ORGANI ZAT I ON, TECHNOL OGY AND MANAGEMENT I N CONST RUCT I ON AN I NTERNAT I ONAL J OURNAL 5( 2) 2013 860

Risks Leading to Cost Overrun

in Building Construction from
Consultants Perspective
This study aims at identifying the risk map for factors affect-
ing cost overrun in building construction projects in the
West Bank in Palestine from the consultants perspective.
The eld survey included 26 consultants. 41 factors are iden-
tied through literature review. The factors are divided into 5
groups. The analysis of the identied 41 factors indicates that 1
factor is located in the green zone, 14 factors are located in the
yellow zone, and 26 factors are located in the red zone of the
risk map. The results indicate that the top ve afecting factors
are: political situation, uctuation of prices of materials, eco-
nomic instability, currency exchange, and level of competitors.
It is hoped that these ndings will guide eforts to enhance the
cost performance of construction industry.
DOI 10.5592/otmcj.2013.2.5
Research paper
Ibrahim Mahamid
Civil Engineering Department, Hail
University, Hail, Saudi Arabia
imahamid@ymail.com
Nabil Dmaidi
Civil Engineering Department,
An-Najah National University, Nablus,
Palestine. and Minister of transport,
Palestinian ministry of transportation
pa@najah.edu
Cost Overrun,
Risk Map, Building
Construction,
Construction in Palestine
Keywords
Civil Engineering Department, Hail
University, Hail, Saudi Arabia
imahamid@ymail.com
861
INTRODUCTION
The construction industry is the tool
through which society goals of urban
and rural development can be achieved.
It has a great impact on the economy of
all countries (Leibing, 2001). However,
the construction process is inuenced
by highly changing and unexpected
variables, which could result from dif-
ferent sources. These sources include
performance of construction parties,
nancial issues, managerial issues,
resources unavailability, and external
conditions. As a result, poor perfor-
mance in terms of delay and cost over-
run in construction projects could occur.
The construction industry and its par-
ties are associated with high degree
of risk due to the nature of construc-
tion business activities, processes,
environment and organization. Risk
in construction has been the object
of attention because of time and cost
overruns associated with construction
projects (Kartam et al., 2001).
Cost overrun is one of the most
important problems in the construc-
tion. According to Azhar et al. (2008),
cost overrun is a very frequent phenom-
enon and is almost associated with all
projects of construction industry. Cost
overrun is simply dened as the difer-
ence between the nal actual cost of
a construction project at completion
and the contract amount, agreed by
and between the owner and the con-
tractor during signing of the contract.
According to Ahmed et al. (2003), cost
overrun and delays on construction
projects are a universal phenomenon.
They have a negative efect on clients,
contractors, and consultants in terms
of growth in adversarial relationships,
mistrust, litigation, arbitration, cash-
ow problems, and a general feeling
of trepidation towards each other
(Ahmed et al., 2003). So it is essential to
dene the actual causes of cost overrun
in order to minimize and avoid increas-
ing cost in any construction project and
to avoid any other negative efects.
In Palestine, the construction sector
contributes to 26% of the Palestinian
GDP (MAP, 2002). This is a relatively
high proportion covered by this sector
comparing to what is mentioned by
Chitkara (2004) in that construction
industry accounts 6-9 % of GDP in
many countries, thus it strongly afect-
ing various economic, social, educa-
tional, and vocational sectors.
Palestinian construction sector
plays a major role in supporting the
Palestinian national economy, providing
homes and facilities, improving infra-
structure, and absorption labor forces.
However, many local construction proj-
ects report poor performance due to
many causes such as (UNRWA 2006):
unavailability of materials
excessive amendments of design
and drawings
poor coordination among
participants
ineffective monitoring and feedback
lack of project leadership skills
While the observations indicate
that the cost overrun is a major phe-
nomenon in Palestinian construction
industry, very few studies have been
conducted to investigate it. This paper
presents the ndings of a survey aims
at identifying the risk map for factors
afecting cost overrun in building con-
struction projects in the West Bank in
Palestine from the consultants per-
spective. It is hoped that these ndings
will guide eforts to enhance the per-
formance of the construction industry
in Palestine.
Objectives
The objectives of this paper include
the following:
To identify the factors affecting cost
overrun in building construction in
the West Bank in Palestine from con-
sultants perspective
To identify the risk map for cost over-
run factors
Literature review
Numbers of studies have been con-
ducted to investigate the cost overrun
in construction projects. Mahamid et
al. (2012) conducted a study to investi-
gate the statistical relationship between
actual and estimated cost of road con-
struction projects using data from
Palestinian road construction projects
awarded over the years 2004 to 2008.
The study was based on a sample of 169
road construction projects. The nd-
ings reveal that 100% of projects sufer
from cost diverge, it is found that 76% of
projects have cost under estimation and
24% have cost over estimation. The dis-
