Causes of Cost Overruns in Construction Projects

Running head: COST OVERRUNS IN NEW ZEALAND CONSTRUCTION INDUSTRY
Cost overruns in New Zealand Construction Industry
University Name
Student Name
Authors’ Note

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COST OVERRUNS IN NEW ZEALAND CONSTRUCTION INDUSTRY
Table of Contents
Introduction................................................................................................................................2
Construction Projects in New Zealand.......................................................................................2
Definition of cost overruns.........................................................................................................4
Cost Overruns in International construction projects.................................................................5
Review of Prior Evidences.........................................................................................................7
Categories of cost overruns........................................................................................................9
Measures of Control.................................................................................................................14
Measurement............................................................................................................................18
Conclusion................................................................................................................................20
References................................................................................................................................20

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COST OVERRUNS IN NEW ZEALAND CONSTRUCTION INDUSTRY
Literature Review
Introduction
The issue of cost overrun in specifically construction sector is common throughout the world
as well as the construction segment is not an exception. The primary objective of the current
study is to identify both the causes of cost overruns in particularly construction projects. The
current section presents a comprehensive review of literature from diverse sources in a bid to
undertake the current study. The objective of this study is to evaluate cost overruns on
construction projects in New Zealand, different categories of cost overruns, different factors
affecting cost overruns particularly during implementation of costs of construction.
Construction Projects in New Zealand
The construction segment can be considered to be an important contributor to the economy of
New Zealand, presenting 8% of the gross domestic product, 10% of particularly national
employment, a contribution that is developing; diversifying and certain sections are
essentially becoming more effective as the segment develops (Chappell et al., 2018).
Nevertheless, the segment put up with a number of internal as well as external constraints that
limit overall productivity along with performance. The current segment throws light on value
of construction segment, the important role that it plays in the economy of New Zealand.
Nevertheless, it recognized that the boom-bust feature of the segment was necessarily an
issue, and was a barrier to enhance productivity together with overall performance. The main
focus of the government has the need to be developed for the segment, permitting it to
maintain and design skills.
Construction sector essentially plays a significant part of the economy of New Zealand

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In essence, the construction segment plays an important role in the economy of New Zealand,
thereby contributing towards higher level of employment, better businesses as well as
augmented gross domestic product. Essentially, the construction industry can be considered
as the fifth largest segment in terms of employment, consisting of 178.100 FTEs along with
53.600 FTEs in particularly construction associated services. In essence, this necessarily
accounts for approximately 10% of total employment across the entire economy. In
particular, one of the major 10 industries in terms of contribution to gross domestic product
of New Zealand is the construction industry. Shehu et al., (2014) suggests that the
construction industry replicates highest growth rate particularly between the year 2012 as
well as 2015. In addition to this, this accounts for approximately 10% of the entire
employment throughout the entire economy (Ibrahim & Shakantu, 2016). Thus, it can be
hereby mentioned that core construction contributes towards generation of around 26000
jobs, or in other words, one job out of every five new jobs that are generated in particularly
the nation New Zealand. Again, on the other hand it can be hereby mentioned that there are
several traditional sectors namely, agriculture, fishing as well as forestry between the
financial years 2012-2015 that presented approximately 330 new jobs chiefly over the same
time period.
As suggested by Sambasivan et al., (2017), roughly 54% of gross fixed capital of the nation
New Zealand was mainly facilitated through construction industry. In essence, this replicates
that the segment plays an important role in developing infrastructure stock of the nation New
Zealand that is necessarily then base of productivity as well as economic rate of growth.
Particularly, construction actions are focussed in three different regions namely Auckland,
Wellington as well as Canterbury. Presently, just about 25% of the entire GFCF investment
carried out by public sector entities (Waithera & Susan, 2017). This specific fraction is

