Study of Causative Factors of Cost Overrun in Large Projects of Southern Part of Peninsular Malaysia

Construction cost overrun problem has become a global concern amongst the practitioners and academic researchers because the construction projects are very rarely completed within the estimated cost. There are various contributing factors to cost overrun. This study focused on cost overrun problem encountered in large construction projects. Data was gathered using structured questionnaire survey among clients, consultants and contractors in the southern part of Malaysia. Statistical methods were used to analyze the data. The survey results showed that 96% of the respondents agreed that most construction projects faced cost overrun with an average amount ranging from 5% to 10% of the contract sum. Investigation on the causes of cost overrun involved 35 common factors identified through literature works. Results found that fluctuation of materials price, cash flow & financial difficulties faced by contractors, delay in progress payment by owner and frequent design changes were most dominant factors causing cost overrun. Spearman correlation test was conducted on the factors and found that slow information flow was highly correlated with lack of communication between parties (with a correlation value p = 0.787) A standardized design practices, efficient resource planning & management and proper financial management should be considered as effective tools in controlling cost overrun especially in large construction projects.