crepancy between estimated and actual
cost has average of 14.56%, ranging
from -39.3% to 98%.
Al-Zarooni et al. (2000) conducted a
survey to investigate variations in UAE
public projects estimates. They found
that the variations (positive or negative)
between feasibility and contract cost,
ranging between -28.5% and +36%.
They stated that these variations could
be explained by the fact that feasibility
estimates in the government agencies
are usually budgeted using a Single Unit
Estimating (cost per square foot) basis,
regardless of the nature of projects and
their associated risks or the construc-
tion complexity of each building type.
Researches on construction projects
in some developing countries indicated
that by the time a project is completed,
the actual cost exceeds the original con-
tract price by about 30 % (Al-Momani,
1996).
Odeck et al. (1995) assessed
Norwegian toll roads in order to reveal
whether planning procedure shortcom-
ings experienced by Norwegian road
agencies had resulted in poorer than
projected nancial performances for
some of the toll roads. They found
overestimation of trafc forecasts and
underestimation of construction costs.
In their small sample of 12 toll projects,
they found cost overruns on average at
about 5%, but the interval was large
from -210 to 170%.
I . MAHAMI D N. DMAI DI RI SKS L EADI NG TO COST OVERRUN I N BUI L DI NG CONST RUCT I ON F ROMCONSUL TANT S PERSPECT I VE pp 860 - 873
ORGANI ZAT I ON, TECHNOL OGY AND MANAGEMENT I N CONST RUCT I ON AN I NTERNAT I ONAL J OURNAL 5( 2) 2013 862
Al-Juwairah (1997) conducted a study
to identify the most severe factors afect-
ing construction cost in Saudi Arabia. 42
factors were considered in the study. He
concluded that the most severe factors
afecting construction cost from the con-
tractors perspective are: cost materials,
incorrect planning, contract manage-
ment, wrong estimation method, and
previous experience in contract.
Al-khaldi (1990) concluded that the
top ve factor afecting construction cost
in Saudi Arabia from contractors view
are previous experience in contracts,
payments, availability of management
nance and plans, type and size of con-
tract and its content, and project loca-
tion. On the other hand, the top ve fac-
tors from consultants view are previous
experience of contract, type and size
of contract and its content, payments,
project location, and contract period.
Al-Najjar (2008) identied the essen-
tial factors and their relative importance
that afect cost overrun in construction
projects in the Gaza strip. The study
illustrated that the top afecting fac-
tors include: prices uctuations of con-
structions, contractors delay of mate-
rial delivery and equipment, and prices
ination.
Iyer et al. (2005) conducted a study
to identify the factors afecting cost per-
formance of Indian construction proj-
ects. 55 factors were identied. They
concluded that the top afecting factors
are: conict among project participants,
ignorance and lack of knowledge, pres-
ence of poor project specic attributes
and non existence of cooperation, hos-
tile socio- economic and climatic con-
ditions, reluctance in timely decision,
aggressive competition at tender stage
and short bid preparation time.
Elinwa et al. (1993) identied 31 fac-
tors afecting the construction cost in
Nigerian Construction projects. They
concluded that cost of materials, fraudu-
lent practices and kickbacks, and uc-
tuation of prices of materials are three
of the most important factors leading to
cost overrun.
Frimpong et al. (2003) concluded
that the main causes of delay and cost
overruns in construction of groundwater
projects in Ghana are: monthly payment
difculties from agencies, poor contrac-
tor management, material procurement,
poor technical performances, and esca-
lation of material prices.
Azhar et al. (2008) conducted a
study in order to identify the major
cost overrun factors in construction
projects in Pakistan. 42 factors were
identied. They found that the top
ten afecting factors are: uctuation
in prices of raw materials, unstable
cost of manufactured materials, high
cost of machineries, lowest bidding
procurement procedures, poor project
(site) management or poor cost control,
delays between design and procure-
ment phases, incorrect or inappropri-
ate methods of cost estimation, addi-
tional work, improper planning, and
unsupportive government policies.
Okpala et al. (1988) studied the
causes of delay and cost overrun in con-
struction projects in Nigeria. 20 factors
were identied as causes of delay and
27 factors as causes of cost overrun. The
results indicated the following:
1. high costs can be minimized by mini-
mizing lapses in the management of
human and material resources.
2. despite some slight differences, the
professionals generally agreed that
shortage of materials, methods of
financing and payments for com-
pleted works, and poor contract man-
agement are the three major reasons
for high construction costs.
3. price fluctuation (in material) was
identified as the most important
factor responsible for the escalation
of project costs.
Nega (2008) found that the most
important causes of cost overrun
in building construction projects in
Ethiopia are ination or increase in the
cost of construction materials, poor
planning and coordination, change
orders due to enhancement required
by clients, and excess quantity during
construction.
Efect
Author
Less prot
to client
Less prot
to contractor
Cash ow
problems
Disputation
End user
satisfaction
Company
failure
Mbachu et al.
(2004)