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characteristically higher at lower points particularly in the construction sector cycle and it is
noted to be around 31% in the year 2010.
Definition of cost overruns
Particularly, in normal terms, cost overruns that are also known as cost escalation increase in
cost, or else overruns of budget can be considered as the excess of actual cost over the
approximated budget. As rightly indicated by Shehu et al., (2014), cost overrun can plainly be
indicated as when the final cost of the particular project surpasses the original
approximations. Also, this can be considered as the variance between original cost
approximation of a project and actual construction cost on conclusion of the entire work.
Cost overruns in construction projects can happen owing to varied reasons. A specific study
in Ghana regarded twenty six different factors that generated cost overruns in the area of
construction industry of specifically ground water projects. The overall results of ranking
from the viewpoint of three different parties engaged. This reflected that the most significant
cost overrun factors comprise of management of poor contractors, monthly difficulties in
disbursement, material procurement, and poor technical performance along with escalation of
prices of material (Ahiaga-Dagbui & Smith, 2014).
Cost Overruns in International construction projects
Cost overrun in particularly construction projects in Saudi Arabia (perspective of
contractors): Performance of cost of a specific project is normally an important
consideration for various construction parties. Over and over again, cost overrun can be
considered to be one of the most recurring issues particularly in the construction sector and
this can have an adverse influence on success of the project from the perspective of quality,
level of safety, overall quality, time as well as cost (Sovacool et al., 2014). Essentially, this

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study is undertaken to examine overall cost overrun in diverse construction projects in the
nation Saudi Arabia in a bid to recognize diverse reasons behind overrun of cost and their
significance as per contractors by means of a questionnaire survey.
Review of case of Jordan for analysing factors influencing
As mentioned by Senouci et al., (2016), majority of the construction projects in developing
nations are featured by overruns particularly in time. Particularly, this specific research was
undertaken in an attempt to recognize different facets for such overruns in characteristic
developing environment of Jordan. Again, a descriptive study was undertaken and two
different types of data were acquired. There are different overrun variables that were
extracted from prior academic literature and from a thorough assessment of perception of
around 30 engineers and thereafter ranked as per Severity Index. This study identified top 10
factors directing towards time overruns in particularly construction projects and treated by
employing Principal Component and Factor Analysis (PCFA) (Mulla & Waghmare, 2015)
“Study of association between time and cost overrun as well as productivity on
constructions”
As rightly indicated by Larsen et al., (2015), majority of construction sites, the most excellent
performance are unattainable with poor level of productivity leading to overrun of time and in
consequences escalation of cost of different projects. Analysis of article as per the views of
Olaniran et al., (2015), construction productivity has constantly declined. In essence, the
issue of lower level productivity is not restricted to the nation of Nigeria. Subramani et al.,
(2014) witnessed that construction efficiency in particularly the United Kingdom was lesser
than in loads of other European nations regardless of the encouraging ciphers witnessed
during the boom of 1980s. As such, it can be hereby said that there is not anything as perilous

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to a nation as a shrink in productivities as it generates inflationary stress, social disagreement
and mutual distrust (Saidu & Shakantu, 2016).
“Time overrun and cost effectiveness in the construction area”
In essence, project management is considered as the art of directing as well as coordinating
both human in addition to material resources all the way through the life of a venture by
utilizing up to date management techniques to attain programmed objectives of capacity, cost,
time with quality along with satisfaction of participants. Especially, the construction industry
is more often than not huge, intricate and dissimilar from other sectors. In essence, this
sectors calls for much investment and engages different categories of participants. However,
one of the most widespread actions in the system of administration is planning. Developing
the project plan can be regarded as the first thing that needs to be considered at the time of
carrying out any type of project (Senouci et al., 2016). Nevertheless, there are numerous
people who fail to understand the overall value of a scheme in saving particularly time,
money, along with many other issues.
Review of Prior Evidences
As indicated by Senouci et al., (2016), there are several research papers that are published
and numerous studies are undertaken on the theme of cost overruns in developing projects on
civil engineering. A study undertaken reflected that just 16% of all projects executed could
meet the three different criteria of performance. The three different criteria of performance
include completion of different projects on specified time, well within the predetermined
budged cost along with quality standard. Again, another study assessed the records of over
and above 4000 projects on construction and observed that projects are hardly ever completed
within the assigned budgets. In addition to this, it was also witnessed that cost overruns were
regular phenomenon in global construction industry. In essence, in an international study

