International Conference on Emerging Trends in Computer and Image Processing (ICETCIP'2014) Dec.
15-16, 2014 Pattaya (Thailand)
A Theoretical Review of the Causes and Effects
of Construction Projects Cost and Schedule
Overruns
Mukuka M.J, Aigbavboa C.O., and Thwala W.D.
AbstractThis study examines previous literature on
construction projects cost and schedule overruns, with the specific
aim of identifying the causes and effects of cost schedule overruns in
construction projects. This is because the concept of construction
projects cost and schedule overruns has attracted much attention in
recent years and that researchers and research bodies, be it corporate
or government that try to formulate remedies to projects cost and
schedule overruns should begin with an understanding of the causes
of these overruns and their effects to the construction industry as a
whole. The study is conducted with reference to existing theoretical
literature, published and unpublished research. The study is mainly
a literature review/survey on the causes and effects of construction
project cost and schedule overruns. The primary findings emanating
from the study revealed that empirical studies have identified a
number of important factors which cause projects cost overruns,
such as fluctuation of prices of material, cash flow and financial
difficulties faced by the contractor, poor site management and
supervision, lack of experience and schedule delay. The study
further revealed that poor site management, delay in progress
payments, poor communication and financial difficulties by the
contractor are among the identified causes of construction projects
schedule overruns by previous scholars. Literature also revealed that
extension of project, additional cost, budget short fall, adversarial
relationship between participants of the project, delayed payments to
contractors, poor quality workmanship and dissatisfaction by project
owners and consequently by end users as the major effects of cost
overruns. Furthermore, it was observed that time overrun, cost
overrun, arbitration, litigation, disputes and total abandonment of
projects were the effects of construction projects schedule overruns.
The study explores the causes and effects of construction projects
cost and schedule overruns and presents a robust background on the
theories of construction project cost and schedule overruns.
KeywordsCost overruns, Schedule overruns, Construction
Industry, Causes and effect of cost and schedule overruns.
Mulenga. Mukuka is an MTech students with the Department of
Construction Management and Quantity Surveying, University of Johannesburg,
Johannesburg, 2028 South Africa (corresponding author to provide phone:+27
(0) 11 559 6398; fax:+27 (0) 11 559 6630; e-mail: sirjoze2002@gmail.com).
Clinton. Aigbavboa is a Lecture with the Department of Construction
Management and Quantity Surveying, University of Johannesburg,
Johannesburg, 2028 South Africa (corresponding author to provide phone:+27
(0) 11 559 6398 ; fax:+27 (0) 11 559 6630; e-
mail:caigbavboa@uj.ac.za).
Wellington. Thwala is a Professor with the Department of Construction
Management and Quantity Surveying, University of Johannesburg,
Johannesburg, 2028 South Africa (corresponding author to provide phone:+27
(0) 11 559 6048; fax:+27 (0) 11 559 6630; e-mail: didibhukut@uj.ac.za).
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I. INTRODUCTION
C OST and schedule overruns can occur for a wide variety
of reasons on various types of projects which has led to
the debate on how to minimise these construction projects
cost and schedule overruns [1]. However, Memon, Rahman,
Asmi, and Azis, [2] states that in order to find measures of
minimising these overruns, the very first and most important
step is to identify and understand the factors responsible for
the overruns. Hence, this paper examines previous literature
on causes and effects of construction projects cost and
schedule overruns.
II. CONSTRUCTION PROJECTS COST OVERRUNS
Cost overruns are very common in the construction
industry. Hardly few projects get completed within original
costs [3]. Al-Najjar [4] defines cost overruns as the change in
contract amount divided by the original contract award
amount. However, Zhu and Lin [5] states that cost overrun
can be defined as excess of actual cost over budget. Cost
overrun is also sometimes called cost escalation, cost increase
or budget overrun. Memon, Rahman and Abdul Azis [2]
outlines that cost is among the major considerations
throughout the project management life cycle and can be
regarded as one of the most important parameters of a project
and the driving force of project success. Olawale and Sun [6]
states that despite the availability of various control
techniques and project control software many construction
projects still do not achieve their cost objectives. Hence,
despite its proven importance it is not uncommon to see a
construction project failing to achieve its objectives within the
specified cost [2]. Park and Papadopoulou [7] states that
construction cost overruns mean negative publicity for the
design team and loss of client confidence. The repercussions
for contractors are similar as they see their profit margins
shrink.