Zainuddeen et al.
(2008)

Arditi et al.
(1985)

Ahmed et al.
(2003)

Charoenngam et
al. (2001)

Nega (2008)

Table 1. Main efects of cost overrun in construction projects through previous studies
863
Cost overrun factors 1 2 3 4 5
1) Cost estimating factors
cost of labor
cost of machinary
transportation cost
high machinary maintenace cost
high interest rates by bankers
wrong estimation method
cost of insurance
uctuation of prices of materials
bureaucracy in tendering method
waste on site
long period between design and time of tendering
2) Factors related to construction items
fraudulent practices and kickbacks
contract management
additional work
duration of contract period
contractual procedure
frequent changes in design
lack of adequate manpower
3) Factors related to project participants
disputes on site
lack of coordination between construction parties
poor nancial control on site
poor planning
previous experience of contract
relationship between managers and labors
4) Environmental factors
level of competitors
manipulation of suppliers
absence of construction-cost data
economic instability
efects of weather
government policies
inadequate production of raw materials by the country
monopoly by suppliers
number of competitors
number of projects going at the same time
I . MAHAMI D N. DMAI DI RI SKS L EADI NG TO COST OVERRUN I N BUI L DI NG CONST RUCT I ON F ROMCONSUL TANT S PERSPECT I VE pp 860 - 873
ORGANI ZAT I ON, TECHNOL OGY AND MANAGEMENT I N CONST RUCT I ON AN I NTERNAT I ONAL J OURNAL 5( 2) 2013 864
A number of studies were conducted
to investigate the efects of cost overrun
in construction projects. Table 1 summa-
rizes some of these efects as presented
in some previous studies.
Research methodology
41 factors that might afect cost overrun
in building construction projects were
dened through a detailed literature
review. The similar factors were grouped
under one main group; the factors were
divided into 5 groups: cost estimating,
construction items, project partici-
pants, environmental, and nancing
(Table 2). The factors were tabulated
into a questionnaire form. Then the draft
questionnaire was discussed with some
construction parties who are involved
in building construction to evalu-
ate the content of the questionnaire.
Modications and changes have been
done. Recommendations for minimizing
cost overrun in building construction
projects were emphasized in view of
the results of the study.
Questionnaire design
The questionnaire is divided into two
main parts. Part I is related to gen-
eral information for the company. The
consultants were requested to answer
questions pertaining to their experi-
ence in building construction and their
opinions about the percentage average
cost overrun in building construction
projects they have experienced. Part
II includes the list of the identied fac-
tors afecting cost overrun in building
construction. For each factor two ques-
tions were asked: what is the degree of
severity of this factor on cost overrun in
building construction? And what is the
frequency of occurrence for this factor?
Both frequency and severity were cat-
egorized on a ve-point scale as follows:
very high, high, moderate, little and
very little (on 5 to 1 point scale).
Data analysis
Frequency index (F.I) and severity index
(S.I) are calculated for each factor
according to the following formula
Index (%) = a (n/N)100/5 (1)
Where; a is the constant express-
ing weighting given to each response
(ranges from 1 for very low up to 5 for
very high)
n is the frequency of the responses
N is total number of responses
Table 3 shows the scale used to
determine the severity and frequency
levels for cost overrun factors. When
the factors severity and frequency
levels are calculated, its location in
the risk map is identied according to
Figure 1 and Table 4.
Figure 1 and Table 4 show the stan-
dard risk map which is used to deter-
mine the risk zone for each identied
cost overrun factor. The map is 5x5
matrix with severity ranging from VL to
VH on the horizontal axis and frequency
(with the same range) on the vertical
axis. Three zones are presented in the
map: green, yellow and red (The U.S.
Federal Highway Administration Ofce
of International Programs, 2007).
The zones have the following
characteristics:
Green zone: risks in this zone are low
level, and can be ignored.
Yellow zone: risks in this zone are of
moderate importance; if these things
happen, one can cope with them and
move on. However, if their frequency
is moderate it should be reduced and
if their severity is moderate, it should
be controlled and reduced and a con-
tingency plans should be in place just
in case they do.
political situation
poor productivity
project location
social and cultural impacts
5) Financing factors
currency exchange
inationary pressure
project nancing
Table 2. List of cost overrun factors
Index value (Scale) Severity Frequency
20% very low (VL) very low (VL)
20% - 40% low (L) low (L)
40% - 60% moderate (M) moderate (M)
60% - 80% high (H) high (H)
80% - 100% very high (VH) very high (VH)
Table 3. Scale used to identify factors severity and frequency level
865
Red zone: risks in this zone are of
critical importance. These are the top
priorities, and are risks that a close
attention should be paid to them.
Results and findings of the
research
General characteristics of
respondents
The questionnaire was sent out to a
total of 30 consultants, asking their
contribution in identifying the risk map
for the considered 41 factors in terms of
severity and frequency using an ordinal
scale. A total of 26 consultants lled
the questionnaire. The response rate
by the consultants is 87%.
Figure 2 shows the distribution of
the respondents according to their
experience in building construction.
It shows that most of respondents have
experience of more than 15 years in
building construction.
Size of cost overrun in building
construction projects
The analysis of the participants
responses regarding the cost over-
run in building construction projects
reveals that 100% of respondents indi-
cated that the average cost overrun
in building construction projects that
they have experienced is between 10%
and 30% of the original estimated cost
of a project. More illustration is shown
in Figure 3.
Factors risk map
Cost estimating factors
Table 5 and Figure 4 illustrate the risk
map for cost estimating factors. 11 fac-
tors are considered under this group.
The results indicate that 4 factors are
located in the red zone, 6 factors are
located in the yellow zone and 1 factor
is located in the green zone.
Factors related to construction items
Table 6 and Figure 5 illustrate the risk
map for factors related to construction
items. 7 factors are identied under this
group. The results indicate that 5 factors
are located in the red zone and 2 factors
are located in the yellow zone. The table
shows that there is no factor under this
group is located in the green zone.
Factors related to project participants
Table 7 and Figure 6 illustrate the risk
map for factors related to project partici-
pants. 6 factors are considered under
this group. The results indicate that all
factors under this group are located in
the red zone.
Severity
Frequency
VL L M H VH
VL green green green yellow red
L green green yellow red red
M green green yellow red red
H green yellow red red red
VH green yellow red red red
Table 4. The risk map
VH
H
Frequency M
L
VL
VL L M H VH
Severity
Figure 1. Zones of the risk map
C
o
n
s
u
l
t
a
n
t
s