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carried out on cost overrun concerns in transport communications projects containing 258
projects in approximately 20 nations, it was observed that roughly 90% of the adopted
projects encounter the issue of cost overrun and essentially performance of projects from
perspective of cost has not enhanced with passage of time, since it is the identical order of
scale as it was previously. Chappell et al., (2018) mention that cost overrun in particularly
construction projects can take place due to different reasons. Also, there are a number of
scholars who have examined different reasons of cost overrun in diverse nations. Particularly,
a specific study undertaken in Ghana regarded 26 different factors that generate cost overrun
in particularly creation of framework of ground water development projects (Shehu et al.,
2014). In essence, the overall outcomes of ranking based on the viewpoints of three involved
parties namely (Clients, contractors as well as consultants) pointed out that most significant
cost overrun facets are poor management of contractors, difficulties in payments on monthly
basis, procurement of material, meagre technical performances as well as hike of prices of
material.
Particularly, in Nigeria, approximately 42 different factors of cost overrun were examined.
Based on the study, it was observed that lack of familiarity, skills as well as experience of
contractors, movement in the materials prices, regular changes in design, non monetary
stability along with rates of high interest charged by different banks on their loans were
overriding factors generating cost overrun. Particularly, in the nation Kuwait, an extensive
study was undertaken on the residential projects carried out by private sectors (Ibrahim &
Shakantu, 2016). Essentially, the study reflected that contractor associated concerns; material
linked issues along with financial restraints were the most important reasons of overrun of
cost. Particularly, in Malaysia, a research work assessed huge projects and observed that flow
of cash and financial concerns encountered by contractors, poor management of site by
contractors as well as supervision, insufficient contractor experience, dearth of site workers,

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erroneous planning and arrangement by service provider were most rigorous factors whilst
alterations in project scope and repeated design alterations are least upsetting facets on cost of
construction (Sambasivan et al., 2017).
As indicated by Waithera & Susan (2017), a detailed study undertaken on construction
industry of UK detected 21 important factors leading to overrun of cost. However, the most
important factors among them are: design alterations, risk as well as uncertainty related to the
projects, erroneous estimate of time as well as cost, meagre performance of various
subcontractors and intricacy of works. Again, in yet another developed nation (specifically,
Canada), an extensive study was undertaken which intended to discover the causes for cost
along with scheduled overruns in particularly oil and gas mega construction projects. 87
senior project managers across global were surveyed for arriving at conclusion as regards the
primary causes for cost overruns (Shehu et al., 2014). However, the main concerns
discovered are: the deficiency of knowledge regarding the project and its intricacy, mistaken
costs estimation, nonexistence of a plan that deal with the alterations in design and necessities
of execution and the dearth of managerial stratagems.
Ahiaga-Dagbui & Smith (2014) mentioned that another research work was carried out to
examine the specific factors affecting the cost overrun on mainly high rise buildings in the
nation Indonesia. Results of the study indicated that the prime factors exerting influence on
cost overrun are necessarily cost enhancement of prices owing to inflation, imprecise material
approximation and extent of project intricacy. In the same way, in Vietnam, an extensive
research discovered that the major five facets generating cost overrun in huge construction
projects include improper management of site and administration, dearth of support in project
management, financial difficulties of owners and transformation in design (Sovacool et al.,
2014).

