Root-Cause Analysis of Construction-Cost Overruns
Publication: Journal of Construction Engineering and Management
Volume 140, Issue 1
Abstract
Despite their negative impact on the construction industry, cost overruns have become an almost natural part of building and infrastructure projects. This paper examines the phenomenon as a worldwide problem, identifies its root causes, ranks them (on a local basis), and analyses them. Root-cause analysis is not merely an arbitrary expression; rather, it is a systematic, formal, well-structured methodology, used as part of the total quality-management approach. The expand–focus principles and techniques were applied in this research for assembling an initial, as wide as possible, inclusive list (pool) of 146 potential causes gathered from the international professional literature as well as from prominent local experts. Through two cycles of expand–focus, they were filtered and merged into merely 15 independent universal root causes. These were further investigated through a cross-sectional survey among 200 local construction practitioners who ranked the 15 universal root causes according to their conceived local importance and influence on cost overruns. The survey revealed that, locally, Cause number 1 is premature tender documents; Cause number 2 is too many changes in owners’ requirements or definitions; and Cause number 3 is tender-winning prices are unrealistically low (suicide tendering). The unique value of this paper to the global community of construction engineering and management is twofold: (1) It identified 15 universal root causes of cost overruns, which provide a good starting point for any local investigation, and (2) offers a well-structured methodology for ranking these 15 universal root causes in accordance with the local circumstances, thereby pinpointing the vital few that may prevent locally a substantial part of the problem.
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Acknowledgments
The author wishes to acknowledge the participation and contribution of Mr. Shabtay Iuclea in the research study that preceded this article (Rosenfeld and Iuclea 2011). Similarly, the author also wishes to acknowledge the contribution of Dr. Matti Relis in multiple brainstorming sessions and his professional advice to make this study, as well as the present paper more applicable by the construction industry.
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Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 140 • Issue 1 • January 2014
Copyright
© 2013 American Society of Civil Engineers.
History
Received: Aug 18, 2011
Accepted: Aug 20, 2013
Published online: Sep 12, 2013
Published in print: Jan 1, 2014
Discussion open until: Feb 12, 2014
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