Literature Review: Cost Overruns in Oman Construction Projects

This report presents a literature review and case studies on cost overruns in public construction projects in Oman. The study begins with a literature review defining cost overruns, exploring various causes of delays, and comparing findings from multiple research papers across different countries like the United States, Turkey, Vietnam, and Malaysia. The report then presents four case studies of government projects in Oman, including water transmission projects, building projects, and road projects, which experienced delays and cost overruns. Each case study details the original scope, change orders, time extensions, and cost implications, analyzing the factors contributing to the overruns, such as design errors, scope changes, and inadequate planning. The report highlights the impact of these variations on project costs and timelines and discusses the causes of the problems encountered in those projects. Finally, it examines the outcomes of each case study and concludes with the impact of cost overruns, and potential solutions.

Literature Review 1
COST OVERRUNS IN CONSTRUCTION PROJECTS: A CASE STUDY OF PUBLIC
PROJECTS IN OMAN
By (Name)
Course
Professor’s name
University name
City, State
Date of submission

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Literature review
According to Alzebdeh, et al., (2015 p.55): cost overrun can be referred to as cost
increase or budget overrun. It entails expenses that are more than what was initially accounted
for. Saidu & Shakantu (2016 p.104) identifies cost overrun as a happening where the final total
amount of money used in the execution of a given project surpasses the initial provisional sum.
Cost overrun can be explained as a ratio between the total amount used in a project and the total
expected project costs as calculated in the contract-bid costs (Alzebdeh, et al., 2015: 86; Lu, et
al., 2017: 122; Saidu & Shakantu, 2016: 125). Cost overrun is defined as a scenario whereby the
cost of supplied good or services exceeds the initially quoted value when the deal to supply was
being agreed on between an individual funding a project and a contractor.
The usefulness of construction ventures, regularity of projects that have run late and the
expenses associated with the lateness have proved to be a motivating factor to researchers. The
available information is vast with several outlined reasons why projects delay and also the perils
that come with them. The trading world is so vast and involves a lot of stakeholders thus the
reasons for lateness in construction projects keep changing day by day (Saidu & Shakantu,
2016).
However, different research brings out different reasons for delays over a given period of
time. Additionally, the individuals involved in the surveys taken play a part on the final result of
the reasons arrived at. An example is the financiers of project focus blame on the contractors or
consultants and they forget to assess the role they have played in contributing to the lateness
(Saidu & Shakantu, 2016). Not taking into consideration all the possible causes of lateness leads
to biased conclusions. Different individuals carry different opinions on the factors that delay
construction projects. An example is Samarghandi, et al., (2016) believe that inexperience lead to

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delays in Oman, whereas Subramani, et al., (2014) render the said factor as not necessary when
valuing the reasons. Yafai, et al., (2014) argue that poor planning, agreement of shop drawings,
change orders, hiring of workers and substandard work are the main reasons for lateness in
Oman whereas a different group, Al Zadjali, et al., (2014), think contrary to their conclusion.
In the United States just like Oman, the factors that lead to late completion of projects
include, harsh climatic conditions, lack of both skilled and non-skilled manpower and finally
inconveniences by subcontractors Assbeihat & Sweis, (2015). In Turkey, lagging was initially
researched by Bierman, et al., (2014) where they outlined that the main contributors of lateness
in projects and to be precise public funded projects are; inadequate raw materials, delayed
payments and construction errors by the contractor. Another study in the same country by Desai,
et al., (2015) outlined 83 reasons in 9 major areas that contribute to delays. The most significant
contributor was found to be; lack of experience from the contractors, poor project scheduling,
inappropriate site overseeing procedures and constant change of orders.
The increased project costs and delays in Oman are majorly contributed by; poor
overseeing by individuals in charge of the project, unaccounted for ground conditions, wrong
decision making and finally as the previous countries there is endless change of orders (Desai, et
al., 2015; Islam & Trigunarsyah, 2017). In addition, the delays are mainly facilitated by; change
orders, inadequate skilled personnel, inefficient organization and the inadequate supply of the
construction materials (Jarkas, et al., 2015). In Vietnam, after extensive research, the causes of
delayed project completion and increased overrun costs are; lack of precise deadlines,
inexperienced and unskilled personnel, poor design drawings, errors in cost estimation, lack of
funds from sponsors of the project and poor government policies (Oyewobi, et al., 2016). For the
case of Thailand, the conclusion arrived at after research outlined inadequate resources and