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Categories of cost overruns
Cost overruns due to inaccurate approximations
Different categories of cost overruns depend on different causes leading to the same. In order
to maintain overruns at a minimum level, it is important to undertake certain effective
strategies and processes of implementation to keep the construction projects within
constraints of budget. Whilst majority of stakeholders of a project are willing to get started
with the project, there are faulty schedules as well as budgets to commence with; the
construction project is necessarily headed for particularly overrun from day one. Owing to
competitive nature of particularly bidding procedure, approximations might suffer from
various wrongful anticipations of the scope of work counted in the specific project. However,
in several cases, certain projects will also be approximated on a one size fits all, with
opportunities of exceeding that initial estimate high (Senouci et al., 2016). Thus, it is
important to the success of the project to diligently carry out the process of pre-construction
planning and be accurate and at the same time realistic regarding deadlines of projects along
with costs from particularly architects as well as contractors. Approximating the project in an
accurate manner can be started in the RFP procedures. In essence, this is the chance where
architects, contractors as well as owners can express their issues over specific budget along
with timelines of the entire project. In case if any one of the parties seems to be unrealistic
regarding timing or else budget, then this can be considered as an immediate red flag or a
warning signal that this specific project can head towards an overrun. Although pre-
construction along with design services might perhaps contribute towards around 15% of the
budget in case if this procedure can successfully recognize potential concern before
construction actually starts (Mulla & Waghmare, 2015). In essence, this 15% shall
necessarily be nothing compared to the total amount of wealth saved for the overall procedure

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down the line. Due to this opportunity for savings of cost, pre-construction is regarded to be
an important as the building stage as it truly lays the foundation for an intricate project. In
essence, a solid phase of planning mainly before groundbreaking makes certain that that there
is a superior procedure of documentation, less confusion between managers and a solid
schedule of project.
Cost overruns due to errors in design of projects
In case if the plans of project designs are flawed, then it can direct the way towards overruns
of cost even though there is proper allocation of time as well as resources for appropriate
budget as well as schedule approximations particularly in the pre-construction planning
phase. As rightly suggested by Larsen et al., (2015), deficiency in design refers to poor
design, inaccurate or else incomplete plan. Olaniran et al., (2015) suggests that deficiencies
are extremely common and can be regarded as a pain point for different owners as well as
designers. Essentially, a study from Engineers Daily approximated that errors in designed
stood for approximately 38% of disputes of all construction projects. Concurrently,
incomplete otherwise inaccurate plans or schemes almost always lead to substandard work
from different contractors completing the work that can show the way to legal encounters
down the line. In the design phase itself, software for the construction projects can help in
decreasing risk of errors else wise incomplete designs. As rightly indicated by Ahiaga-
Dagbui & Smith (2014), management of project can be said to be better served with
particular software that can incorporate real time alterations into account. In case if the
project experiences unexpected alterations in the scope else wise one of the processes, then it
becomes comparatively easier to initiate these kinds of alterations into a dynamic digital
model of he entire landscape than to redraw explicit models on document. On the other hand,
to enable different contractors as well as sub contractors to develop as per specifications of
design, owners along with contractors need to convene on specific scope of the work as well

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as performance responsibilities in particularly the contract phase (Mulla & Waghmare, 2015).
In particular, this documentation have the need to include clear different references to
different specifications of project on design documents, warranties of the precise work that is
to be completed by contractors. Ahiaga-Dagbui & Smith (2014) say that this can be regarded
as a risk allocation chart and a procedure for different unforeseen concerns. Primarily, this
agreement needs to define different dispute resolution along with process of mediation, in
case if the disagreements take place during construction. In this regard, it can be hereby
mentioned that addition of added level of security can make certain that designs are
appropriate and expectations are clear and project. This in turn can also ensure that projects
do not undergo overruns owing to corrective actions in the phase of construction (Mulla &
Waghmare, 2015).
Improper planning for changing orders
In conjunction with errors in designs, change orders are yet another common reason for
overruns of cost in projects of construction. In essence, a change order stems when a specific
owner otherwise a contractor realises that designs are not working properly or might perhaps
attempt to introduce novel spaces, fixes or requirements after initial models as well as
budgets have been completed. Supplementary necessities will normally lead to superior costs
and that can obviously negate original project budget. In essence, supplementary time,
materials as well as man power necessary for completing novel initiative might also to be
categorised as an overrun of costs in case if the augmentation affect different other aspects of
entire project. As a consequence, alterations might perhaps be handled properly in the phase
of contract, at the time when a change order provision can be added to specify processes and
budget required (Mulla & Waghmare, 2015). In case if it is not addressed ahead of time,
different contractors might possible think about enhancing overall cost of contract
particularly in anticipation of alterations or disputes that could stem in case if they did not

