Factors Causing Cost Overrun In Construction Industry And Role Of BIM In Mitigating Cost Overrun

Background

In the past decades, the construction projects are identified for its cost overruns as well as a delay in the completion of project work. The factors which are accountable for cost overruns like an underestimation of the cost to create the project feasible, addition to project scope afterwards in a project planning stage and change in construction conditions. One of the contributing factors to cost overrun in a construction project is project delays. Ahiaga-Dagbui and Smith (2014) indicated that the construction project is often over budget. As per the report is mainly of the UK construction projects, the price is underestimated in 90% of the projects, the actual cost is on average of 28% superior to the predictable costs and the cost overruns are autonomous on the geographic locations (Ahsan and Gunawan, 2010). With the size of the construction project, there is an increase in the percentage of cost overruns.

The particular research study is aimed to review the factors which are caused cost overruns along with appraising the control of those factors in the construction projects. Insufficient data, as well as lack of knowledge, is main clarifications of underestimations which are expected to be a development in forecasting accurateness over time (Al-Momani, 2000). Underestimation of the project cost for the construction project leads to highly benefited cost ratio for the project which leads to troubles.  

In the construction industry, one of the common issues are affecting the performance of the project is a cost overrun. The literature study is focused on various factors causing cost overrun and its vital importance in different countries. Change in project scope, design errors and construction damage are reasons behind cost overrun. Baiden, Price and Dainty (2006) identified that fluctuations in the cost of raw materials and higher cost of the machinery are the reasons behind poor cost control. Bhargava et al. (2010) concluded that external factors are hard to organise beyond the management of the project manager, and then the incidence of the happening is low. The internal factors of cost overrun are required of regular control. Chan, Scott and Chan (2004) found that cost is considered as one of the considerations throughout the project management lifecycle. Doloi (2012) studied that cost allocation among the activities caused delays in the project work. Cost variance is considered as important indicators for the success in a project. The finished project is not measured as doing well until there is falling of budgeted cost. Williams and Samset (2010) discussed that despite proven importance, it is scarce to observe that the project is to be completed in the estimated cost of the project plan. The researcher is focused on identification of the cost overrun factors to improve construction performance. Cost performance is a measure of productivity as well as the profitability of the business organisation. Ramanathan, Narayanan and Idrus (2012) argued that it is measured between the planned cost as well as actual construction cost on the completion time of the project plan.

Research Objectives and Questions

Figure 1: Factors causing cost overrun in construction project

(Source: Chan, Scott and Chan, 20014, pp-154)

Kagioglou, Cooper and Aouad (2001) concluded that there is a need for the owner and skilled architects to work together for completion of design drawings before estimation of project cost so that the organisation can prevent any cost overruns. Liberatore, Pollack-Johnson and Smith (2001) stated that the management team should notice actual cost overrun in the construction industry at project starting phase. To mitigate cost overruns, it is recommended to use of construction information system for shaping the organisational strategy. It is a medium to achieve competitive advantages of the organisation and enhance the efficiency of the construction project throughout the project lifecycle.

In the construction project, Building Information Modelling (BIM) is a 3D model process which provides the construction professionals with a tool for designing, constructing and managing the buildings plus infrastructure. Love et al. (2012) discussed that BIM is a digital image of both physical as well as functional uniqueness of the capability. BIM reduces rework in the construction work as digital BIM allows allocating and collaborating across the professionals in the project. With the use of BIM 360 tools, the construction team can review drawings as well as models onsite so that they have able to access up-to-date information from wherever in addition to anytime (Odeyinka, Lowe and Kaka, 2008). BIM is used to plan along with visualising entire project work throughout pre-construction. Williams and Samset (2010) stated that simulations plus 3D visualisations are used for the clients to experience them about the plan and make changes before starting of construction. Therefore, there is very less possibility of errors and changes in cost after entire project planning. Real-time collaboration, as well as a single document, can reduce the risk of the company to provide outdated information (Olawale and Sun, 2010). There are various benefits to save the money such as it saves time by reduction of time for the project life cycle, elimination of the construction agenda setbacks. BIM allows design as well as documentation to be finished on time with estimated project cost.

Figure 2: Measures of cost overrun using BIM

(Source: Williams and Samset, 2010, pp-47)

The purpose of this research study is to evaluate the factors for the cost overrun in the construction industry. This study also examines the role of information management like BIM in the construction industry as a mitigation measures against the cost overrun. The management team should prepare the project brief and conduct feasibility study to analyze the cost overrun effects. The main research objectives are identified as:

• To determine factors that can influence cost overrun in the UK construction industry
• To identify the events to be taken against the cost overrun factors
• To analyze the importance of BIM in the construction project

Research Methodology

In the construction project, one of the main factors for the project achievement is the completion of project work in budget and time. It is critical to achieving due to narrow margins. End of project work in the estimated budget is complex task mainly in the construction projects as there are many factors which provide a negative impact on project accomplishment and barriers towards completion of project work on time. Following are the research questions such as:

1.    What are the factors causing cost overrun in the construction industry?
2.    How would BIM have a positive impact in the construction industry?