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manpower, inappropriate scheduling of the project, change of orders and inadequate funds as the
main reasons for delays (Sepasgozar, et al., 2015).
Oman just like the other country, experiences lateness in delivery of projects. Several
research materials were used in the study of the country and the most crucial factors identified
were, unavailability of materials, delayed payment to suppliers, change of orders, delayed
drawings submission and finally inefficient site coordination procedures (Yafai, et al., 2014). A
different research questionnaire within the same country identified the following 10 reasons for
delays and overrun cost increase in construction projects; poor scheduling, inappropriate site
supervision, lack of experience from the contractors, delayed payments, subcontractors lack of
cooperation and finally the inadequacy of both skilled labour and raw materials (Assbeihat &
Sweis, 2015).
Research done in Malaysia also concluded that financial and coordination issues are the
most crucial factors (Bierman, et al., 2014). A final survey points out unskilled manpower,
delayed material delivery, inflation, lack of enough equipment and poor decision making are the
factors causing delays in the Malaysian construction industry (Emam, et al., 2015). Although
these inquiries were conducted by different individuals in Oman, there are some factors that are
similar. The differences noted can be attributed to the different survey methods used, different
individuals approached and different compiling methods.
Case Studies
In this section, we will look at 4 case studies of projects done by the Oman Government
that experienced delays and cost overrun. These projects include water transmission projects,
buildings, roads, and ports. The delivery system used in constructing all the mentioned projects

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involved the traditional method, where the client hires the architect as a consultant and later
select a contractor from a tendering process. All the case study projects are unit price types.
Clause 55 and clause 56 talks about the estimated quantities and the actual quantities respectively
on the standard document of building and civil engineering works are mainly used for
substructure purposes and superstructure respectively (Collins & Parrish, 2014). Clause 55 gives
an allowances of quantities to be re-measured due to omissions, actual site conditions, and errors
in the Bill of Quantities. The table below shows the cost overrun
Table 1: Time Extension caused by Change Orders for the Case Studies
Case number Original time (days) Total time extension
(days)
Time extension/original
time (%)
1 608 52 8.55
2 365 365 100
3 731 154 21.1
4 824 274 33.25
Case study 1: Water Transmission Project
The scope of tasks to be carried out in this project included construction, commercial operations
and commissioning. The Water Transmission Project involved storage reservoirs, pumping
stations, and different transmission pipelines. This project was part of the projects commissioned
in sea water desalination plant that was carried out by a number of contractors. A number of
change orders were issued as shown below;

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The change order number 1 occurred to cover the cost of redirecting the pipeline due to the legal
right granted to pass through the main high way and the change of the foundation design from
raft to pile foundation. This order change caused delays and the governments delays to purchase
the desalinated water from its purchasers and browser it to the customers. Change order 2, arise
in dear need to cover up the cost of levelling the area between the reservoir and the desalination
plant including the construction of the guard house and the filling station that were not initially
included in the bill of quantity (Al Zadjali, et al., 2014). Change order 3 came about to cover the
cost of delays paid for the items such as insurance, site facilities, and other items. Change order
number 4, was issued to cover for the cost of redirecting the pipeline from passing through
houses and private farms.
The above changes cost approximately US$7,539,216, which was about 16.75% of the
original sum contract (Al Zadjali, et al., 2014). This variation can be classified into two sets, i.e.,
client related and consultant related. The first group include the variations caused by the client
new scope of additional requirements, which included the construction of the guard house and
the filling station and leveling the area between the desalination plant and the reservoir. The
second group was as a result of design errors that were caused by rerouting and changing the
foundation design. The second type of variation could have been avoided by field survey, being
aware of the local regulations, and doing a proper soil investigation. The first type could have
been avoided by proper phasing and planning of the project. It is evident that the consultant
related causes gave birth to the client’s related causes. As a result of the cost increase, an 8.58%
extension of time was granted (Al Zadjali, et al., 2014).
The total cost of variation surpassed the cost contingency. In Oman, such problems of
cost overrun are sorted out by borrowing additional funds from the government or transferring

