A Summary of an Article Analyzing the Cost of Overturn of Construction Projects Done in Ethiopia

Category: Employment, Statistics
Last Updated: 23 Mar 2023
Pages: 6 Views: 127

The article being summarized is titled "Causes of Cost Overrun in Federal Road Projects of Ethiopia in Case of Southern District" by Belachew, Mengesha, and Mohammed; the article was published by the Science Publishing Group in the American Journal of Civil Engineering. This article analyzes the cost overrun of construction projects done in Ethiopia. The information in the article was obtained by case studies and surveys from clients, consultants, and contractors. The article by Belachew, Mengesha, and Mohammed is summarized below.

The construction industry is important and emphasized because it can develop the economics of a country. The economics develop because road projects create career opportunities and the standards of the country increase due to the complexity of completing projects within a time frame and budget. In Ethiopia, 80% of projects analyzed in this study have cost overrun. Ethiopia experiences cost overrun partially due to government funding because its government cannot always adjust to unpredicted costs.

Also, in eighteen construction projects, some of the teams involved in the project are not participating in the beginning stages, which is a factor leading to cost overrun. In this study, cost overrun is actual cost minus estimated cost. In addition, surveys identify shared factors and case studies support those factors. Lastly, this study uses the spearman correlation coefficient to compare the accuracy of the relationship between two elements. The spearman correlation coefficient will show if the relationship is completely related, significantly related, somewhat or moderately related, minimally related, and unrelated.

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Next, the article has a case study which finds that in Case A, the study considers projects that are significantly completed. Some of the issues that cause cost overrun are related to design changes, which are hindered by delayed resources, increased resource cost, weather, and poor management and techniques. In Case B, the soil has an unpredictable and unfavorable condition that causes cost overrun. After analyzing Case A and B, the article looks at the magnitude and reasons for cost overrun. The range of cost overrun is between 4.16% and 83.2% and the average percentage is around 21.52%, which is significant because this data conveys s that millions of dollars are being spent over the estimated cost. From the case study, cost overrun is due to minimal planning and monitoring.

This problem mainly exists because the projects have unpredictable circumstances. The unpredictable circumstances are due to inaccurate designs which are caused by incorrect planning and investigation of the area. Additionally, there has to be more digging of materials (e.g. rock) than what was estimated which delays the due date and increases the cost of labor. The second reason is due to the planning and application of the project. The project was more difficult than expected, took more time, cost more money, and needed more unity with the government and community. The third reason is that there was a delay in resources. For example, materials such as cement took longer to arrive, workers were incompetent, and machines broke down. The fourth and final reason is that material prices increased. Cost overrun occurs because it is extremely hard to predict price changes.

Next, the survey is analyzed. The survey respondents consist of directors, project managers, planning engineers, contract engineers, site engineers, and office engineers. A majority of them think that cost overrun is a significant problem. These respondents are found to be reliable through statistical analysis and are categorized as clients, consultants, and contractors. The survey has forty-eight factors that cause cost overrun and the respondent has to rate them from one to forty-eight. Forty factors are grouped into three groups: project supervision factors, process of project implementation factors, and the business-related factors.

When considering the project management factors, the clients' think the causes of cost overrun are due to the lack of communication when designing, the inaccuracy of cost estimation, and inexperience in the estimators. These reasons are problems that occur before constructing the project. From the consultants' perspective, the problems are the inaccuracy of cost estimation, lack of reviewing contracts, and lack of coordination when designing.

Lastly, from the contractors' perspective, supply delays (i.e. a delay in receiving materials and machinery), inaccuracy in cost estimation before and after constructing, and payment delays are the reason for cost overrun. The delaying of supplies and payment is caused by the condition that there are only a few suppliers of materials in Ethiopia and laborers only work for wages, not accomplishment. Thus, when supplies are delayed, payments still need to be made to laborers, and when payments are not met, then laborers will not work as efficiently.

Through analyzing these factors, the relation between clients' and consultants' answers are significantly related, the clients' and contractors' answers are moderately related, and the contractors' and consultants' answers are significantly related. Regarding the project implementation factors, a majority of the clients claim that cost overrun occurred because of lack of training, benefit realization (i.e. the situation when businesses realize they are gaining or losing profit) and production support (i.e. cost and implementation of software used in project).

From the consultants' and contractors' perspective, lack of training, benefit realization, and the incompetence in the application process were key factors in cost overrun. Through analysis, the client versus consultant, the client versus contractor, and the contractor versus consultant all have a significant relationship. Therefore, all of their answers are similar. Pertaining to business factors, the client, consultant, and contractor all agree that suppliers and material price changes are factors that can cause cost overrun. There is a very significant relationship between the three parties' opinion with respect to each other.

Lastly, the overall ranking of forty factors is analyzed and put into a table. The top six factors after averaging are in this order: material price changes, underestimation of cost, delay in supplying material and machinery, inaccurate review of contracts, incoordination when designing and inaccurate cost planning and managing before and after the contract phase. Part of the problem with cost overrun is that the three groups have different views on problems. For example, material price changes are ranked first and second by clients and contractors, but ranked ninth by consultants. Another example is that clients and consultants ranked supply delays as eleventh, but contractors ranked that issue as first.

Through this finding, a conflict of interest is proven true through statistical analysis because the client and contractor relationship and consultant and contractor relationship are only moderately related, not fully or significantly. However, the client and consultant rankings are significantly related but not close to being fully related.

After using a survey's data, the top six out of forty factors that cause cost overrun are changes of a material's price, cost underestimation, supply delay in materials and machinery, inexact review of contracts, incoordination when designing and imprecise cost planning and managing before and after the contract phase. A case study is additionally used to analyze the issue of cost overrun in Ethiopia.

The top six reasons highlight the main issue that occurs in cost overrun, which is that there is poor planning and prediction amongst the clients, consultants, and contractors involved. Additionally, sometimes those parties have a conflict of interest which can complicate issues such as delay in supplies. If Ethiopia wants to eliminate cost overrun, then they must start planning and managing their projects better, unifying all parties involved, and consider the worst and most unpredictable circumstances.

After reading this article, the article proves itself as valid because there are various instances where cost overrun occurs. There are bridges, highways, and roads that will remain unfinished for a considerable amount of time because of cost overrun. Most people can probably name a construction project they have seen that is unfinished and will be unfinished for days, months, and years.

Additionally, the article highlights the biggest issues of cost overrun, which are related to lack of planning and inaccurate estimations. A lot of companies are quick to leap on projects if they can enact a project, but do not think of the unpredictable circumstances such as price changes. Through this article, companies do not set a high budget, but set an exact budget. It is senseless that companies will not set a budget way higher than estimated because machines will unexpectedly break, delays will happen and cause an increase in cost of labor, people may demand more money due to working conditions, and so on.

Lastly, the article highlights that everyone involved must be unified. There seems to be a conflict of interest on what is the most and least important; the clients, consultants, and contractors do not have the same ranking for various factors of cost overrun. This situation can cost overrun in itself because they will estimate differently and have different goals after analyzing cost overrun issues which when put together, will be inaccurate.

Therefore, this article is very important and accurate because companies doing construction projects need to understand that everyone has different goals and estimations; in addition, unpredictable circumstances will occur and need to be accounted for during the planning process.

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A Summary of an Article Analyzing the Cost of Overturn of Construction Projects Done in Ethiopia. (2023, Mar 23). Retrieved from https://phdessay.com/a-summary-of-an-article-analyzing-the-cost-of-overturn-of-construction-projects-done-in-ethiopia/

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