A

Project Report on
Evaluation of cost overrun and implementation of effective cost control techniques
By
Gulshan kumar (1609700041)

Hardik sharma (1609700042)

Uday Pratap singh (1609700923)

Ayush kumar pal (1609700036)

Submitted in partial of requirements of the degree
Bachelor of Technology
In
Civil Engineering
Submitted to
Mrs. R. Niveda
(Assistant Professor of civil department)

Department of Civil Engineering

Galgotias College of Engineering and Technology , Greater Noida

Dr A.P.J Abdul Kalam Technical University ,Lucknow 2019-20

 Abstract

In India the number of building construction projects is increasing however, these projects are not completed in
allocated time and cost this is because of the financial condition of the country ,hence cost overrun is one of the
major problems. Through this project we tried to find information on the factors that cause cost, overrun during
construction and their effects on building construction projects.

The important causes of cost overrun were found to be inflation or increase in the cost of construction materials,
poor planning and coordination, change orders due to enhancement required by clients, excess quantity during
construction. With the help of available literature we found out major causes of cost overrun. This project attempts
to provide broader understanding of the frequent causes of cost overrun. The study is important as it sheds light on
how construction professionals can implement cost control measures in place to avoid recurrence of these
problems. The attainment of effective cost control measures for development projects is a prerequisite for the
successful completion of such projects, which are vital for the country's socio-economic advancement.
 INTRODUCTION

• The construction industry has a great impact on the economy of all countries. It is one of the sectors that
provide crucial ingredients for the development of an economy.
• The construction industry in many countries accounts for 6-9 % of the Gross Domestic Product (GDP) it
reaches up to 10 % of the GDP of most countries.
• One cannot think of widespread investment in manufacturing, agriculture, or service sectors unless the
construction results of infrastructure facilities are in place.
• In some of the developing countries, the growth rate of construction activity outstrips that of population
and of GDP
• A cost overrun, also known as a cost increase or budget overrun, involves unexpected incurred cost.
• When these costs are in excess of budgeted amounts due to an underestimation of the actual cost during
budgeting.
• Cost overruns are common in infrastructure, building, and technology projects.
• Cost overrun is distinguished from cost escalation, which is an anticipated growth in a budgeted cost due
to factors such as inflation.
 LITERATURE REVIEW
• Sai Murali Krishna Reddy.Raya and S.S Bhanu Prakash (2016), “Cost and Time Overrun in Indian
Construction Industry” A lot of research and studies have been done to identify the root cause of the time overrun
and cost overrun in construction projects which lead to the delay in the project completion Time and cost are the
lifelines of any and every project. It is of supreme importance to study, analyze and evaluate the common factors
leading to these constraints and suggest the best mitigation measures to overcome time and cost overrun
constraints. During the construction phase it is the prime responsibility of the project managers to monitor cost and
time and avoid the overruns of the both cost and time. Due to these limitations, this paper discusses the effective
cost and time control overrun practices in construction industry.

• Ram Singh(2009), “Delays and Cost Overruns in Infrastructure Projects: An Enquiry into Extents, Causes and
Remedies” Ram Singh say media reports abound on instances of prolonged delays and excessive cost overruns in
infrastructure projects. Only a small number of projects get delivered in time and within the budget. Examples of
successful project implementation, like construction of the Delhi Metro Rail, are few and appear only far in
between. Indeed, the problem of time and cost overruns in India is widespread and severe. Yet, very few empirical
studies exist on the subject. Even rarer are the studies based on completed projects. As a result, the extents as well
as the causes behind delays and cost overruns have remained under researched.
• Ramanathan Chidambaram and Narayanan Sambu Potty(2014), “Qualitative analysis of Time delay and
Cost overrun in Multiple Design and Build Projects” Projects are more complicated involving huge contract
values, participants from multi-discipline, more specialized works, tighter schedule, stringent quality standards,
etc. Ultimately, cost and time are the two key parameters that plays significant role in a project success. The
study focuses on multiple Design and Build project which has complicated risk and is governed by fixed
contract sum (Lump sum). As such, there is no such specific study to address this problem faced in Malaysia
construction industry. Qualitative research was applied at three stages of projects for time delay and two aspects
for cost overrun. This paper presents one aspect each for time delay and cost overrun.

• T. Subramani, et al (2014), “Causes of Cost Overrun in Construction” The industry plays a pivotal role in
developing the country’s infrastructure, a pre-requisite for high levels of economic growth. Most construction
projects experience cost overrun and it put massive financial burden on the client or owner. Therefore this
research was carried out to identify the causes leading to cost overrun in construction projects. Desk study along
with questionnaire survey was used to identify the causes of cost overrun. A total of 30 filled questionnaires
were collected from clients, consultants and contractors. From the analysis of the results it was found that
consensus of opinion exists between respondents on the causes of cost overrun. The results showed that, slow
decision making, poor schedule management, increase in material/machine prices, poor contract management,
poor design/ delay in providing design, rework due to wrong work, problems in land acquisition, wrong
estimation/ estimation method, and long period between design and time of bidding/tendering are the major
causes of cost overrun.
 BRIEF METHODOLGY

•Identified the projects, which has undergone time and cost over-runs.
•Studied all the available plans, estimates, schedules and work procedures in detail and collected all the relevant
data about the project.
• Analyzed the data obtained and compared the estimated and actual schedules and budget to understand the causes
and implications of overruns.
• Examined the reasons for the over-runs through either personal interviews or questionnaires.
• Listed out all the shortcomings.
• Identified the reasons of Time and cost overruns through a general survey of opinion from Architects, Consultants
and Contractors and suggest the possible remedial solutions.
 Reasons for cost overruns
Pre-execution phase -:

* Delays in land acquisition and site handover

* Manifold regulatory approvals from several agencies

*Poor program management resulting in ineffective co-ordination with other projects

* Scope creep and inadequate Detailed Project Report (DPR)

* With increasing importance of environmental safeguards projects require additional budgets

execution and closing phase -:
* Insufficient management of Project design/scope change

* Material price escalation beyond projections

* Poor connectivity to project site

* Inadequate availability of skilled resources

* Other factors impacting project costs

Factors impacting PSU’s and non-PSU’s project cost
Sector-wise impact of factors on cost overruns
 Recommendations to reduce cost overrun
* Set up a single window clearance mechanism to simplify the regulatory approval process

* Setup a three-tier project/program management office structure in the country to monitor infrastructure
projects

* Modify bidding criteria procedures

* Develop robust process for fast and efficient dispute resolution

* Institutionalize project management training for professionals

* Reform India’s Vocational Education and Training program to create a large pool of employable work force

* Develop efficient transport and logistic system in the country to enable faster project implementation

* Create an exhaustive list of empanelled vendor at Central level for infrastructure projects
 Recommendations to reduce cost overrun
* Set up a single window clearance mechanism to simplify the regulatory approval process :

-> Government could follow a three-step approach to institutionalize this :

• Create a checklist for diversified approvals with a step-by-step guide along with a list of required
documents. This checklist would also include the list of concerned offices addresses and contact
details.

• Open single service windows that centralize applications and forward them to relevant authorities to
minimize the number of physical visits and save time.

• Transform single access service window into one stop agency that processes applications internally
and has the authority to take informed decisions by comprising representatives of various approval
agencies at a central level.
* Setup a three-tier project/program management office structure in the country to monitor infrastructure
projects :
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