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some funds from other ongoing projects to cover up the costs in a particular project. The first
method is always accustomed to delays caused by the government before remitting the funds
needed while the second method leads to the reduction in the scope of such projects or even post
ponding them until the time the funds are allocated. This clearly shows how variations in projects
requirement may cause delays and disrupt client’s plans, in addition causing confusion in the
management of the project (Alzebdeh, et al., 2015). Moreover, this could become even more
complicated if the client could not be in a position to remit the additional funds required and in
such a situation, the project could have been suspended for unknown period.
Case Study 2: Building project
The original scope of the building project involved the construction of two typical school
buildings. Building A and B each classrooms consisting of three floors with an approximate area
of 7, 650 m2. Change order 1 was issued when the owner needed another similar building C that
has the same design as building A and B, although serving the school with different functions
such as offices, halls and labs. etc. Due to the change of use of building C, the building was
modified into a larger space of 9130m2, and scopes including structural, windows, doors,
plumbing, air conditioning, electrical etc. (Alzebdeh, et al., 2015). Therefore, leading to change
order 2. During the construction process, the client realized that the additional cost cannot be
covered within the budgeted amount and requested for a reduction in the scope, which resulted in
the demolition of larger partitions in the building. However, just before the completion of the
works, the client demanded for the reparation of the floors to sublet more offices that can be able
to fit within the floor area as much as possible, which led to the issue of change order 3 and
more time overrun.

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This case study shows that there was no proper planning of building C, and the new
changes were not carefully evaluated before the contractor was issued with the new scope of the
building. It was also observed that the changes in the building disrupted the flow of work since
the contractor was made to demolish some of the works and reconstruct several parts in the
building. In the long run, the final cost of building C increased from $3,508,771 to $4,996,046
which meant that there was 42.4% increase from the original cost while the construction time
doubled (Al Zadjali, et al., 2014). The above issues could have been avoided if the client’s needs
were tabled at a go and billed within the available budget. Moreover, the consultant could have
advised the client on the possible risks of changing orders on the project’s cost and progress.
Case Study 3: Road Project
This project entails construction works of a 74 km road using asphalt material. The design of the
road was based on the existing route of the track. A make shift road was constructed by the
directive of change order No. 1 for diversion of traffic in the course of the construction works.
Coastal sediments bearing sabkha soils that usually contain high amounts of salt together with
low bearing capacity got discovered during construction in some sections of the road going up to
a depth higher than 80 cm. The consultant therefore had to redesign the cross-section of the road
detailing more excavation and embankment by a reinforced geo-grid (Al Zadjali, et al., 2014).
This additional works in the design led to change order No. 2, where if summed with change
order No. 1 had a net effect exceeding 10% of value of the contract. The contractor therefore had
the right ask for new rates to cover the additional works. Change order No. 3 came as a result.
Some of the mistakes that the consultant made were;

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● Inadequate geo-technical investigation for assessment of quantities and estimation of
Sabkha soil depth.
● The design did not incorporate detail of the temporary road that was constructed.
The aforementioned mistakes caused an increase in the project costs by R.O 1,010,730 and
$2,607,663 representing 35.6% positive variation of the initial cost (Al Zadjali, et al., 2014). An
appropriate survey inspection and well detailed design should have minimized the associated
risks.
Case Study 4: Port Project
This project entails 4.2 km of breakwaters construction for a sea port as well as a fishery harbor.
The activities under scope include;
● Dredging
● Ground replacement
● Disposal of material after dredging
● Construction of rock core, concrete armor, concrete crest walls and rock armor.
It was discovered later after the project had been awarded that the breakwater construction
using CORE-LOC Armor would save costs as opposed to the earlier stated STABIT Armor units
(Al Zadjali, et al., 2014). A negotiation involving the client and contractor brought up savings on

