Factors that lead to the cost overrun in construction process

BUILDING SURVEY(AP 229 D3)

[FACTORS LEAD TO THE COST OVERRUN IN CONSTRUCTION PROCESS]

RESEARCH PROPOSAL:FACTOR THAT LEAD TO THE COST OVERRUN

IN CONSTRUCTION PROCESS.

Abstract

Based on this research proposal, the purpose of this research

proposal is to determine the factors that lead to the cost

overrun in the construction project, in this proposal also have

been stated the objective of this study it is to identify the

financial management department for this project, to explore the

way they manage for financial in the construction process and to

identify cost constrain that arise. With the objective there have

been several research question that been stated in this research

question that show what the need to do to determine the factors

of cost overrun. Besides ,in this proposal there also have

literature review that show the overall of about this research,

such as construction cost is a responsibility of owner to provide

a cost for the construction project to the contractor do his job

and pay for construction needed. In this literature review also

have been stated about the cost estimation, financial department

consultant and about what is cost overrun. Furthermore, in this

proposal also been stated about the methodology of research

process ,it is from determine the research topics until the

FUNDAMENTAL RESEARCH METHODOLOGY (BSS 518)



method that want to be used, the method that being used is by

using primary data that research based on the respondent

interview and secondary data that research based on the

books ,journal ,article and conference paper. Besides ,in this

proposal also there have several factors that lead to the cost

overrun that been recorded in the preliminary data ,it is Lack

of project management supervision, Poor estimation and inaccurate

estimation of original cost, Fluctuation price of material for

construction site ,and Problems from the owners and owner’s will.

In a nutshell, problem of cost overrun in construction project

not a small issue it is can lead to the serious issue if it is

not being solved.

Introduction

Nowadays there have a lot of construction process that happen in

our country, with the increasing of the construction activities

in our country, it is also lead to the increasing to the problem

in the cost management or cost control. Every construction

process that have been carried out there have some of the issue

or problem that arise in the cost management in the construction

process, especially issue of cost overrun on the construction




process. According to Mohamed, (2011) project cost management can

be define as a process to determine the time required at each of

the activities of the project ,the resources should be allocated

to the execution of the activity by the individuals ,materials

and equipment.As we know, cost is the budget or money that we

used to construct a building, without money or budget there have

no building that can be construct. So ,it is important to have a

cost management, to make sure the smoothly of construction

process.

Statement of problem

Factor that lead to the cost overrun in the construction process.

1.Literature review

What is construction cost?

According to the Mc. Grawhill,(1998) also said construction cost

can be define as a construction portions, it is based on the upon

the sum of the construction contract and other direct

construction costs ,but it is not included for land, right of way

,professional services and other costs, it is been classified as

the responsibility of owner to provide the cost for the

construction as one of the outlined in the construction




contract.it is also a cost for contractor for all the

construction cost such as pay for the workers.

Cost estimation

According to PMBOK,(n.d) cost estimation is the iterative process

of developing an approximation of the monetary resources needed

to complete project activities. Project teams should estimate

costs for all resources that will be charged to the project. This

includes but is not limited to the Labor, Material,

Equipment ,Services, Software ,Hardware, Facilities and

Contingency Costs.

Financial department consultant

Financial department consultant it is a companies or individuals

that will plan for the financing for the owners .Financing

department also will check all the expenditure of money for the

construction project to make sure all the construction that have

been done is follow with the contract and to make sure the

expenditure of cost for construction do not exceed from the

initial cost that have been estimate.

Cost overrun.

According to the Serdar et.al ,(2012) Cost overrun can be defined

as when the project objectives have not been achieved within

estimated budget.




According to Kamaruzzaman,(2010) also Cost overrun is when the

final cost or expenditure of the project exceeds the original

estimation cost.

KEYWORD: Project Management Body of Knowledge

Preliminary data : Factor that lead to the cost overrun in

construction process.

1. Lack of project management supervision

Project manager is the person that responsible to monitoring

the all the construction site activities (Mohamed ,2011).As a

project manager also is the person responsible to make sure the

construction process do as have been plan especially on the cost

budget. Due to the lack of project management in the construction

process will lead to the cost overrun and cause the budget that

have been planned not going smoothly.




Name and date Said

Kamaruzzaman ,2010

Lack of monitoring and

management of site and lack of

project management assistance

can lead to the cost overrun in

the construction process. The

skillful and experience do not

enough in managing a site,

because lack of poor

construction management show

the weakness of contractors in

manage the construction site.

