Managing the Drivers of Cost Escalation in the Road Development Sector: An Overview
International Journal of Science, Technology and Society
Volume 3, Issue 6, November 2015, Pages: 295-303
Received: Sep. 14, 2015; Accepted: Oct. 21, 2015; Published: Nov. 24, 2015
Views 4434      Downloads 112
Authors
Joseph Ignatius Teye Buertey, Department of Built Environment, Pentecost University College, Accra, Ghana
Theophilus Adjei-Kumi, Department of Building Technology, University Post Office, Kumasi, Ghana
Felix Atsrim, Department of Project Management, Pentecost University College, Kaneshie, Ghana
Kwesi Boateng, Department of Built Environment, Pentecost University College, Accra, Ghana; Ghana International Airport, Accra, Ghana
Article Tools
Follow on us
Abstract
The management of construction cost escalation requires that proponents understand the drivers of project cost. The aim of this research was therefore to evaluate the causes of project cost escalation with a case study in Ghana. The research was carried out using quantitative approach by distributing questionnaires to built-environment professionals and stakeholders in the road sector. Findings suggest that fluctuations in cost indices, variation in work due to incomplete scope definition, corruption, unstable exchange rate, schedule delays, and poor risk management are the major key drivers affecting cost escalations on road projects in Ghana. The study held that the lead times allowed between base dates of estimates, actual award and commencement date of the project has a contributing factor for cost escalations. To manage cost escalation, the challenge of incomplete scope definition and instability in micro economic indicators must be managed by the players of the economy. To curtail corruption, the procedures for the awarding of contracts which are subjective with public officials having discretions to determine the least evaluated bidders even though there are procedures for determination, must be reviewed. The use of such discretionary powers accounts for perceived corruption along with contractor behaviour resulting in under dealings. The bidding and award stage of projects mark the beginning of interaction between public official and contractors and hence, the hatching point for project corruption. It is recommended that the management of cost escalation would require the improvement of the governance structures and procurement process for public sector projects. The conclusion of the survey suggests that a holistic approach is required to control the trend but more importantly, on attitudes of officials involved which would require improved ethical commitment.
Keywords
Road Projects, Cost Escalations, Risk Management, Cost Growth, Construction, Civil Engineering
To cite this article
Joseph Ignatius Teye Buertey, Theophilus Adjei-Kumi, Felix Atsrim, Kwesi Boateng, Managing the Drivers of Cost Escalation in the Road Development Sector: An Overview, International Journal of Science, Technology and Society. Vol. 3, No. 6, 2015, pp. 295-303. doi: 10.11648/j.ijsts.20150306.14
References
[1]
Baiden-Ammissah, P.D. (2000) “Enhancing the delivery performance of district assembly Projects”, an unpublished M.Sc Thesis submitted to the Kwame Nkrumah University of Science and Technology, Department of Building Technology, Kumasi.
[2]
Baker, M. (2005). World Transparency Report Focus on Corruption in construction. London Transparency International (TI).
[3]
Buertey J.T.I., Amoa, P., Adjei Kumi, T, (2011) Construction cash flow Prediction Model: A Case Study of the District Assembly Common Funded Projects. Pentvars Business Journal.Vol 5, No. 2.
[4]
Buertey Joseph T.I., (2014). Project Cost Risk and Uncertainties: Towards a Conceptual Cost Contingency Estimation Model, International Journal of Construction Engineering and Management, 3(5): 144-155.
[5]
Chabota, K., Mundia, M., Kanyuka M., Cost escalation and schedule delays in road construction projects in Zambia, International journal of project management, Volume 27, Issue 5, July 2009, Pages 522–531.
[6]
Cheri H. (2015). Understanding and Managing Cost Escalation. Construction Risk Engineer with XL Group’s North America Construction team. http://xlgroup.com/fast-fast-forward/articles/understanding-and-managing-construction-cost-escalation.
[7]
Dawood, N., Yasuhara, T., Usuda, Y., Matsuda, C., Sawada A., (2001). Analysis of cost escalation and risk assessment of infrastructural projects: an application in Japanese civil engineering projects. In Akointoye A. (Ed) 17th Annual ARCOM conference, University of Salford 2001, Vol. 1, 835-44.
[8]
Douglas Gollin (2010), Richard Rogerson, Agriculture, Roads, and Economic Development in Uganda, NBER Working Paper No. 15863, Issued in April 2010, NBER program(s): PE-PR.
[9]
Ehuman L. and D.R. Rao (2008), African Development Fund for the supplementary loans for the Tema-Aflao road/Akatsi-Akanu road/Eumoa-Ghana road program.
[10]
Frimpong, Y., J. Oluwoye, and L. Crawford (2003).Causes of delay and cost overruns in construction of groundwater projects in developing countries; Ghana as a case study, International Journal of Project Management, Vol. 21, Issue 5, pp. 321-326.
[11]
Ghulam S., & Umtaz, M. A. (2007), Determinants of Corruption in Developing Countries, The Pakistan Development Review 46: 4 Part II (Winter 2007) (2007), pp. 751 – 764.
[12]
Ghana investment Promotion Centre Act, 2010, Act 863. [Online] http://www.refworld.org/pdfid/548ed8bc4.pdf
[13]
Ismail, A. R., Aftab, H. M. and Ahmad T. A. Karim (2012) Significant Factors Causing Cost Overruns in Large Construction Projects in Malaysia, Journal of Applied Sciences, (2012), 13: 286-293.
[14]
Kaliba, C., M. Muya, and K. Mumba (2009). “Cost escalation and schedule delays in road construction projects in Zambia”, International Journal of Project Management, Vol. 27, Issue 5, pp 522-531.
[15]
Mensah Amoah, K. (2003b). First African Conference on Road Maintenance, Libreville: Ghana Road Fund.
[16]
Messick, R, (2011) Curbing fraud, Corruption, Collusion in the Road Sector. Washington: World Bank.
[17]
Naoum, S. G. (2007), Dissertation Research and Writing for Construction Students, Oxford, Butterworth-Heineman.
[18]
New Zealand institute of Economic Research (NZIR, 2014). Construction Industry study. Implications for cost escalation in road building, maintenance and operation. NZIER final report to the Ministry of Transport, November 2013.
[19]
Peter M., & William F. W. (2006), Measuring and Managing Cost Escalation AACE International Transactions, CSC.06.
[20]
Price Water House Coopers (2009). Corruption Prevention in the Engineering & Construction Industry. PWC, 1-6. Fufulso – Sawla Road project appraisal report, [Available from], http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Ghana/Fufulso-Sawla Road Project.pdf.
ADDRESS
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
U.S.A.
Tel: (001)347-983-5186