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properly plan for the overrun. In case if specific construction software is utilized, then new
level of functionality whilst decreasing the total number of resources utilized. Even though
scope changes are necessary, then they need to be handled proactively and considered in
advance to lessen the probability of cost overruns in diverse construction projects.
Administration Errors leading to Cost Overruns
With solid designs as well as no changes in project, projects can still experience overruns in
case if project administrators are not up to accelerate with progress of success. In essence, at
the time when small errors take place between teams of administrator, the outcomes can be
disastrous. In addition to this, in case if communication lines between particularly
administrators are restricted, issues that take place on one aspect of a certain project might
perhaps become known to other project managers until it becomes too late. There are several
contractors as well as owners who are of the opinion that the best solution for mainly bad
administration is mainly to enhance overall size of the team of administration. The rationale
behind this is that administrators can concentrate particularly on the particular project area
when there are individuals on the job (Mulla & Waghmare, 2015). Nevertheless, this might
possibly be the best solution particularly in the long run since enhancing total number of
individuals in the administration can direct the way towards failures in collaboration that
might certainly engage overrun of cost. As opposed to adding more to the team of
administration, there is need to equip the entire team with appropriate tools. In essence,
project management software can aid in playing the role of numerous administrators.
However, unlike conventional administration, software provides the capability to view the
entire project from varied angles, keeping up with varied scenarios. Notions can be altered
digitally and compared alongside to prior iterations of the project However, when it is about
manual faults in invoicing, process of accounting and delivery monitoring that can lead to
overruns, soft3ware can also aid in the process of lessening overall risk. As correctly

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mentioned by Olaniran et al., (2015), administrator errors are rather simple to avert with
software system that guarantees the accuracy of different project documents and provides
alarms for deliveries. With the additional support digitally, administrators will have entire
visibility along with flexibility into project to preserve operations as well as logistics working
effortlessly.
Poor Management Site
As rightly indicated by Larsen et al., (2015), there are different aspects of a specific project
that need to be kept on track during process of construction. Unfortunately, this does not
always go as planned directing towards severe cost overruns in different construction
projects. Personalities also engage in conflicts with site of the project changes all of a sudden.
In essence, an inherent trust gap occurs between owners and different project contractors
might already exist due to natural interest conflict between two different parties. In essence,
this can have devastating influence on overall momentum of the project. Enhancing
communication on site with construction software can lessen certain issues with site
management. Again, with software, enumerations as well as designs can be referred to
digitally for accurate reading and diverse scenarios can be examined alongside to assess the
ones that can direct the way to superior outcome (Mulla & Waghmare, 2015). As digital
enumerations are assured to be accurate and software designs can be trusted to appropriately
depict on site descriptions, decisions can be made quickly founded on solid information. As
rightly indicated by Olaniran et al., (2015), the appropriate software also delivers more
opportunity for collaboration. Online admittance to designs as well as scenarios permits for
higher communication from remote locations. In particular, decisions can be essentially
framed whole project leaders are particularly on site, assessing the issue directly. Ahiaga-
Dagbui & Smith (2014) mentions that faster communication can direct the way towards

