Analysis of cost escalation and risk assessment of infrastructure projects: An application in Japanese civil engineering projects

Cost escalation of construction projects can be defined as the departure of final project costs (after construction) from the initial budget estimates. This can be caused by a number of factors ranging from design changes to high cost of materials, machinery and labour (i.e. more than initially anticipated). As cost escalates, all budgetary and fiscal plans can be thrown in to chaos, causing the construction market to suffer for the lack of predictability. There is an increasing interest by the Japanese Ministry of Land, Infrastructure and Transportation to establish accurate costs estimates and risk assessment for construction (in particular infrastructure) projects to reduce cost escalation at all stages of the construction process. Current practices in the industry suggest that there is a lack of structured methodologies to assess risk and cost escalation of construction projects. In this context, the objective of this research project is to identify cost escalation drivers through the analysis of previous projects and develop a methodology for assessing risk factors and improve cost estimates. A total of sixteen historical case studies (construction projects of bridges in Japan) has been collected and analysed. Several investigation methodologies have been used in this papers, these were: literature review, analysis of historical case studies, Delphi methods for judgmental analysis, interviews and brain storming sessions with project mangers.