Frederick & Nancy ,2009

Due to the lack of project

monitoring of project manager

especially when there have

changes on the scope of work

and that also lead to the

changes of budget, but the

project manager did not involve

to monitoring it can cause to

the cost overrun in the project

cost.




without monitoring and supervision from the project manager on

the construction site, the construction process will not going

smoothly and lead to the cost overrun, that cost is increase form

the cost that have been planned and estimate

2. Poor estimation and inaccurate estimation of original cost

Every project must be estimate the cost and budget before start

the construction process to avoid form the cost overrun or over

budget when construction process started. Poor estimation and

inaccurate of construction budget will lead to the overrun of

cost for construction process. Estimation is an appraisal,

opinion, or an approximation as to the cost of a project prior to

its actual construction.(Frederick,2012).

Name and date SaidKamaruzzaman,2010 Have stated that due to the

technical problem such as do

not have experience to estimate

the project cost and due to the

lack of project information to

estimate lead to the cost

inaccurate estimation on the

initial cost is the biggest




factor that have led to the

cost overrun for construction

process.

Frederick, 2009

The estimation of material cost

, labour , equipment cost and

overhead very important, the

wrong estimation can led to the

serious cost overrun in the

construction project.

Every estimation that have been made will be changed during

construction process, because estimating for the project cost it

is only the initial cost and can be changed, but with the wrong

estimating for the cost construction project can lead to the cost

overrun when construction process .

3. Fluctuation price of material for construction site.

Material is very important element that used in the

construction process, without material there have no

construction would be proceed. Material price will always

fluctuation with the economy in Malaysia ,due to the

fluctuation of material price it is will affect the cost for

the construction project




Name and date Said




Kamaruzzaman ,2010Due to the high of inflation

and suppliers speculation, it

is hard to estimate the cost

for the construction material

due to the fluctuation of

price from the suppliers that

can lead to the overrun of

construction cost that have

been estimate on the initial

stage.

Mohamed ,2011

The increase of material that

lead to the cost overrun is

maybe due to the material that

been imported from abroad have

an increment in the foreign

exchange rate .Besides it is

also due to the changes of

material that being used in

the construction site with the

drawing that have been

provided, and the material

that have been used more

expensive that affect the cost




that have been spend for the


The fluctuation of materials price cannot being control because

it is objective, the changes of price is due to the types of

material and economy condition. Fluctuation price is the most

factors that lead to the cost overrun in the construction process

that cannot be avoid.

4. Problems from the owners and owner’s will.

According Frederick and Nancy ,(2003) owners can be define as

the individual that seeking for a home for their growing

family ,a large organization responding to a change in technology

,a municipality seeking to improve infrastructure, or a developer

working to make money by filling a perceived marked need. Owners

very important to construct a project because the owner is where

the project of construction born. Owner also is a source and

backup for the financial and budget for the construction process.

Without a owner there no project, during the construction process

the owner will give the cost for the construction process and the

owner will decide the design of building that they want. Because

of owners will and cannot give the budget or delay for payment

can affect to the construction process especially on the cost

that lead to the cost overrun.




Name and date Said

Kamaruzzaman,2010

Mohamed ,2011

Frederick & Nancy ,2003

Due to the owner’s need the

mistake of design

occur ,because unrealistic

design only can be occur when

the construction process is

started and it is lead to the

cost overrun because

construction project need to

changed it.

Kamaruzzaman,2010

Jimmie ,2004

Williams ,2010

The owner cannot prepare for

the sufficient cost for the

construction project cost and

sometimes some owner cannot pay

on time based on the agreement

to the contractor ,and cause

the delay of project and lead

to the cost overrun in





Due to the owner’s needed and owner’s cannot provide for the cost

payment to the contractor can lead to the cost overrun in the


After the preliminary collecting the data, the data analysis must

be proceed, analyze the data whether it is relevant with the

research topics or not, and analyze the all the information to

make sure the all the questionnaire and the objective of the

research topics have been collect.

Aim

The purpose this research is to determine the factors that lead

to the cost overrun in construction process.

Objective of the study

1. To identify the financial management department for the

project

2. To explore the way they manage for financial in the


3. To identify cost constrain that arise.

Research question

i) Who is responsible to manage the financial for the

project?

ii) How they manage the cost for construction process?




What the cost constrain that arise in the construction

process?

iii) Why the financial problem happen?

iv) How the solved the financial problem that arise?

Limitation of research

1.The limitation that will happen is, the data of estimation for

initial cost and cost that have been spend will be hard to get

from financial department.

2.The interview process will be limit, because some data is

private especially on cost data.

