The cause factors of large project's cost overrun: a survey in the southern part of Peninsular Malaysia

Abstract

Construction cost overrun has become a global concern amongst the practitioners and academic researchers because the construction projects are very rarely completed within the estimated cost limit. There are various contributing factors to cost overrun. This study focuses on cost overrun encountered in large construction projects. Data was gathered using structured questionnaire survey among clients, consultants and contractors in the states of Johor, Melaka and Negeri Sembilan of Peninsular Malaysia. Statistical methods were used to analyze the data. The survey results show that 96% of the respondents agreed that most construction projects face cost overrun with an average amount ranging from 5% to 10% of the contract sum. Investigation on the causes of cost overrun involves 35 common factors identified through the literature. Results indicate that fluctuation in materials price, cash flow and financial difficulties faced by contractors, delay in progress payment by owner, and frequent design changes were most dominant factors causing cost overrun. Spearman correlation test was conducted on the factors showing that slow information flow was highly correlated with the lack of communication between parties (with a correlation value ρ = 0.787). Standardized design practices, efficient resource planning and management and proper financial management should be considered as effective tools in controlling cost overrun especially in large construction projects.

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