sound. This
result is supported by Enshassi et al. (2005), Abdul
Rahman et al. (2013), and Mahamid (2014).
9. Conclusion
This study has investigated the factors affecting cost
estimating accuracy in construction projects in the West
Bank in Palestine. Forty-one factors were identified
through research. The identified factors were combined
into five groups. A questionnaire survey was performed.
The field survey included responses from 60 contractors
and 45 consultants.
The findings reveal that the top ten affecting factors
according to contractors are: fluctuation in the currency
exchange rate; contract management; the number of
competitors; the financial status of owners; fluctuation of
the prices of materials; frequent changes in design;
awarding the contract to the lowest bidder; the political
situation; previous experience of the contractor; and the
financial status of contractors. The top ten affecting
factors according to consultants are: the political
situation; fluctuation of the prices of materials; economic
instability; poor planning; previous experience of the
contractor; the financial status of the contractor;
manipulation of suppliers; the financial status of the
owner; awarding the contract to the lowest bidder; and
contract management.
Contractors and consultants specify the same ranking
of sources affecting cost estimating accuracy in
construction projects. They specify financing factors as
the top ranked group, followed by factors related to
construction parties, environmental factors, factors
related to construction items, and cost estimating factors,
respectively.
The value of the Spearman’s rank correlation
coefficient of 0.83 shows that there is good agreement
between contractors and consultants on the importance of
the factors affecting cost estimating accuracy in construc-
tion projects in the West Bank in Palestine. Statistical
analyses of the data show the following: (1) the minimum
importance index has the values 36.29 and 32.69% from
contractors and consultants, respectively; (2) group
indexes are between 54 and 83%. These indicate that the
identified factors are highly relevant to the problem of cost
estimating accuracy in construction projects in the West
Bank.
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