Statement of significance

This research proposal topics very important to be explore,

because cost overrun always been occur during construction

project, with this research it can help and guide to manage the

construction cost with proper management and can avoid the cost

overrun from happen again.

Methodology


Determine the topic for

Identify the aim, objective , and problemstatement ,significance of study ,and limitation for the



For this task I must determine my research topic,and finding my

aim,objectives and problem statement for this topic.For theFUNDAMENTAL RESEARCH METHODOLOGY (BSS 518)

Collecting data for researchtopic

Primary data: qualitative

1.Respondent Interview: quantity survey consultant and project manager

2. questionnaire

Secondary data

1. Journal2. Conference

paper3. Books

Data analysis

Recommendation

conclusion



collection of data I will used primary and secondary data,primary

data is the data that get fom the interview the respondent and

based on the questionare that called ad qualitative.qualitative

is a data normally appeared in the form of text and explanation

from the respodent.Secondary data is the data that I get based on

the journal,conference paper,books and online website.All the

data will be collected and be analyze and called as data

analysis.After the analyze process the reccommendation should be

stated to solved the problem that arise.




Research outline

1.Introduction

Stated about the condition of construction site nowadays that

cost overrun occur most of the site, and it is brief why this

topic being choose and carried out.

2.Statement of problem

In this chapter ,it is brief about the literature review of this

topic and brief about the preliminary data that have been search.

3.Aim and objectives

Stated about the purpose for this topics being carried out and

the objective to this topics is to achieve the topic requirement.

4. limitation of study

It is brief about the limitation for research being carried out,

and some of data cannot be provided.

5 .Methodology




Brief about the method that being used to carried out this

research topic for collection of data, in this proposal it is

used secondary and primary data for the method.

6. Data analysis

All the data that have been collected will be analyze and

recorded.

7. Problem and recommendation

It is brief about the problem that occurs during the research

being carried out and recommendation is the suggestion to solve

all the problem that occur.

8. Conclusion

Stated about the summary of all about the research topic that

have been carried.

Conclusion

Cost overrun have become more serious issue in construction

process, every construction project will be cost overrun occurs

due to the owners’ will, fluctuation material price ,lack of

supervision and poor estimation of construction cost, without t

a proper planning and proper co-operate between project manager

and owners the problem of cost overrun in construction project

cannot being solved. The owner’s should use the financial

consultant to avoid from cost overrun happen in the construction




project to make sure budget that have been provide is enough for

construction process and not exceed from the initial estimate.

References




Book :

1. Trefor williams,2010,Construction Management-Emerging Trends

and Technologies, United States, America.

2. Frederick E.Gould,2012,Managing the Construction

Process ,New Jersey.

3. Frederick Gould & Nancy Joyce,2009,Construction Project

Management -3rd Edition, Pearson Education, New Jersey.

4. Frederick Gould & Nancy Joyce,2003,Construction Project

Management -2nd Edition, Pearson Education, New Jersey.

5. Jimmie W.Hinze,2004,Construction Planning And Scheduling-2nd

Edition, Pearson Education ,New Jersey.

6. Mohamed A.El-Reedy,2011,Construction Management of

Industrial Project ,Scrivener Publishing , New Jersey.

Online Journal :

1. S.N.Kamaruzzaman,2010,Cost Performance for Building

Construction Projects In Klang

Vallley,http://pkukmweb.ukm.my/jsb/jbp/index.html. Retrieved

on : 7 December 2014.

2. Serdar Durdyev ,Syuhaida Ismail and Nooh Abu Bakar,2012,

Factors Causing Cost Overruns in Construction of

Residential Projects.

https://www.academia.edu/2012994/FACTORS_CAUSING_COST_OVERRU

NS_IN_CONSTRUCTION_OF_RESIDENTIAL_PROJECTS_CASE_STUDY_OF_TUR

KEY.




Retrieved on : 23 December 2014.

Website:

1. http://thelawdictionary.org/construction-cost/, The Law

Dictionary, Retrieved on : 22 December 2014

Online Article

1. http://encyclopedia2.thefreedictionary.com/

Construction+cost, Construction Cost, Retrieved on: 22

December 2014

2. http://doit.maryland.gov/SDLC/Documents/Cost_Estimating.pdf,

Cost Estimating, Retrieved on : 22 December 2014


http://doit.maryland.gov/SDLC/Documents/Cost_Estimating.pdf

http://encyclopedia2.thefreedictionary.com/Construction+cost,%20Construction

http://encyclopedia2.thefreedictionary.com/Construction+cost,%20Construction

http://thelawdictionary.org/construction-cost/

Factors that lead to the cost overrun in construction process

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