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better decisions since real time insights can help in addressing a specific situation before it
turns into a bigger concern and links the budget.
Fixing overrun of cost in varied construction projects
Larsen et al., (2015) correctly suggests that lessening cost overruns can prove to be a priority
in the process of planning. Evaluation of reasons for cost overruns along with incorporation
of right solutions can bolster the capability to implement difficult projects with higher
control. By means proper planning and with the help of construction productivity software, it
is possible to considerably reduce overruns in the project and develop higher amounts of
profits.
Measures of Control
As rightly put forward by Olaniran et al., (2015), proper planning might perhaps help in
preventing several problems that can necessarily haunt a specific project on construction
particularly all the way till its completion. In essence, there is always a cost overrun scheme
for majority of projects on construction, but situations occur that lead certain projects to set
out off track which again make overruns of cost unavoidable. Important members of project
remaining on top and combating project cost overruns encounter problems by unearthing and
staying attentive to ways of avoiding the issues from deteriorating. As correctly mentioned by
Ahiaga-Dagbui & Smith (2014), one significant footstep of project management is to
measure up to budgeted/estimated project with particularly the concluded actual project.
Again, cost overruns also have the necessity of a constructive evaluation (Mulla &
Waghmare, 2015). Essentially, once the specific project is entirely finished, and costs
incurred for the project are disbursed, a inquisition meeting with important individuals of the
team of project management to talk about rights as well as wrongs is highly suggested.

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Larsen et al., (2015) suggested the necessity for project owners as well as architects to closely
operate to complete the entire design or drawings particularly before preparation of project
approximations else wise awarding contracts in a bid to avert erroneous project estimates and
thereafter cost overruns as a consequence. Olaniran et al., (2015) recommended that risk
analysis of varied uncertainties can be carried out for arriving at an appropriate contingency
cost, and necessarily this needs to be further added to the estimate of budget. Again, in areas
of cost planning procedures, both economists of design along with architects ought to
participate (Ahiaga-Dagbui & Smith, 2014).
As rightly put forward by Ahiaga-Dagbui & Smith (2014), management of a firm has the
need to identify overrun in actual cost in specifically the field of construction at the period of
commencement of the project and sketch remedial measures specifically at the start itself to
lessen overall influence of cost overrun. Olaniran et al., (2015), mentioned that majority of
causes of setback, stoppage of projects and subsequently cost overrun of different
construction project link to human as well as management issues and consequently improve
the potential of managers as well as engineers might alleviate cost overrun.
Larsen et al., (2015) suggested measures for instance ascertainment of fitting financing at the
stage of planning, incessant work-schooling programs with techniques of management of
project and procedures, effectual and resourceful procurement scheme and satisfactory
contingency allowance for the purpose of alleviating overrun of cost and setbacks.
In order to minimize delays in time along with overruns of cost Sovacool et al., (2014)
suggested the following policies
ü Make certain availability of sufficient finance,
ü Execute proper preconstruction scheme on various tasks as well as resources

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ü Allocation of ample time along with money for phase of design
ü Hire an self-governing, control engineer (Sovacool et al., 2014)
ü Selection of an able consultant along with reliable contractor.
The client has the need to carry out the following in order to diminish delays in time and
overruns of cost.
ü Agree to adequate time to organize and arrange project briefs along with feasibility studies
ü Make certain that adequate finances are accessible before projects are initiated
ü Make certain that contractors can institute an effectual system of material management
ü Executing institutional strengthening along with development of manpower in diverse areas
of management of project, utilization of information and management of data base.
Shehu et al., (2014) suggested nonstop professional development measures, methodical
exploration of site, evidently defined matrix of roles as well as accountabilities, brief
regarding client, techniques of management of value, bridging identified gaps in insight
between the diverse groups as several measures to tone down delays in projects, that in turn,
will alleviate overrun of cost. According to their views, effectual management of project site
can be considered to be an important factor for enhancement of productivity.
Olaniran et al., (2015) recognized 90 different measures for mitigating overall influence of
the top five important cost as well as time controls of particular project and categorised them
under preventive methods, predictive dimensions, corrective measures as well as
organizational dimensions. In essence, they concluded that even though external facets are
normally tricky to control or ahead of control of managers, overall frequency of incidence is

