Assessment of Construction Cost Overrun and Its Impact on Project Delivery

CHAPTER ONE

1.1 Background of the Study

Construction cost overrun is one of the most persistent challenges facing the construction industry. It occurs when the actual cost of a project exceeds the initial budget. This problem affects profitability, project completion time, and client satisfaction. According to Olatunji (2021), cost overrun often results from poor project planning, inaccurate estimates, design changes, and inflation.

Project delivery depends heavily on effective cost control and accurate forecasting. When costs exceed expectations, contractors face financial strain, which can delay work and compromise quality. As Aigbavboa and Oke (2020) explained, proper cost management ensures that resources are efficiently utilized and that projects are delivered within budget. However, weak financial monitoring, poor risk assessment, and lack of cost discipline frequently lead to overruns in both public and private sector projects.

In many cases, cost overruns reduce investor confidence and discourage future funding. Therefore, understanding the causes and consequences of this issue is essential for improving construction performance. This study assesses the factors that contribute to cost overruns and examines their impact on project delivery.

1.2 Statement of the Problem

Despite improvements in construction management techniques, cost overruns remain common. Many projects experience financial setbacks because of inaccurate cost estimation and weak budgeting. According to Ofori (2019), these issues arise from unforeseen site conditions, inflation, delayed payments, and inadequate project supervision.

Contractors often underestimate the importance of continuous cost monitoring, leading to poor financial control. In some cases, design modifications and material price increases occur without corresponding budget adjustments. As a result, projects exceed their financial limits and fail to meet completion targets.

This study investigates the causes of cost overruns and analyzes how they affect project delivery, particularly in relation to time, quality, and client satisfaction.

1.3 Aim and Objectives of the Study

The main aim of this study is to assess construction cost overrun and its impact on project delivery.

The specific objectives are to:

1. Identify the major causes of cost overrun in construction projects.

2. Examine how cost overrun affects project delivery in terms of time, quality, and scope.

3. Evaluate the management practices used to control cost overruns.

4. Recommend strategies to minimize cost overrun and enhance project performance.

1.4 Research Questions

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

2. How does cost overrun influence project delivery?

3. What cost management practices help control overruns?

4. What strategies can reduce cost overrun and improve project outcomes?

1.5 Significance of the Study

This study is significant because it highlights how financial inefficiencies affect project success. As Oke and Aigbavboa (2020) observed, cost overruns reduce contractor profitability and client trust. The study will help contractors, consultants, and project managers understand how effective cost planning and monitoring improve delivery outcomes.

For policymakers, the study offers insights into the need for stronger cost control frameworks and accountability mechanisms in construction. Academically, it adds to existing literature on project management, cost analysis, and sustainable project delivery.

1.6 Scope of the Study

The study focuses on construction cost overruns and their impact on project delivery in building construction. It examines the financial, managerial, and technical factors that lead to cost increases. The research limits its focus to projects where cost control directly influences time and quality performance.

1.7 Limitations of the Study

The study may face challenges such as limited access to accurate financial records and reluctance from firms to disclose cost data. Differences in project size, scope, and funding arrangements may also influence results. However, the study will rely on validated data and professional insights to ensure accuracy and reliability.

1.8 Definition of Terms

• Cost Overrun: The amount by which actual project costs exceed the original estimated budget.

• Project Delivery: The process of completing a construction project within agreed time, cost, and quality parameters.

• Cost Control: The process of monitoring and managing expenditures to ensure that project costs remain within budget.

• Construction Management: The practice of planning, coordinating, and controlling a project from inception to completion.