The research methodology is theoretical knowledge organised around the operational steps which outline the research process for quantitative and qualitative research. The research study will implement a mixed methods approach to combine the quantitative measurement of the flow of information with qualitative research method. The research methodology reveals principles for the research where the researcher will select the methods and techniques to conduct the research study based on the research objectives. The quality of flow of research information should be better so that there is a proper measurement of implementing BIM in the construction industry (Wang, Dulaimi and Aguria, 2004). The qualitative research is exploratory research which gains an understanding for underlying the opinions as well as motivations. It offers insights into the research crisis and helps to expand thoughts in addition to a hypothesis for the quantitative research.

In the research study, selection of the research problem is not the initial step in research, but there is the identification of the research problem which is the initial step in the research study. The selection of a research problem is being governed by reflective project thinking. It is not right to think that identification of research problem means to select of research topic for conducting the study. To collect data and information related to the research topic chosen, the researcher decides of qualitative research and quantitative research methods. In this study, both the means and the mixed method is selected.

It is a method to develop an understanding on the social sciences to find ways people feel. This method is originated from the social sciences which will enable the researchers to study the social leaning occurrence (Shane et al. 2009). It is focused on the interpretation of the occurrence in natural settings to make sense in terms of meanings of people to carry out research settings. The data collection methods are involved of personal experiences, interactions as well as visual texts importance to life of people. Below table shows advantages and disadvantages of qualitative research:

Advantages of qualitative research	Disadvantages of qualitative research
The subject materials are evaluated with greater details.	The data quality which is gathered using qualitative research is subjective.
The research frameworks are based on availability of the data.	The rigidity of data is critical to reveal as well as review.
The research data of this method is based on experiences of human as well as observations.	The qualitative research is created research findings which are valuable but it is critical to present.
It is an open ended process.	The data which are created through this method is not accepted.
This research method provides content for creative as well as marketing project teams.	The researcher influences negative effect on gathered data for this research study.

Advantages and Disadvantages of Qualitative Research

This research method is based on objective facts as well as numerical data. This research type is based on numbers as well as concrete with measurable facts. The outcome of this method is easier to measure as well as the results are shown throughout objective data. This method is used which is measurable in the proper way to investigate the research phenomena. This type of research method is used of observation and survey method to collect data related to selected research topic. Below table shows advantages and disadvantages of qualitative research:

Advantages of quantitative research	Disadvantages of quantitative research
The problem and research question is examined by forming the research hypothesis derived from the theory.	It is not used to explain social phenomenon that is less useful in the research field.
Each of the steps is reduced bias the time of gathering and analyzing the data.	There is improper representation of target population.
The results derived from this method are valid and reliable to larger population.	This research method has inability to control the project environment.
This method is measuring gaps among various groups of population and assessing effectiveness of using this method.	There is required to have extra resources for analyzing the research results.

Ramanathan, Narayanan and Idrus (2012) discussed the effect of the construction cost overrun in construction projects in the UK. The research method is a strategy which is used to implement the research plan. The designs, as well as methods, are different as it is related. The good research method is ensured that the data obtained which will help to answer selected research questions. The data are being derived from primary as well as secondary sources; therefore a mixed research approach is used to be implemented by a combination of these two data sources for the quality flow of information.

A survey questionnaire study is designed with 10 questions related to cost overrun. The purpose of the survey is to identify the factors caused cost overruns and appraise the influence of those identified aspects have on overrun of cost in the construction project. The selected populations for conducting the survey are architects, project manager, contractors and engineers. The target population is comprised of the private sector. Identification of cost overruns factors and assessment of the impact is measured as significant for managing the projects (Shane et al. 2009). The knowledge from the survey responses helps the project manager to be more focused on critical influences with respect to control of cost on the development of construction projects.

Figure 3: Primary data collection method

(Source: Created by author)

It is referred to the data which are collected by someone other than user such as this method is used to collect data which is already available as well as analysed by other authors. The sources of secondary data are published and unpublished data, newspaper and journals. Literature study is done for gathering and collecting data related to factors causing cost overrun in the construction project. The unpublished data are considered as inadequate as its level of accuracy is achieved in data found to be inadequate.

