Some Cost And Schedule Overrun Issues Construction Essay

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Cost and schedule overrun remains a huge problem faced by project and its increasing with the increase in size and complexity of project resulting to the abandonment of some projects or profitability being impaired (Avots). In controlling this problem it is necessary to first identify their causes in order to apply appropriate management tools and techniques to areas of control that have a higher likelihood of proving beneficial to the project .

The importance of integrating an efficient monitoring and control system into the project plan cannot be overemphasised as the presence of effective monitoring and controlling tool ensures the non-occurrence of cost and schedule overrun. The use of these tool, to monitor the elements of cost and schedule will go a long way in ensuring that there are no cost overrun and schedule overrun. An effective Monitoring and control system runs throughout the life cycle of the project, from initiation to execution. cost and schedule over runs are evident in projects not effectively monitored or controlled leading to failure. This can be avoided by ensuring early detection of deviations from the baseline, known as variance and corrective measures and decisions taken.

 This essay is aimed at identifying some of the inhibiting causes of project delay and cost overrun with the view of proposing mitigating action to prevent an d control them in a project

CHANGES IN REQUIREMENTS AND SCOPE OF PROJECT

Changes in requirement and scope of projects can result to project delay and cost overrun.These changes are due to change orders issued to cover variations in scope of work, quatity of material, design errors and unit rate changes. This results in what is known as " Scope creep". Koushi, Alrashid ,and Kartam() identified scope creep as one of the major causes of project delays and cost overrun, "Scope creep " as defined by PMBOK() is a change or variation occurring in projects without putting into consideration, the time and budget. This can arise as a result of poor definition of scope at project conception, poor implementation of change control process during project execution, poor stakeholder's engagement during scope definition resulting to a lack of understanding or misinterpretation of project scope, other reason for this could be traced to new opportunities,uncertainities, economic factors, changes in technology and inadequate management support,, however some could be non essential changes to the project requirement and plan. These non essential changes are mainly from a change of mind and not due to oversight, mistakes or environmental changes which would have made them necessary. Though contracts may include change clause which allows for certain changes to the requirements, however small a change is ,it will result in escalation. The implementation of a change requires either of or a combination of redesigning or reorganizing work, acquiring resources ,altering previous plan or undoing earlier work, the accumulation of these changes ,even small ones have substantial effect on schedules, cost and performance as changes are more difficult and costly as more work is completed on the project. Schedule delays, disputes and cost overrun are the most important effect of theses change order as this changes to the scope reflect changes in requirements and work definition which eventually result to time and cost increase or overrun .

Cost estimation for projects are determined at the initiation stage, and the work to be done as indicated in the project scope is put into consideration in arriving at the estimate thus a change order later in the project will incurring more cost and longer period. A study carried out by Koushi, Alrashid ,and Kartam() revealed that projects without change orders enjoyed shorter time delays and cost ,compared to those with the issuance of one change order or more which will eventually lead to project delay and cost overrun.. Introduction of change into a project becomes more difficult as the project progresses, as it is more difficult to implement and the effect on other parts of the project is larger with an equally higher cost of implementation, as more work will need to be undone to initiate the changes.

In mitigating against changes in requirement and scope of project a clear understanding or the project scope should be ensured at the definition stage, all stakeholders should have a clear understanding and interpretation of the scope, inclusion, exclusion, statement of requirement established by the client, and a scope verification process to be used during the planning and execution of the project. A clear statement of requirement established by the client should be clearly understood by the stakeholders involved.

It is necessary that changes required in the project should be well identified, measured, initiated and controlled in a formal process, controlled by the project manager.\this is the aim of the Scope change control implemented through the integration of an Change management plan in planning stage and change control plan during the execution stage and configuration management. This ensures control control of the number of imperative changes thereby helping to control their influence on escalation, This plan should be monitored throughout the project, and proper understanding and agreement of the defined scope and change process by all stakeholders.The use of the scope statement in moitoring the execution face to ensure that work done meets the defined scope

Projects could also be freezed against all non-imperative changes at a pre-defined phase to allow for finalization of design and movement to the next stage ,this point should be agrred amongst stakeholders and agreed to by management to reduce the chances of allowing changes that will adversely affect scheduling and cost

POOR PROCUREMENT PLANNING

Cost and schedule overrun can occur due to poor procurement planning

Cost and schedule overrun can occur due to poor procurement planning.this could be in form of delay in materials,ambigious definition of procurement material, The increase in material prices due to inflation can also affect the procurement procees as amout budgeted or estimated will not be able to procure material.this inflation as indicated by Frimpong, Oluwoye and Crawford (2003) is probably due the increase in demand without a equl increase in supply thus resulting in the demand exceeding supply ,thus creating scarcity of goods and increase in material.

MITIGATION

Project procurement consist of the development of

contract strategy, the proper management and coordination of the contracting activities in procurement from the early stage of the project and contract definition, the market study during the tendering process, documentation of contract to contract performance and administration of contract after the contract has been awarded (Frimpong, Oluwoye and Crawford 2003)

An establishment of an effective and efficient material procurement strategy within projects with the contribution and cooperation of the project team of client, consultant and contractors will go a long way in helping to eliminate obstacles in procurement and ensure that procurement processes be embarked on at appropriate times, an improvement of the procurement process should be ensured with proper execution of procurement plan to avoid supply delays hence project delay and cost overrun. The purchasing procedure should als o be well managed in terms a cost ,quality and the technical knowhow of the people involved,an effective procurement plan will also help in ensuring proper procurement is carried out.

