Intoday’s construction industry, cost overrun is a very common phenomenonworldwide.
The problem of cost overrun is critical and needs to be studied moreto improve the issue (Angelo and Reina, 2002). In a study conducted by Omoregieand Radford (2006), it was reported that a minimum average of cost escalationin construction projects in Nigeria is 14% every year. Cost overruns inbuilding construction projects can occur due to various causes, and a number ofresearchers have investigated the various causes of cost overruns. Forinstance, Ameh et al.
, (2010) in his study investigating 42 cost overrun cases,found that lack of experience of contractors, cost of material, fluctuation inthe prices of material, frequent design changes, economic stability, highinterest rates charged by banks on loans and mode of financing, bonds andpayments as well as fraudulent practices and kickbacks were dominant factorscausing cost overruns in Nigeria. Doloi (2011) found out in his work thatfactors causing cost overruns in construction projects in Nigeria wereincrement of materials prices, delay in supply of raw materials and equipmentby contractors, fluctuations in the cost of building materials, unsettlement ofthe local currency in relation to dollar value, project materials monopoly bysome suppliers, resources constraint of funds and associated auxiliaries, notbeing ready, lack of cost planning/monitoring during pre-and post-contractstages, improvements to standard drawings during construction stage, designchanges and inaccurate quantity take-off. The problem of cost overruns is notonly a Nigerian thing. It is a problem worldwide for example, Le-Hoai et al.(2008) found out that poor site management and supervision, poor projectmanagement assistance, financial difficulties of owner, financial difficultiesof contractor, design changes were most severe and common causes of costoverrun in Vietnamese construction industry. Also, Memon et al. (2010)investigated large projects in Malaysia and found out that cash flow andfinancial difficulties faced by contractors, contractor’s poor site managementand supervision, inadequate contractor experience, shortage of site workers,incorrect planning and scheduling by contractors were most severe factors thatcause cost overruns, while changes in scope of project and frequent designchanges were least affecting factors on construction cost. Koushki et al.
(2005) studied private residential projects in Kuwait and concluded thatcontractor related issues, material related problems and financial constraintswere major reasons of cost overruns. Costis one of the primary measures of a project’s success. This is true, especiallyfor public projects in developing countries like Nigeria, because publicconstruction projects in these countries are executed with scarce financialresources. Most literature review on construction projects suggested that thecommon criteria for project success are generally considered to be cost, timeand quality Frimpong et al, (2003). A project is deemed successful if it wascompleted on budget, on schedule, conformed to user expectations, metspecifications, attained quality of workmanship and minimized constructionaggravation Olawale et al., (2010). Generally, a project is consideredsuccessful in Nigeria if the project is completed within a stated cost orbudget, getting the project into use by a target date, meets the technicalspecification, and if there is a high level of satisfaction concerning theproject outcome among the project participants.
In Nigeria, the present stateof the construction industry falls short of meeting domestic and internationalquality standards and the performance demand expected from the sector. Constructionprojects especially building projects, have problems with constructiontechniques and management as well as limitations of funds and time. Thecritical problems are inability to complete the projects on schedule, lowquality work and cost overruns.
. In general, most (if not all), constructionprojects experience time overrun and cost overruns during their executionphase. An examination of the records of more than four thousand constructionprojects by Morris et al, (1990), showed that projects were rarely finished ontime or within their allocated budgets in Nigeria.