F
r
e
q
u
e
n
c
y
100 %
80 %
60 %
40 %
20 %
0 %
< 5 5 to 10 10 to 15 > 15
Experience (years)
Figure 2. Distribution of the respondents according to their experience
in building construction
I . MAHAMI D N. DMAI DI RI SKS L EADI NG TO COST OVERRUN I N BUI L DI NG CONST RUCT I ON F ROMCONSUL TANT S PERSPECT I VE pp 860 - 873
ORGANI ZAT I ON, TECHNOL OGY AND MANAGEMENT I N CONST RUCT I ON AN I NTERNAT I ONAL J OURNAL 5( 2) 2013 866
Environmental factors
Table 8 and Figure 7 show the risk map
for environmental factors. 14 factors are
identied under this group. The results
indicate that 8 factors are located in the
red zone and 6 factors are located in the
yellow zone.
Financing factors
Table 9 and Figure 8 illustrate the risk
map for nancing factors. 3 factors are
considered under this group. The results
indicate that all factors under this group
are located in the red zone.
Top afecting factors
Table 10 shows the top priority factors
that afecting cost overrun in building
construction projects and their related
groups in ascending order. All of these
factors are located in the red zone of the
risk map. In order to rank them accord-
ing to their degree of importance from
consultants perspective, the impor-
tance index for each factor is calculated
as a function of frequency and severity
indexes, as follows:
Importance Index (IMP.I) (%) = [(F.I) (%)
(S.I) (%)] /100 (2)
The results indicate that there are
26 factors located in the critical zone of
the risk map. Their distribution among
the groups is as follow:
4 factors are related to cost
estimating
5 factors are related to construction
items
Factor S.I Severity level F.I
Frequency
level
Map zone
cost of labor 59.62 M 57.69 M yellow
cost of machinary 54.81 M 47.12 M yellow
transportation cost 50.96 M 50.00 M yellow
high machinary maintenace cost 44.23 M 50.00 M yellow
high interest rates by bankers 44.23 M 45.19 M yellow
wrong estimation method 65.38 H 58.65 M red
cost of insurance 44.23 M 46.15 M yellow
uctuation of prices of materials 81.73 VH 77.88 H red
bureaucracy in tendering method 63.46 H 49.04 M red
waste on site 32.69 L 50.00 M green
long period between design and time of
tendering
60.58 H 56.73 M red
Table 5. Risk map for cost estimating factors
F
r
e
q
u
e
n
c
y

