A system dynamics approach to conceptualise causes of cost overrun of construction projects in developing countries

Purpose: This study aimed at developing and empirically testing a system dynamics causal loop (SDCL) model for investigating factors related to the risk of cost overruns, associated with the performance of construction projects in developing countries. Design/methodology/approach: Using data derived from the Ghanaian construction industry (GCI), a conceptual system dynamics model was hypothesised and empirically tested. Findings: Supported by empirical evidence, the study established that the low technical capacity of consultants is the underlying cause of cost overruns in government projects. There is a strong proof of the relationship between the results of the SDCL model and poor contract planning and supervision, change orders, competence of the project team and the lack of effective coordination amongst the contractual parties. Practical implications: The final SDCL model has revealed key risk components that would require standard mitigation measures in order to achieve “acceptable success” in construction projects. Originality/value: The study presents an interactive approach for construction practitioners in developing countries to prioritise the causes of cost overruns in order to initiate quick responses.