Cost overruns – helping to define what they really mean

Invernizzi, Diletta Colette; Locatelli, Giorgio; Brookes, Naomi

doi:10.1680/jcien.17.00001

Cited by 22 publications

(16 citation statements)

References 20 publications

(10 reference statements)

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“…A delay event, traditionally described as an event yielding an overrun in allocated time beyond a planned completion date contracting parties agreed for project delivery [20], can result in cost overruns [21]. Although there is no one universal definition for cost overruns [22], this research aligns with the interpretation by Ahiaga-Dagbui, et al [12] as "the difference between project completion cost and budgeted cost at project approval". Cost overruns are influenced by variables within the political, social, technical, and psychological root causes [19].…”

Section: -Literature Reviewsupporting

confidence: 63%

The Influence of Optimism Bias on Time and Cost on Construction Projects

2021

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The unresolved scholarly debate to curtail cost and time performances in projects has led to alternate solutions, departing from the dominant technical school of thought to include concepts from behavioural sciences. In this paper, we consider the psychological effect, namely optimism bias, as one of the root causes for delays in cost overruns on projects. The research objectives were to determine the level of bias among project participants, rank time and cost overrun causes according to the participants’ bias score and establish a mitigation strategy to curb potential delays and cost overrun impacts based on the bias scores obtained. A literature survey was conducted to determine causal factors contributing to delays and cost overruns linked to optimism bias. Through a pilot survey of three semi-structured interviews, eighty factors obtained from the literature survey were reduced to 24 critical delay and cost overrun factors relevant to Trinidad and Tobago. A questionnaire was subsequently developed seeking construction professionals to rate their bias scores based on an 11-point Likert scale. The research confirms that project planners and decision-makers exhibit moderate levels of optimism bias; however, participants lacked awareness of the impact of optimism bias on projects outcomes. Project location, environmental impacts and historic preservation, and labour disputes are the top three critical factors where project professionals displayed increased optimistic tendencies. It is proposed that contingency “time window” and reference class forecasting be implemented as control mechanisms to mitigate the impacts of time and cost overruns on projects. This research introduces a novel method to account for and measure optimism bias on construction projects. This study adds knowledge into delays and cost overruns causation and provides a foundation for future studies on quantifying psychological effects on projects and enhancing overall project management practices. Doi: 10.28991/esj-2021-01287 Full Text: PDF

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Section: -Literature Reviewsupporting

confidence: 63%

The Influence of Optimism Bias on Time and Cost on Construction Projects

2021

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“…Consequently, different comparisons can cause huge variations in reported results. Surprisingly, professional associations such as the Project Management Institute and the Association for Project Management do not provide clear definition of cost overruns ( 9 ). Probably the most common definition of cost overruns is the one used by Flyvbjerg et al ( 5 ), namely the difference between final costs and the cost estimate at the time of the decision to build.…”

Section: Previous Studiesmentioning

confidence: 99%

Cost Escalation in Road Construction Contracts

Welde

Dahl

2021

Transportation Research Record

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This paper presents a study of cost escalation in unit price road construction contracts. The aim is to investigate why the final cost of contracts differs from the agreed contract cost following tendering, both to identify causes of observed discrepancies and to suggest measures that could improve the planning and delivery of future projects. Road projects often consist of several contracts and as they account for the biggest costs of the projects, cost escalation in the contracts may increase the risk of project cost overrun. Even if contract cost performance is an important indicator of project success, it may be too simplistic to equate this with project success. It is quite possible to deliver a project within budget even if contract costs escalate, as long as the project cost contingency is adequate to cover such escalations. However, escalations in contracts increase the risk of project overrun and may lead to other problems such as conflicts and delays. The results show that most of the studied contracts experienced cost escalation. The main cause of the escalation was change orders to the scope that were not covered by the original contract. In addition, the results indicate that complexity represented by contract size, duration, and urban location increases the risk and size of cost overrun. Based on these findings, the paper presents some recommendations on how contract delivery can be improved as well as some implications for future research.

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“…The third step consists of the operationalization of the independent and dependent variables, i.e., respectively, the project characteristics and their performance (e.g. assessed in terms of cost overruns, Invernizzi et al, 2017a). To do this, it is necessary to differentiate between "concepts" and "constructs," where a construct is a more formalized definition of a concept, a concept being a "general idea in our heads about a variable which has a part to play in our theories" but that still cannot be observed directly (Lee and Lings, 2008).…”

Section: Methodology Based On Benchmarkingmentioning

confidence: 99%

A methodology based on benchmarking to learn across megaprojects

Invernizzi

Locatelli

Brookes

2018

IJMPB

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Article:Invernizzi, DC orcid.org/0000-0001-8178-9557, Locatelli, G orcid.org/0000-0001- 9986-2249 and Brookes, N (2018) A methodology based on benchmarking to learn across megaprojects: the case of nuclear decommissioning. International Journal of Managing Projects in Business, 11 (1 ReuseUnless indicated otherwise, fulltext items are protected by copyright with all rights reserved. The copyright exception in section 29 of the Copyright, Designs and Patents Act 1988 allows the making of a single copy solely for the purpose of non-commercial research or private study within the limits of fair dealing. The publisher or other rights-holder may allow further reproduction and re-use of this version -refer to the White Rose Research Online record for this item. Where records identify the publisher as the copyright holder, users can verify any specific terms of use on the publisher's website. The methodology is exemplified in this paper using the case of Nuclear DecommissioningProjects and Programmes (NDPs). Indeed, due to their characteristics, NDPs can be addressed as megaprojects, and are a relevant example for the application of the methodology presented here that collects and investigates the characteristics that mostly impact the performance of (mega)projects, through a continuous learning process.

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Cost overruns – helping to define what they really mean

Cited by 22 publications

References 20 publications

The Influence of Optimism Bias on Time and Cost on Construction Projects

The Influence of Optimism Bias on Time and Cost on Construction Projects

Cost Escalation in Road Construction Contracts

A methodology based on benchmarking to learn across megaprojects

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