o
f

c
o
n
s
u
l
t
a
n
t
s

r
e
s
p
o
n
c
e
s
100 %
80 %
60 %
40 %
20 %
0 %
< 10 10% - 30% 30% - 50% 50% - 100%
Cost overrun in building construction
Figure 3. Responses regarding the average cost overrun in building
construction
waste on site cost of labor
cost of machinary
transportation cost
cost of insurance
high machinary maintenace cost
high interest rates by bankers
wrong estimation method
uctuation of prices of materials
bureaucracy in tendering method
long period between design and time
of tendering
Figure 4. Risk map for cost estimating factors
867
6 factors are related to construction
parties
8 factors are related to environmental
group
3 factors are related to financing
group
It can be seen that all factors related
to construction parties are identied
as critical factors. These factors are
human related, meaning that these fac-
tors could be controlled and reduced by
improving the skills of the participants
(i.e. contractors, consultants, design-
ers, owners, labors, and suppliers).
The results are supported by some
investigated previous studies as
shown in Table 11.
Statistical analyses
Tables 12 presents the statistical analy-
ses for the severity and frequency
responses of cost overrun factors as
assessed by consultants. The table con-
tains the computation of the weighted
mean, standard deviation, and coef-
cient of variation. These statistics
are used to interpret the dispersion,
fraudulent practices and kickbacks
additional work
lack of adequate manpower
duration of contract period
contractual procedure
frequent changes in design
contract management
Figure 5. Risk map for factors related to construction items
Factor S.I Severity level F.I
Frequency
level
Map zone
fraudulent practices and kickbacks 54.81 M 49.04 M yellow
contract management 74.04 H 66.35 H red
additional work 54.81 M 59.62 M yellow
duration of contract period 68.27 H 62.50 H red
contractual procedure 59.62 M 60.58 H red
frequent changes in design 66.35 H 55.77 M red
lack of adequate manpower 64.42 H 50.96 M red
Table 6. Risk map for factors related to construction items
Factor S.I Severity level F.I
Frequency
level
Map zone
disputes on site 63.46 H 55.77 M red
lack of coordination between construction
parties
67.31 H 54.81 M red
poor nancial control on site 62.50 H 53.85 M red
poor planning 80.77 VH 58.65 M red
previous experience of contract 78.85 H 67.31 H red
relationship between managers and labors 62.50 H 64.42 H red
Table 7. Risk map for factors related to project participants
disputes on site
lack of coordination between designers and contractors
poor nancial control on site
poor planning
previous experience of contract
relationship between managers and labors
Figure 6. Risk map for factors related to project participants
I . MAHAMI D N. DMAI DI RI SKS L EADI NG TO COST OVERRUN I N BUI L DI NG CONST RUCT I ON F ROMCONSUL TANT S PERSPECT I VE pp 860 - 873
ORGANI ZAT I ON, TECHNOL OGY AND MANAGEMENT I N CONST RUCT I ON AN I NTERNAT I ONAL J OURNAL 5( 2) 2013 868
absence of construction-cost data
efects of weather
government policies
monopoly
poor productivity
social and cultural impacts
level of competitors
manipulation of suppliers
economic instability
inadequate production of raw materials by
the country
number of competitors
number of projects going at the same time
political situation
project location
Figure 7. Risk map for environmental factors
currency exchange
inationary pressure
project nancing
Figure 8. Risk map for nancing factors
Factor S.I Severity level F.I
Frequency
level
Map zone
level of competitors 75.00 H 72.12 H red
manipulation of suppliers 76.92 H 60.58 H red
absence of construction-cost data 58.65 M 58.65 M yellow
economic instability 80.77 VH 68.27 H red
efects of weather 58.65 M 49.04 M yellow
government policies 54.81 M 48.08 M yellow
inadequate production of raw materials by the
country
69.23 H 51.92 M red
monopoly by suppliers 55.77 M 39.42 L yellow
number of competitors 73.08 H 73.08 H red
number of projects going at the same time 63.46 H 55.77 M red
political situation 87.50 VH 76.92 H red
poor productivity 58.65 M 56.73 M yellow
project location 65.38 H 52.88 M red
social and cultural impacts 48.08 M 48.08 M yellow
Table 8. Risk map for environmental factors
Factor S.I Severity level F.I
Frequency
level
Map zone
currency exchange 73.08 H 74.04 H red
inationary pressure 77.88 H 66.35 H red
project nancing 75.96 H 68.27 H red
Table 9. Risk map for nancing factors
869
compactness, and the degree of homo-
geneity of the collected data
Table 12 shows that the standard
deviations of the cost overrun factors
for severity and frequency responses
are ranging from 0.55 to 1.24 and 0.63
to1.06, respectively. A visual indica-
tion obtained from the scatter diagram
shown in Figure 9 and Figure 10 shows
that the data has good compactness,
indicating that there is a good data
consistency and agreement between
consultants on the severity and fre-
quency of the identied factors.
Table 12 also shows that the sta-
tistical analyses of the severity and
frequency responses have reasonable
coefcient of variations, ranging from
15%-40% and 16%-43% respectively.
Visually, it can be seen from Figure
11 and Figure 12 that as the factors