III. CONSTRUCTION PROJECTS SCHEDULE OVERRUNS
Projects or construction works that are not delivered on
time to the client are referred to as projects that have
undergone schedule overruns. Hence, Mohamad [8] Defines
schedule overruns as an act or event that extends the time to
complete or perform an act under the contract. Also, Assaf
and Al-Hejji [9], defined schedule overruns as the time
overrun either beyond completion date specified in a contract,
 International Conference on Emerging Trends in Computer and Image Processing (ICETCIP'2014) Dec. 15-16, 2014 Pattaya (Thailand)
or beyond the date that the parties agreed upon for delivery of
a project. It is basically a project slipping over its planned
schedule and is considered as common problem in
construction projects worldwide. Assaf and Al-Hejji [9]
further illustrates that, to the owner, schedule overruns means
loss of revenue through lack of production facilities and rent-
able space or a dependence on present facilities. In some
cases, to the contractor, schedule overruns means higher
overhead costs because of longer working periods, higher
material costs through inflation, and due to labour cost
increases. Alkhathami [10] states that schedule overruns can
be defined as extra time required to finish a given
construction project beyond its original planned duration,
whether compensated for or not.
IV. CAUSES OF CONSTRUCTION PROJECTS COST OVERRUNS
Cost overruns do not just occur naturally, there are a
number of factors during the construction process that when
not managed properly can lead to cost overruns. Al-Najjar [4]
identified a total of 42 factors that cause cost overruns and
ranked the top ten causes as follows: Technical incompetence,
poor organizational structure, and failures of the enterprise,
lack of cost reports during construction stage, inadequate
project preparation, planning and implementation, delays in
issuing information to the contractor during construction
stage, lack of coordination at design phase, change in the
scope of the project or in Government policies, Some
tendering manoeuvres by contractors, such as front- loading
of rates, incomplete design at the time of tender, bad
allocation of labour inside the site and delays in decisions
making by government were ranked the top ten causes of cost
overruns.
Eshofonie [11] revealed a total of 40 causes of cost
overruns with the top ten causes being the following: cost of
materials, incorrect planning, wrong method of estimation,
contract management, fluctuation of prices of materials,
previous experience of contractor, Absence of construction
cost data, Additional cost and Project financing. However, the
study of Ameh, Soyingbe and Odusami [12] identified factors
that cause of cost overruns, these factors were then
categorised in 5 categories namely: environmental factors,
construction factors, construction Item Factors such as
frequent design changes, Cost estimating factors and
financing factors. Baloyi and Bekker [13] revealed that
increase in material cost, inaccurate material estimates,
shortage of skilled labour, clients late contract award, project
complexity, increase in labour cost, inaccurate quantity take-
off, difference between selected bid and the consultants
estimate, change orders by client during construction and
shortage of manpower.
Rahman, Memon and Abd. Karim [14] identified the
following as the top ten causes of cost overruns in large
construction projects: fluctuation of prices of material, cash
flow and financial difficulties faced by the contractor, poor
site management and supervision, lack of experience,
schedule delay, inadequate planning and scheduling,
incompetent subcontractors, mistakes and errors in design,
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frequent design changes and poor financial control on site.
These results were not in agreement with the results of
Memon el al [15] where poor design and delays in design,
unrealistic contract duration and requirements imposed, lack
of experience, late delivery of materials and equipment,
relationship between management and labour, delay in
preparation and approval of drawings, inadequate planning
and scheduling, poor site management and supervision,
mistakes during construction and changes in material
specification and type were identified as the top causes of cost
overruns. Kasimu [16] identified five categories of causes of
cost overruns which include: financial related factors, factors
related to construction parties, factors related to construction
items, environmental related factors and politics related
factors.
V. CAUSES OF CONSTRUCTION PROJECTS SCHEDULE OVERRUNS
Causes of schedule overruns are factors that lead to
construction projects not being finished according to the
planned scheduled time at the inception of project. Ade-ojo
and Babalola [17] states that there are 6 major causes that
would lead to schedule overruns, the identified causes were
ranked as follows: design error, poor site condition, delay in
payment, financial incapability of client, financial
incapability of contractor and non-availability of
subcontractor and supplier. Further, Akinsiku and Akinsulire
[18] show that, financial or cash flow difficulties, financial
difficulties faced by contractors and public agencies, frequent
change order and design, failure to pay for completed works,
shortages of resources, considerable additional work,
escalations of material prices, increases in the scope of work,
delay in design work and late delivery of materials are the top
ten causes of schedule overruns on construction projects.
However, Ali, Smith, Pitt and Choon [19] shows that
labour Shortage, contractors financial difficulties,
construction mistakes and defective works, coordination
problem, material shortage and poor Site management are the
major factors that contribute to schedule overruns con
construction projects in Malaysia. Furthermore, Memon et al.
[20] revealed that design and documentation issues, financial
resource management, project management and contract
administration, contractors site management, information and
communication technology, material and machinery resource,
labour (human) resource and external factors as the major
factors affecting time performance on construction projects.
