Factors Affecting Cost Escalation In Construction

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The study focusing on the identification and valuationof factor affecting cost escalation in building construction projects.Thestudies also deal with the issue of cost escalation and way it is currently being handled in building construction. Cost escalation has impact on the quality, project schedule and cause hindrance in project completion. Cost escalation is major provision in the cost estimation process which yield values for increase in the cost of equipment,material,labor,etc...Due to continuous price changes over the time. Most significant cost escalation factors are raw material input price, demand and supply, powertax, transportation cost,inflation,taxes,exchange rates and government policy. Theacceleration in price of materials has…show more content…
This industry consumes 40 to 50% of the national five year plan outlay and contributes 20% of gross domestic product. Medium to large scale industry take over a year for completion and the cost of material and labor often increase, which leads to major problem in administration of contract. Over the past few years the construction industry has facing severalproblems due to rapid increase in price of construction material,labor,interest charges and equipment cost. Rate escalation is defined as changes in the cost or price of specific goods or service in given economy period. This similar concept of inflation and deflation except that escalation specific to an item or class of item it is often not primarily driven by change in the money supply, and it tend to be le…show more content…
Each factor presents a challenge to any agency seeking to produce accurate project cost estimate. Cost escalation refers to the increase in amount of money required to construct a project over and above the original budgeted amount. Project costs wereaffected by among other things, inflation and changes in scope to accommodate economic consideration that occur over time as a project is designed and built. Escalation to be a result of problems such as poor contract management, poor technical performances, delay in land acquisition,unexpected problem in supply of raw materials, illegal encroachment on land even during project implementation or due to internal problems in organization. It has further been noted that delays between the planning stage and actual

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