weighted mean increase, the coef-
cient of variation decrease, meaning
that the participants are highly agreed
on the impact of the top afecting
factors.
Factor S.I
Severity
level
F.I Frequency level IMP.I Related group
political situation 87.50 VH 76.92 H 67.31 environmental
uctuation of prices of materials 81.73 VH 77.88 H 63.66 cost estimating
economic instability 80.77 VH 68.27 H 55.14 environmental
currency exchange 73.08 H 74.04 H 54.11 nancing
level of competitors 75.00 H 72.12 H 54.09 environmental
number of competitors 73.08 H 73.08 H 53.40 environmental
previous experience of contract 78.85 H 67.31 H 53.07 project participants
project nancing 75.96 H 68.27 H 51.86 nancing
inationary pressure 77.88 H 66.35 H 51.67 nancing
contract management 74.04 H 66.35 H 49.12 construction items
poor planning 80.77 VH 58.65 M 47.37 project participants
manipulation of suppliers 76.92 H 60.58 H 46.60 environmental
duration of contract period 68.27 H 62.50 H 42.67 construction items
relationship between managers and labors 62.50 H 64.42 H 40.26 project participants
wrong estimation method 65.38 H 58.65 M 38.35 cost estimating
frequent changes in design 66.35 H 55.77 M 37.00 construction items
lack of coordination between construction
parties
67.31 H 54.81 M 36.89 project participants
contractual procedure 59.62 M 60.58 H 36.11 construction items
inadequate production of raw materials by the
country
69.23 H 51.92 M 35.95 environmental
disputes on site 63.46 H 55.77 M 35.39 project participants
number of projects going at the same time 63.46 H 55.77 M 35.39 environmental
project location 65.38 H 52.88 M 34.58 environmental
long period between design and time of
tendering
60.58 H 56.73 M 34.37 cost estimating
poor nancial control on site 62.50 H 53.85 M 33.65 project participants
lack of adequate manpower 64.42 H 50.96 M 32.83 construction items
bureaucracy in tendering method 63.46 H 49.04 M 31.12 cost estimating
Table 10. Red zone factors and their related groups
I . MAHAMI D N. DMAI DI RI SKS L EADI NG TO COST OVERRUN I N BUI L DI NG CONST RUCT I ON F ROMCONSUL TANT S PERSPECT I VE pp 860 - 873
ORGANI ZAT I ON, TECHNOL OGY AND MANAGEMENT I N CONST RUCT I ON AN I NTERNAT I ONAL J OURNAL 5( 2) 2013 870
Conclusion
This study is conducted to investigate
the cost overrun in Palestinian building
construction projects from consultants
perspective through a questionnaire
survey. The analysis of the participants
responses reveals that the cost overrun
in building construction projects is a
severe problem. 100% of the respon-
dents indicated that the average cost
overrun that they have experienced is
between 10% and 30% of the projects
estimated cost. The study also identied
the risk map for 41 cost overrun factors.
26 factors were concluded as critical
factors. Inputs of the consultants under-
line that the top ve factors afecting
cost overrun in building construction
projects are: political situation, uc-
tuation of prices of materials, level of
competitors, currency exchange, and
economic instability.
The statistical analyses of the sever-
ity and frequency responses indicate
that the data has good compactness
and homogeneity, meaning that there
is a good data consistency and agree-
ment between consultants on the
severity and frequency of the identi-
ed cost overrun factors. It also shows
that the participants are highly agreed
on the impact and frequency of the top
afecting factors.
Based on the study ndings, the fol-
lowing points are suggested in order to
minimize and control cost overrun in
building construction projects:
Training courses and workshops
should be conducted to improve
Critical cost overrun factor in this study Supported by
Political situation Al-Najjar (2008)
Fluctuation of prices of materials
Al-Najjar (2008), Elinwa et al. (1993), Frimpong et al. (2003),
Azhar et al. (2008), Okpala et al. (1988), and Nega (2008)
Level of competitors Iyer et al. (2005)
Previous experience of contract Al-Juwaireh (1997) and Al-khaldi (1990)
Project nancing
Iyer et al. (2005), Al-khaldi (1990), Frimpong et al. (2003), and
Okpala et al. (1988)
Inationary pressure Al-Najjar (2008) and Nega (2008)
Contract management
Al-Juwaireh (1997), Azhar et al. (2008), Frimpong et al. (2003),
and Okpala et al. (1988)
Poor planning Al-Juwaireh (1997), Nega (2008), and Azhar et al. (2008)
Duration of contract period Iyer et al. (2005) and Al-khaldi (1990)
Wrong estimation method Al-Juwaireh (1997) and Azhar et al. (2008)
Frequent changes in design Nega (2008)
Lack of coordination between construction parties Iyer et al. (2005) and Nega (2008)
Contractual procedure Azhar et al. (2008)
Inadequate raw materials Okpala et al. (1988)
Project location Al-khaldi (1990)
Poor nancial control on site Azhar et al. (2008)
Long period between design and time of tendering Azhar et al. (2008)
Table 11. Comparison between ndings of this study and previous studies
871
Factor
Severity responses Frequency responses
X
Sn CV (%)
X
Sn CV (%)
cost of insurance 2.21 0.65 29.46 2.31 0.97 41.91
fraudulent practices and kickbacks 2.74 1.10 40.00 2.45 0.77 31.55
level of competitors 3.75 0.69 18.48 3.61 0.82 22.64
manipulation of suppliers 3.85 0.63 16.32 3.03 0.86 28.28