The study of Pourrostam and Ismail [21] shows the following
as the top ten causes of schedule overruns: poor site
management, delay in progress payments by client, change
orders by client during construction, ineffective planning and
scheduling of project by contractor, financial difficulties by
contractor, slowness in decision making process by client,
delays in producing design documents, late in reviewing and
approving design documents by client, poor contract
management by consultant and problems with subcontractors.
 International Conference on Emerging Trends in Computer and Image Processing (ICETCIP'2014) Dec. 15-16, 2014 Pattaya (Thailand)

VI. EFFECTS OF COST OVERRUNS
Effects are the consequences that will be encountered when
cost overruns occur on a construction project. Nega [22] states
that cost overruns have obvious effects for the key
stakeholders in particular, and on the construction industry in
general. To the client, cost overrun implies added costs over
and above those initially agreed upon at the onset, resulting in
less returns on investment. To the end user, the added costs
are passed on as higher rental or lease costs or prices. To the
professionals, cost overrun implies inability to deliver value
for money and could well tarnish their reputations and result
in loss of confidence reposed in them by clients. To the
contractor, it implies loss of profit for non-completion, and
defamation that could jeopardize his or her chances of
winning further jobs, if at fault. To the industry as a whole,
cost overruns could bring about project abandonment and a
drop in building activities, bad reputation, and inability to
secure project finance or securing it at higher costs due to
added risks [22].
The study of Nega [22] further identified the following
as the major effects of cost overruns: delays during
construction, supplementary agreement, additional cost,
budget short fall, adversarial relationship between
participants of the project, loss of reputation to the consultant,
the consultant will be viewed as incompetent by project
owners, high cost of supervision and contract administration
for consultants, delayed payments to contractors, the
contractor will suffer from budget short fall of the client and
poor quality workmanship. However, Eshofonie [11]
identifies four effects of cost overruns as follows: company or
firm liability to insolvency and liability of the companies or
firms to bad debt, under-utilization of man-power resources,
plants and equipment, increased project cost due to extension
of time: Longer project duration means that more resources
will need to be allocated to the project, which then increases
the project costs and project abandonment.
VII. EFFECTS OF SCHEDULE OVERRUNS
Effects of schedule overruns are the consequences that will
occur when the causes of these schedule overruns are not
identified and worked on effectively. The study of Pourrostam
and Ismail [21] identifies and ranks the effects of construction
delays as follows, time overrun, cost overrun, dispute,
arbitration, litigation, and total abandonment of projects.
These findings are in general agreement with other studies as
carried out by Aibinu and Jagboro [23] and Motaleb and
Kishk [24]. However, the study of Baki [25] brings in the
aspect of claims as one of the effects of delays in construction
projects.
VIII. RESEARCH METHODOLOGY
The research was conducted with reference to existing
theoretical literature, published and unpublished literatures.
The study is mainly a literature survey/review and looks at the
literatures relating to construction project cost and schedule
overruns. This is because the concept of projects cost and
schedule overruns has attracted much attention in recent
years and that researchers and research bodies, be it corporate
or government that try to formulate remedies to construction
projects cost and schedule overruns should begin with an
understanding of the causes and their effects. The current
methodology falls within the qualitative research
methodology.
IX. LESSONS LEARNT FROM LITERATURE REVIEW
Literature reviewed showed that the major causes of cost
overruns include: cost of materials, incorrect planning, wrong
method of estimation, contract management, and fluctuation
of prices of materials [11]. Other causes identified through
literature include, environmental factors, construction factors,
construction Item Factors such as frequent design changes,
Cost estimating factors and financing factors [12].
Furthermore, literature showed that the major causes of
schedule overruns include: design error, poor site condition,
delay in payment, financial incapability of client, financial
incapability of contractor and non-availability of
subcontractor and supplier [17]. Other causes of schedule
overruns included: financial or cash flow difficulties,
financial difficulties faced by contractors and public agencies,
frequent change order and design, failure to pay for
completed works, shortages of resources, considerable
additional work, escalations of material prices, increases in
the scope of work, delay in design work and late delivery of
materials [18].
Literature further identified the following as the major
effects of cost overruns, delays during construction,
supplementary agreement, additional cost, budget short fall,
adversarial relationship between participants of the project,
loss of reputation to the consultant, the consultant will be
viewed as incompetent by project owners, high cost of
supervision and contract administration for consultants,
delayed payments to contractors, the contractor will suffer
from budget short fall of the client and poor quality
workmanship [22]. Furthermore, literature showed the major
effects of schedule overruns to be time overrun, cost overrun,
dispute, arbitration, litigation, and total abandonment of
projects [21].
X. CONCLUSION
This article has examined literature relating to construction
project cost and schedule overruns. Literature review showed
that the causes of cost and schedule overruns range from
those caused by poor construction management to those that
are caused by other external factors like poor weather
conditions. Further, literature revealed that there are
corresponding negative effects of construction project cost
and schedule overruns that can eventually lead to total project
abandonment.
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