Root-cause analysis of construction-cost overruns

Despite their negative impact on the construction industry, cost overruns have become an almost natural part of building and infrastructure projects. This paper examines the phenomenon as a worldwide problem, identifies its root causes, ranks them (on a local basis), and analyses them. Root-cause analysis is not merely an arbitrary expression; rather, it is a systematic, formal, well-structured methodology, used as part of the total quality-management approach. The expand-focus principles and techniques were applied in this research for assembling an initial, as wide as possible, inclusive list (pool) of 146 potential causes gathered from the international professional literature as well as from prominent local experts. Through two cycles of expand-focus, they were filtered and merged into merely 15 independent universal root causes. These were further investigated through a cross-sectional survey among 200 local construction practitioners who ranked the 15 universal root causes according to their conceived local importance and influence on cost overruns. The survey revealed that, locally, Cause number 1 is premature tender documents; Cause number 2 is too many changes in owners' requirements or definitions; and Cause number 3 is tender-winning prices are unrealistically low (suicide tendering). The unique value of this paper to the global community of construction engineering and management is twofold: (1) It identified 15 universal root causes of cost overruns, which provide a good starting point for any local investigation, and (2) offers a well-structured methodology for ranking these 15 universal root causes in accordance with the local circumstances, thereby pinpointing the vital few that may prevent locally a substantial part of the problem.