transportation cost 2.55 0.72 28.26 2.50 0.89 35.78
absence of construction-cost data 2.93 0.80 27.18 2.93 0.80 27.18
additional work 2.74 1.01 36.77 2.98 0.85 28.59
bureaucracy in tendering method 3.17 0.95 29.87 2.45 0.87 35.52
contract management 3.70 0.96 25.89 3.32 0.89 26.88
contractual procedure 2.98 0.80 26.97 3.03 0.76 25.01
cost of labor 2.98 0.64 21.38 2.88 0.74 25.51
cost of machinery 2.74 0.85 31.00 2.36 0.71 30.20
currency exchange 3.65 0.80 21.79 3.70 1.00 26.99
disputes os site 3.17 0.86 27.08 2.79 0.71 25.48
duration of contract period 3.41 0.83 24.24 3.13 0.81 26.00
economic instability 4.04 0.76 18.93 3.41 1.00 29.36
efects of weather 2.93 0.89 30.41 2.45 0.66 27.01
uctuation of prices of materials 4.09 0.60 14.78 3.89 0.77 19.66
frequent changes in design 3.32 0.98 29.46 2.79 0.71 25.48
government policies 2.74 0.94 34.26 2.40 0.98 40.63
high interest rates by bankers 2.21 0.82 36.86 2.26 0.98 43.40
high machinary maintenace cost 2.21 0.65 29.46 2.50 0.89 35.78
inadequate production of raw materials by the
country
3.46 0.99 28.67 2.60 0.93 36.01
inationary pressure 3.89 0.86 22.18 3.32 0.98 29.46
lack of adequate manpower 3.22 0.90 28.01 2.55 0.82 32.33
lack of coordination between construction parties 3.37 0.74 21.87 2.74 0.85 31.00
long period between design and time of tendering 3.03 0.76 25.01 2.84 0.92 32.40
monopoly by supplier 2.79 1.03 37.00 1.97 0.76 38.43
number of competitors 3.65 0.74 20.37 3.65 0.74 20.37
number of projects going at the same time 3.17 0.95 29.87 2.79 0.82 29.24
political situation 4.38 0.71 16.16 3.85 0.63 16.32
poor nancial control on site 3.13 0.91 28.98 2.69 0.92 34.35
poor planning 4.04 0.95 23.55 2.93 1.06 36.01
poor productivity 2.93 0.80 27.18 2.84 0.87 30.83
previous experience of contract 3.94 1.24 31.54 3.37 0.97 28.83
project nancing 3.80 0.72 18.96 3.41 0.78 22.78
project location 3.27 0.85 26.07 2.64 0.71 26.91
relationship between managers and labors 3.13 0.81 26.00 3.22 0.81 25.10
social and cultural impacts 2.40 0.89 37.06 2.40 0.93 38.89
waste on site 1.63 0.55 33.59 2.50 0.85 33.94
wrong estimation method 3.27 0.90 27.46 2.93 0.89 30.41
Table 12. Statistical analyses for severity and frequency responses
I . MAHAMI D N. DMAI DI RI SKS L EADI NG TO COST OVERRUN I N BUI L DI NG CONST RUCT I ON F ROMCONSUL TANT S PERSPECT I VE pp 860 - 873
ORGANI ZAT I ON, TECHNOL OGY AND MANAGEMENT I N CONST RUCT I ON AN I NTERNAT I ONAL J OURNAL 5( 2) 2013 872
managerial skills of project
participants
Material prices and labor rates
should be updated continuously.
Sufficient time should be given for
preparing feasibility studies, plan-
ning, design, information documen-
tation and tender submission. This
helps avoiding or minimizing late
changes
Progress payment should be paid on
time
More communication and coordina-
tion between project participants
during all project phases.
Top management must react posi-
tively to political and environmental
changes by means of managerial and
financial policies
References
Ahmed, S., Azhar, S., Kappagantula, P., and
Gollapudi, D. (2003). Delays in: A brief
study of the Florida construction industry.
Proceeding of the 39th Annual Conference
of the Associated Schools of Construction.
Clemson, South Carolina: Clemson
University, Miami, USA.
Al-Juwairah, Y. (1997). Factors Afecting
Construction Costs in Saudi Arabia. Master
thesis, King Fahd University of Petroleum
and Minerals, Dhahran, Saudi Arabia.
Al-Khaldi, Z. (1990). Factors Afecting the
Accuracy of Construction Costs Estimating
in Saudi Arabia. Master thesis, King Fahd
University of Petroleum and Minerals,
Dhahran, Saudi Arabia.
Al-Momani, A. (1996). Construction cost
prediction for public school buildings in
Jordan, Construction Management and
Economics. 14: 311-317.
Al-Najjar, J. (2008). Factors inuencing time
and cost overruns on construction projects
in the Gaza Strip. Master thesis, Islamic
University, Gaza.
Al-Zarooni, S. and Abdou, A. (2000). Risk
management in pre-design stage and its
potential benets for UAE public projects.
Proceedings of the 28th World Congress on
Housing Challenges for the 21st Century,
15-19 April, Abu Dhabi, UAE.
Arditi, D., Akan, G., and Gurdamar, S. (1985).
Cost Overruns in Public Projects. Journal of
Project Management. 3(4): 218-234.
Azhar, N., Farooqui, R., and Ahmed, S. (2008).
Cost Overrun Factors In Construction
Industry of Pakistan. Proceedings of
the First International Conference on
Construction in Developing Countries,
Karachi, Pakistan.
Charoenngam,C. and Sriprasert, E. (2001).
Assessment of cost control systems: a case
study of Thai construction organizations.
Engineering, Construction and Architectural
Management. 8: 368-380.
Chitkara, K. (2004). Construction Project
Management, Planning, Scheduling, and
Controlling. Tata McGraw Hill, 4th edition,
India.
Elinwa, A. and Buba, S. (1993). Construction
Cost Factors in Nigeria. Journal
of Construction Engineering and
Management. 119(4): 698-713.
Frimpong, Y., Oluwoye, J., and Crawford, L.
(2003). Causes of delay and cost overruns
in construction of groundwater projects in
a developing countries; Ghana as a case
study. International Journal of Project
Management. 21: 321 326.
S
t
a
n
d
a
r
d