Delayed payment of contractors/suppliers

Delayed payment or late payment of monies due to contractor,suppliers or consultants as at when due could also lead to project delay and cost overrun.this delay payments could be due to complex financial processes in client organisations,therby resulting to financial difficulties to contractors ,this delay will consequently jeopardise contractor ' s cash fl ow. Leading to slow progress which may also have an infl uence on the supply chain of payment

in whole. thus results in schedule delays,and in cases where interest is being charged to the delayed payments cost escalation will be induced.

Mitigation

Clients/Sponsors should ensure that there are available funds for project before they are being commissioned.

Poor communication MANAGEMENT

Communication management involves the planning,executing and controlling the acqusition and distribution of information which is of importance to the needs of all stakeholders,this include,the project status,accomplishment and events that may affect the project or the stakeholders.if this is absent there would be conflicts ,nisunderstanding,and also the duplication of effort and mistakes if information is not properly or accurately communicated ,this will lead to a delay in decision making as the party involved is not aware or does not understand the need for a decision to be made,this will eventually lead to delays as the project will be on hold if the decisions are not made and this will incurr extra cost for the project , and project will be prolonged that its estimated duration.

Mitigation

With an effective communication plan inlving feed back in place and various teambuilding activities which will help with team bonding the problem of poor communication can be mitigated

role and responsibilities of the project team not defined

Poor contract management

Frimpong, Oluwoye and Crawford (2003) Identified poor contract management as an important factor contributing to the cause of project delay and cost over run. This occurs mostly as a result of how the contracts are being awrded and contactors compliance with terms and conditions of contract.It is a popular trend for contracts to be awarded to the lowest bidder without proper evaluation of the contract who might lack management skills thus payingS little attention to contractors plan, cost control ,human,finanacil and materil allocation and overall project managementtrol, this is evident in their report which showed that majority of contractors in developing countries are entrprenuers, trading good management for the sake of money making by paying low wages ,thus submitting low bid without management skills needed for the project.This eventually leads to their in ability to execute the project as they are not competent ,resulting in issue of delays and cost overrun. ),

Mitigation

A contract management plan contains basic key information on how a contract will be managed.  It sets up systems and processes to make certain that the contractor complies with the terms and conditions during the performance of the contract,it is there fore important to have an effective contract management plan as the contracts specifies customer"requirement,contract management system put in place sjould be able to ensure the proper control and tracking of performance and progress reporting.Terms and conditions of contract should serve as a term of reference in cases of conflict and a tool for the monitoring and control of what is needed or agreed to be done in the contact document,also penalties for contact breach could also be indicated ,this could be from fines for delay to litigation in more serious situations.also A thorough evaluation of bidder before entering into the contract is very important ,client should critically evaluate bidders, this could be done through reaserch,and evaluation could be done using a prioritization form, contractors can be evaluated based on, references from running contracts or jobs, the past portfolio of the contractor ,affiliation of contractor with professional boby,technical and financial capabilities, the list is however not restricted as clients can include tailor the criteria to suit their supply/contract need. Tender documents should thoroughly evaluated with the view of determining true capability of the contractor/suppliers and selection of the most competent contractor/supplier and at a good cost. This help in minimising errors, poor supervision and ensures that people with right qualifications manage the project and they can effectively utilise the project

Poor or inaccurte Cost Estimates

Proper costing is essential in every project thus The

initial cost estimates should be as accurate as possible. As this would allow for clients to ensure required funds for the execution of the project are sourced for and made available when required

. Cost overrun and schedule over run occur due inaccurate cost estimates.cost estimation made without sufficient information rather than having detailed specifications of the project at hand is detrimental to the cost of a project

.This is mostly due to the method of estimation used, as some estimates are based on vague information from similar projects without putting in mind the fact that no project is the same and they are carried out under different conditions and current costs are not taken into consideration. Insufficient information which could be in form of insufficient design and specifications at the time the estimator calculate and the use of inadequate unit price by the estimator would also lead to in accurate cost estimates which is revealed at during the project execution, this would lead to an overrun being recorded as estimated cost will be different from actual cost and in carrying out a re-cost the project is also being delayed.

An increase in the prices of material and inflation could also result in the inaccuracy of cost estimates made.

Mitigation

Avots() identified the importance of good information as it is a key to good estimates.With more and higher quality of information about a project there is a better chance of amore reliable estimate .Als o with the early development of a workbreakdown structure early in the project a better project definition and better estimate can be achieved.it is also of great importance that estimators should have the technical knowhow as the absence of the skill could affect the estimation.Sicne estimations are basd on assumptions ,then assumptions made to be reasonable to a great extent and reliable through proper research and evaluation of these assumptions.A contingency plan should also be esured for risk identified as high priority such as inflation which could have great impact on the project

()Also suggested that Cost and value engineering

principles be applied at all the stages of the project and project managers to ensure that contractual obligations are being dealt with when required.

CONCLUSION

Project delay and cost overrun are important issues that impacts on the time and cost of projects, which could lead to the loss in financial return or other project benefits, thereby costing every stakeholder. By identifying the root cause of this issues and putting in place mitigation plans at the early stage of the project ,project delay and cost overrun can be reduced . Delays and any cost overruns tend to distort initial cost benefit analysis performed thus

the initial cost benefit analyses conducted, factors identified

in this essay need to be carefully managed so as to

avoid risks that are attributable to them. This will need the use of

improved risk and project management practices by clients,and effective planning.

There is alos the need of an effective well structured monitoring and control system to measure and ensure process stick to defined baseline, while seeking to correct any shortfall cannot be overemphasised. This control system should employ the use of various tools and techniques to achieve The control of the changes to scope, schedule control, cost control and also the control of performance, risk and quality to achieve successful project.This was described by Daniel W M Chan and Mohan M Kumaraswamy as one completed on time ,within estimated budget and to specified quality standards.

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