Assessment of Cost Overruns in Building Construction Projects

CHAPTER ONE

1.1 Background of the Study

The construction industry plays a vital role in economic growth and infrastructure development. However, cost overruns have remained one of its most persistent challenges. Cost overrun refers to the excess of actual project cost over the initial budget. It often occurs due to poor cost estimation, design changes, project delays, and inefficient management practices.

Over the years, many construction projects have experienced significant cost deviations, leading to financial losses and delays in completion. These overruns affect both public and private sector projects, reducing profitability and public trust. In addition, they hinder sustainable development and efficient resource allocation within the construction industry.

Quantity surveyors are responsible for cost planning, budgeting, and financial control throughout the project lifecycle. Their role is crucial in preventing cost escalation by ensuring accurate cost estimation and monitoring. Yet, despite their professional input, cost overruns persist. This raises questions about the factors responsible and the effectiveness of current cost control measures.

Globally, studies have shown that cost overruns are common across both developed and developing countries. In some cases, the final cost exceeds the original estimate by 20–50 percent. This trend highlights the need for an in-depth investigation into its causes and mitigation strategies.

Therefore, this study focuses on assessing the major causes of cost overruns in building construction projects. It also examines the impacts on project performance and explores measures to reduce their occurrence.

1.2 Statement of the Problem

Despite advancements in project management tools and cost control techniques, many construction projects still experience cost overruns. This problem leads to disputes between clients and contractors, delayed payments, and even project abandonment.

In many cases, inaccurate cost estimation, inflation, poor supervision, and frequent design changes contribute to cost escalation. However, limited research has analyzed these factors collectively to understand their relative influence. Consequently, there is a need for a systematic assessment to identify the most critical causes and propose practical solutions.

If cost overruns are not addressed, the construction industry will continue to face inefficiencies and financial losses. Hence, this study seeks to fill the gap by evaluating the key factors responsible for cost overruns and suggesting effective preventive strategies.

1.3 Aim and Objectives of the Study

The main aim of this study is to assess the causes and effects of cost overruns in building construction projects.

The specific objectives are to:

1. Identify the common causes of cost overruns in building projects.

2. Examine the impact of cost overruns on project performance and delivery.

3. Evaluate the effectiveness of cost control measures adopted by construction professionals.

4. Recommend strategies for minimizing cost overruns in future projects.

1.4 Research Questions

1. What are the major causes of cost overruns in building construction projects?

2. How do cost overruns affect project performance and delivery?

3. What cost control measures are currently used in construction projects?

4. What strategies can help minimize cost overruns effectively?

1.5 Significance of the Study

This study is significant because it helps construction professionals understand the root causes of cost overruns and how to prevent them. It will guide quantity surveyors, contractors, and project managers in improving cost estimation accuracy and budget control.

In addition, the findings will serve as a reference for policymakers and researchers interested in construction cost management. For students and academics, it provides valuable insight into effective cost planning and financial control in the construction industry.

1.6 Scope of the Study

The study focuses on building construction projects, both public and private. It emphasizes the factors influencing cost overruns, their impacts, and preventive strategies. The research will draw data from ongoing and completed building projects to ensure a balanced analysis.

1.7 Limitations of the Study

This research may face challenges such as limited access to accurate cost data and the unwillingness of professionals to disclose project information. Time and financial constraints may also limit the number of case studies. Nevertheless, the study will ensure reliability through careful data collection and analysis.

1.8 Definition of Terms

• Cost Overrun: The amount by which actual project cost exceeds the estimated budget.

• Quantity Surveyor: A professional responsible for managing costs and contracts in construction projects.

• Cost Control: The process of monitoring and managing project expenses to keep them within budget.

• Building Project: A construction work involving the creation or modification of physical structures.