D
e
v
i
a
t
i
o
n
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
0.00 1.00 2.00 3.00 4.00 5.00
Mean
Figure 9. Factor mean vs. standard deviation for severity responses
S
t
a
n
d
a
r
d

D
e
v
i
a
t
i
o
n
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
0.00 1.00 2.00 3.00 4.00 5.00
Mean
Figure 10. Factor mean vs. standard deviation for frequency responses
873
S
t
a
n
d
a
r
d

D
e
v
i
a
t
i
o
n
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0.00 1.00 2.00 3.00 4.00 5.00
Mean
Figure 11. Factor mean vs. coefcient of variation for severity responses
S
t
a
n
d
a
r
d

D
e
v
i
a
t
i
o
n
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %
0.00 1.00 2.00 3.00 4.00 5.00
Mean
Figure 12. Factor mean vs. coefcient of variation for frequency responses
Iyer, K. and Jha, K. (2005). Factors afecting
cost performance: evidence from Indian
construction projects. International Journal
of Project Management. 23(4): 283-295.
Kartam, N. and Kartam, S. (2001). Risk and its
management in the Kuwaiti construction
industry: a contractors perspective.
International Journal of Project Management.
19(6): 325-335.
Leibing, R. (2001). The Construction Industry:
Process Players. Upper Saddle River, NJ:
Prentice Hall.
Mahamid, I. and Bruland, A. (2012). Cost
deviation in road construction projects: The
case of Palestine. Australasian Journal of
Construction Economics and Building, 12(1),
58 71.
MAP (2002). Survey of the Construction Services
Industry. Unpublished mission report. The
West Bank and Gaza.
Mbahu, J. and Nkado, R. (2004). Reducing
Building Construction Costs: The Views of
Consultants and Contractors. Proceedings
of the International Construction Research
Conference of the Royal Institution of
Chartered Surveyors, Leeds Metropolitan
University.
Nega, F. (2008). Causes and efects of cost
overrun on public building construction
projects in Ethiopia. Master thesis, Addis
Ababa University, Addis Ababa, Ethiopia.
Odeck, J. and Skjeseth, T. (1995). Assessing
Norwegian toll roads. Transportation
Quarterly. 49(2): 8998.
Okpala, D. and Aniekwu, A. (1988). Causes
of High Costs of Construction in Nigeria.
Journal of Construction Engineering and
Management. 114(2): 233244.
Palestinian Contractors Union. Personal
comuunication, August 2010, Ramallah, the
West Bank, Palestine.
The U.S. Federal Highway Administration Ofce
of International Programs (2007). Guide to
the risk assessment and allocation process
in highway construction. Report, July, 2007.
Retrieved from http://international.fhwa.dot.
gov/riskassess/images/riskmatrix.cfm , 20
th

of March, 2010.
UNRWA. 2006. Projects completion reports,
UNRWA, Gaza.
Zainudeen, M., Kumari, G., and Seneviratne,
T. (2008). Impact of Design Changes on
Contractors Cash Flow. Built-Environment Sri
Lanka. 8(1): 2-10.
I . MAHAMI D N. DMAI DI RI SKS L EADI NG TO COST OVERRUN I N BUI L DI NG CONST RUCT I ON F ROMCONSUL TANT S PERSPECT I VE pp 860 - 873