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in general low. Conversely, internal factors are necessarily persistent and call for constant
control.
Senouci et al., (2016) indicated that research on plant of petrochemical and their incentive or
else disincentive contracting backs the usage of incentive or else disincentive stipulation to
enhance overall productivity of labour and lessen overrun of cost. Olaniran et al., (2015)
suggested the following for the purpose of development of capable and effectual best
exercises to enhance construction efficiency:
ü programs of incentive as well as recognition
ü Proper transport system for people to reach remote sites.
ü enhancing management of labour along with relationship
ü Overtime and management of schedule of work
ü Appropriate management of different tools, scaffolding along with diverse equipment
As rightly suggested by Senouci et al., (2016), there are different ways of eliminating delays
and overruns of cost founded on interviews conducted with project managers
ü To keep away from price hikes, it is important to carry out long term agreements with
suppliers of construction material, various sub-contractors along with labor suppliers.
ü Avert substructure operations during particularly the rainy season.
ü Preserving as well as updating cost data base of chiefly equipments and specific materials
at a particular unit price.
ü Institute the logistics appropriately in order to maximize overall productivity.

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ü Deliver accommodation and at the same time arrange different welfare facilities for
different workmen to curtail absenteeism and make best use of productivity
Founded on review of literature presented above, there are 83 different variables that generate
cost overrun together with 69 best exercises that can alleviate cost overrun that were
recognized in review of literature.
Measurement
Index analysis can be used for measurement of cost overruns in construction projects based
on primary data that are available from survey questionnaires. Quantitative analysis can be
carried for different types of indices
As correctly mentioned by Senouci et al., (2016), severity index can be used for the purpose
of expressing severity of different facets that generate overruns and can be calculated using
the below mentioned formula:
In addition to this, frequency index can be used to analyse the frequent occurrence of
different factors that show the way to overruns of costs (Saidu & Shakantu, 2016). The
frequency index can be enumerated utilizing the below mentioned formula:

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Yet another important index of measurement of overrun of cost is the Importance Index The
Important Index indicates overall significance founded on severity as well as frequency and it
is enumerated using the below mentioned formula:
Further, the effectiveness analysis can be used for measurement of cost overruns (Saidu &
Shakantu, 2016). This index can express overall efficacy of a particular mitigation measure
for controlling the cost overrun and it is enumerated using the mentioned formula:
Spearman’s Rank Correlation
As rightly indicated by Subramani et al., (2014), rank correlation method is also utilized for
the purpose of analysing nature and degree of agreement or else disagreement between
different parties (that is to say, owners and contractors, among different consultants as well as
contractors and many others). This method can be considered to be extremely vital for
measurement and comparison of association between rankings provided to two different
parties. Therefore, correlation can be checked between frequencies of particularly overrun of
cost among different stakeholders of particularly the construction industry. In addition
correlation of different index is also to be carried out for thorough assessment.
Conclusion
In conclusion it can be said that mitigation strategies are formulated for handling different
common challenges of overruns of cost in construction projects. In general, it can be said that

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findings in prior literature suggest that external factors are hardly ever influential in cost
overruns and only internal factors and particularly human resource related factors are
extremely important for exerting influence on cost overruns. Since the principal causes are
majorly internal, it is quite possible to minimise the overrun of costs by way of adoption of
proper methodology and system of management of projects and different measures of control
that are adopted are discussed in detail in the study at hand.

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References
Ahiaga-Dagbui, D. D., & Smith, S. D. (2014). Rethinking construction cost overruns:
cognition, learning and estimation. Journal of Financial Management of Property and
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Chappell, N., Jaffe, A. B., & Le, T. (2018). Worker Flows, Entry and Productivity in the New
Zealand Construction Industry(No. w24376). National Bureau of Economic Research.
Ibrahim, S., & Shakantu, W. M. (2016). A Conceptual Framework and a Mathematical
Equation for Managing Construction-Material Waste and Cost Overruns. World
Academy of Science, Engineering and Technology, International Journal of Social,
Behavioral, Educational, Economic, Business and Industrial Engineering, 10(2), 587-
593.
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