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cost of Change Order No. 1. Change order No. 2 and an extension of one month were offered by
request of client for port entrance relocation and design modification of breakwater to allow for
access by vehicles to the bulk liquid berths, turning and passing bays as well as provision of
lights for navigation on roundheads of the breakwater.
As construction went on, the contractor received a directive to halt the works awaiting the
client to decide on some modifications leading to Change Order No. 3. Discovery by the owner
that change of construction method would bring savings brought the variations even before the
start of the construction. Hence an agreement between the client and contractor to share the
savings. This illustrates the limitation in the feasibility study conducted by the consultant in the
investigation of the most appropriate design alternative that is cost friendly (Al Zadjali, et al.,
2014). The savings on cost would have been higher and there was no need of the client sharing
the savings with the contractor. Moreover, time should not have been wasted by the change of
construction method. Variations brought by modification of breakwater imply lack of clarity of
the project objectives in the design phase. The consultant ought to have knowledge of all
objectives and advice accordingly the best design and detail design specifications, giving the
owner an assurance of a clear plan (Al Zadjali, et al., 2014).
A review of the third variation indicates uncertainty in the requirements of the owner and budget
failing to fulfill all the project costs. The time extension by the owner to reach a decision of
going ahead or not with the construction of the fishery harbor led to additional variation.
Mitigation Measures for Cost Overruns

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Delays and cost overrun can be avoided if emphasize is put into the level of technology
that is being put in place in current projects (Jadhav & Bhirud, 2015). The mitigation procedures
that will be put in place should be first categorized and studied independently. After close study
of the factors causing cost overrun, the lead 5 factors were taken and 90 measures to avoid them
were brought forward. After identification, the mitigations were further divided into 4 main
classes. They include; preventive, predictive, corrective and organizational. These mitigation
measures can at some be fluid and can now and again seem like they could be grouped into more
than one class, contingent upon their real use amid the undertaking (Oyewobi, et al., 2016)
Cost overrun mitigation methods were also identified and classified into three major
classes which include proactive, reactive and organizational strategies (Sepasgozar, et al., 2015).
The proactive and organizational methods share a lot in common with the preventive and
organizational ways recommended in the above paragraph. Reactive ways are initiated to avoid
the factors that are the major inducers of the cost overruns whereas the organizational means are
the usual mechanisms put in place by an organization and are not tied to a single project but can
cause an impact to all projects. For example, reactive and organizational; proactive and
organizational; proactive and reactive and organizational control measures. The issues identified
in each control measure are well detailed in figure 1 below;

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Figure 1: Control Measures
Source: (Al Zadjali, et al., 2014)
Additionally, two other concepts were proposed with the aim of reducing the overrun
budgets on construction projects. They entailed reference-class forecasting and increased public
sector accountability which would entail more engagement of the private sectors (Alzebdeh, et
al., 2015). Another group, (Bierman, et al., 2014) proposed three main places on how to cut

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down the issue of cost overrun in a project. The first was decentralization of expenditure in
which the cost overruns of a single project in an area result into decreased cost overruns of
another project within the same area. This system makes it possible to monitor the point at which
the cost overruns happen and the individual who is the main cause of the problem. The final one
is through making sure there is audit and inspection of the project by individuals who are not
direct beneficiaries of the project regularly as the project progresses.
Collins & Parrish, (2014) put forward steps to be used to avoid the repercussions of cost
overruns in a given project. The steps included; a reasonable bill of quantities, matters arising
during the construction process taken into account, competent contractor hired, audit of funds
during the construction process and proper communication systems put in place. Finally, Yafai,
et al., (2014) summed all up by saying that site overseeing factors are the most important issues
causing cost overrun thus an improved way of managing the site and its supervision will greatly
reduce the anomaly.

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References
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