Cost Overrun In Construction Projects

The factors that causes cost overruns in construction projects

Introduction:

Cost overruns in construction projects is a major problem in today’s construction industry, the over spending and under budgeting of projects lead to significant loss of time and money. A brief definition of cost overrun is when a budget is setup for a project and in the end there was more money spent that what was budgeted for. Cost overruns occur mostly in all projects form small too megaprojects, they can influence a construction project’s budget drastically and often even the economy. The construction industry is often utilised by governments not only to stimulate growth but also assist economic recoveries form recession (Lucius Baloyi & Michiel Bekker; causes

Flybgerg, Brzelius & Rothengatte(2003),found that cost overruns are especially evident in infrastructure construction projects. In an article written by Aftab Hameed Memon, he states that there are significant groups that contribute to cost overrun, these are contractor’s site management, project management and contract administration, design and documentation, labour related factors, material and machinery, financial management, information and communication and external

Without the proper managing of money any construction project will fail to achieve its goals which are usually to finish a project within a budgeted amount and within recommended time period. The following are a few methods in which cost overruns can be limited and controlled. An effective strategic plan is to be setup before the construction of any project is started, the second solution is to do proper planning and scheduling of all materials and labour, effective site management, frequent progress meeting, proper emphasis on past experience, use of experienced subcontractors and suppliers, use of appropriate construction methods, use up to date technology, clear information and communication channels, frequent coordination between the parties and comprehensive contract administration(Aftab Hameed Memon, controlling cost overrun factors in construction projects in Malaysia, PG. 2624-2627). The above mentioned solutions are all relative to the any construction project in any part of the world and can especially be used and implemented by South African construction companies to reduce cost overruns to any projects.

Conclusion:

Cost overruns are any ever growing problem in the construction industry but with arise of a problem there is always a solution to be found. With the correct use of funds for projects and with effective planning, cost overruns can be reduced dramatically.