Figure 4: Secondary data collection method

(Source: Created by author)

Main activities/ stages	Week 1	Week 2	Week 3	Week 4	Week 5	Week 6	Week 7
Searching for a research topic for the proposal	·	·
Checking out for the research topic area			·
Planning for the human resources			·
Finalizing the research questions				·
Proposed the literature review					·
Ethical approval of the research study					·
Detailed planning for the research stages						·
Critique the data sources						·
Selection of materials from the literature review				·
Evaluation of sources in the literature review					·
Finalize the literature review						·
Selection of research methods						·
Selection of data analysis phases					·
Review the research methods			·
Draft of the project report							·
Final submission of project report							·

Conclusion

It is concluded that the researcher is expected development in forecasting the accurateness of the cost over time. Underestimation of the project cost for the construction project leads to higher benefit-cost ratio for the project which guides to two types of issues such as the project is started even with the fact that it is not reasonably practicable along with second is that there are higher returns which offer an effect on the actual cost of the project. Cost underestimation is not clarified by error as well as seemed to give details by the planned misrepresentation. Involvement of the client is critical, and the employers should identify the importance of effectiveness and influence of the cost planning on the construction project work. Implementation of discipline is involved with controlling the project budget, planning of cost and controlling of value is seen as a significant procedure to reduce cost overruns of the construction projects. The study is presented a model which is employed to reduce the cost overrun in UK construction projects. While the research study is focused on cost overrun factors, mitigation measures, therefore further research is conducted on time overrun in the project. BIM is used as mitigation measures in the construction industry such that better collaborate and communicate with the professionals and model-based cost estimation for entire project work.        

In the initial stage of the research proposal part, I selected a research topic based on my course work-Construction management and BIM. Based on my course, I selected the topic “Prediction of cost overrun in construction projects”. In the literature study, I reviewed the factors which are sources of cost overruns issues in the UK construction project. After identifying the issues, I selected the mitigation measures to overcome with the problems. In this study, BIM is selected to overcome with the construction issues as this information management helps the professionals to perform the work better on time and save cost. I performed an in-depth analysis of the BIM so that we can use this concept in my research proposal. I selected mixed research method to perform the study such as primary and secondary data collection methods. The research methodology reveals principles for the research where the researcher will select the methods and techniques to conduct the research study based on the research objectives. I analyzed strengths as well as weaknesses of both the methods so that we can determine which method is perfect for this research study and which are not. Finally, I prepared a research plan to analyze the time taken to complete entire research work.  

References

Ahiaga-Dagbui, D.D. and Smith, S.D., (2014). Dealing with construction cost overruns using data mining. Construction Management and Economics, 32(7-8), pp.682-694.

Ahsan, K. and Gunawan, I., (2010). Analysis of cost and schedule performance of international development projects. International journal of project management, 28(1), pp.68-78.

Al-Momani, A.H., (2000). Construction delay: a quantitative analysis. International journal of project management, 18(1), pp.51-59.

Baiden, B.K., Price, A.D. and Dainty, A.R., (2006). The extent of team integration within construction projects. International journal of project management, 24(1), pp.13-23.

Bhargava, A., Anastasopoulos, P.C., Labi, S., Sinha, K.C. and Mannering, F.L., (2010). Three-stage least-squares analysis of time and cost overruns in construction contracts. Journal of construction engineering and management, 136(11), pp.1207-1218.

Chan, A.P., Scott, D. and Chan, A.P., (2004). Factors affecting the success of a construction project. Journal of construction engineering and management, 130(1), pp.153-155.

Doloi, H., (2012). Cost overruns and failure in project management: Understanding the roles of key stakeholders in construction projects. Journal of construction engineering and management, 139(3), pp.267-279.

Kagioglou, M., Cooper, R. and Aouad, G., (2001). Performance management in construction: a conceptual framework. Construction management and economics, 19(1), pp.85-95.

Liberatore, M.J., Pollack-Johnson, B. and Smith, C.A., (2001). Project management in construction: Software use and research directions. Journal of construction engineering and management, 127(2), pp.101-107.

Love, P.E., Wang, X., Sing, C.P. and Tiong, R.L., (2012). Determining the probability of project cost overruns. Journal of Construction Engineering and Management, 139(3), pp.321-330.

Odeyinka, H.A., Lowe, J. and Kaka, A., (2008). An evaluation of risk factors impacting construction cash flow forecast. Journal of Financial Management of Property and Construction, 13(1), pp.5-17.

Olawale, Y.A. and Sun, M., (2010). Cost and time control of construction projects: inhibiting factors and mitigating measures in practice. Construction management and economics, 28(5), pp.509-526.

Ramanathan, C., Narayanan, S.P. and Idrus, A.B., (2012). Construction delays causing risks on time and cost-a critical review. Construction Economics and Building, 12(1), pp.37-57.

Shane, J.S., Molenaar, K.R., Anderson, S. and Schexnayder, C., (2009). Construction project cost escalation factors. Journal of Management in Engineering, 25(4), pp.221-229.

Wang, S.Q., Dulaimi, M.F. and Aguria, M.Y., (2004). Risk management framework for construction projects in developing countries. Construction Management and Economics, 22(3), pp.237-252.

Williams, T. and Samset, K., (2010). Issues in front?end decision making on projects. Project Management Journal, 41(2), pp.38-49.