Chapter 5: Examplesof Budget Over-runs And Late Completion ProjectsMany construction projects have experienced budget overruns and latecompletion, hence, three examples of projects that have undergone budgedoverruns and late completion are: · Burj Khalifa· Sydney Opera House· Scottish ParliamentBuilding 5.1: Burj KhalifaThe Burj Khalifawas built to serve the king of Dubai and provide offices and hotels. Thisproject was planned to start construction in 2003 and estimated to cost $876million USD. The construction started in 2004 and the end value at completionwas a staggering $1.
5 billion USD. The following were the causes for thesestaggering rising costs:· Fatalities– this caused 2,500 labourersto quit their jobs causing late completion and budget overruns.· Adverseweather – workers regularlyfelt faint and had to have time off to recover.· Changesin design due to failures – due to itscomplicated design, many parts of the structure had to be altered for theenvironment such as façade. Due to the abovefactors the completion date was set-back to a 9-month delay and almost doublein the original estimated budget. 5.
2: Sydney Opera HouseThe Sydney OperaHouse was designed by Jorn Utzon and built as a performing arts centre. Theproject was estimated to cost $7 million AUD and to start in 1957, henceforthexpected to be finished in five years. The project didn’t start until 1959 witha completion cost $105 million AUD, completed in 1973. The project’s budget wasoverrun by 15 times the initial budget and took 16 years to complete. The causeof the late completion and budget overrun was due to the main factor which was,insufficient planning during the design stage.
Due to inadequate planning during the design stage, it hasaffected the construction stage, which all accumulates to late completion andbudget overrun.5.3: Scottish Parliament Building The Scottish Parliament Building was engineeredby Ove Arup and Partners to serve the Scottish Parliament. This project was planned in 1999 and estimatedto cost £50 million.
The project finished three years late and the costincreased to an astonishing £414 million, that’s a 730% increase in cost. Themain cause for the late completion and staggering budget overruns was due toscope creep- the project scope was constantly increasing causing multipleeffects on other tasks. Chapter 6: Conclusion Previous research conducted, reveals that budget overruns and latecompletions are significant to the construction industry. Furthermore, it appears that not all projectsaffected by budget overruns and late completion are foreseeable, however, thetendering process considerably impacts on budget overruns and late completion.Budget overruns and late completion seem to work parallel with each other,hence these crucial influences require addressing. The greatest influence forbudget overruns and late completion are delays, clients making controversialdecisions and reduced reputation of contractor.Therefore, it is essential that the actions listed previously are to beadhered to, however, there are some endorsements which must be followed toensure a flowing project. The main endorsements are for the parties involvedare:Client – The client must ensure the availability of sufficient funds,understand the feasibility of last minute decisions and effects it would haveon the project, and the client must suggest a realistic deadline accounting foranticipated delays.
Contractor – The contractor must submit a realistic tender and not one at a bareminimum not accounting for delays and budgeting overruns just to win thecontract. The contractor should employ trustworthy sub-contractors who have agood track history of previous construction projects. Finally, it is essentialthat the contractor must have a consistent and firm management skills as wellas a good reputation in completing successful projects. Consultant – The consultant should have a good communication skills with otherparties, comprehend the project goal and client’s duties. Also, the consultantshould solve and discrepancies between parties before and during theconstruction phase, as this will reduce premature complications such as budgetoverruns.Bibliography · UKEssays. (2017). Budget Over Runs And Late Completion OfProjects.
online Available at:https://www.ukessays.com/essays/construction/budget-over-runs-and-late-completion-of-projects-construction-essay.
phpAccessed 2 Dec. 2017. · Project Smart. (2017). Why Over 90 Percent of AllProjects Finish Late. online Available at:https://www.
phpAccessed 2 Dec. 2017. · Smallbusiness.chron.com.
(2017). What Are Reasonsfor Cost Overruns in Project Management?. online Available at:http://smallbusiness.chron.com/reasons-cost-overruns-project-management-63225.htmlAccessed 3 Dec.
2017. · Arcom.ac.uk. (2017). online Available at:http://www.arcom.ac.
uk/-docs/proceedings/4cbaa2ca1021ce2bc010658d11b15190.pdfAccessed 3 Dec. 2017. · Who’s Who Legal. (2017).
Death, Taxes and CostOverruns – The Latest Legal Features, Research and Legal Profiles – Who’s WhoLegal. online Available at:http://whoswholegal.com/news/features/article/32342/death-taxes-cost-overrunsAccessed 3 Dec.
2017. · Irbnet.de. (2017).
online Available at:https://www.irbnet.de/daten/iconda/CIB_DC22746.pdf Accessed 3 Dec.
2017. · Arcom.ac.
uk. (2017). online Available at:http://www.arcom.ac.uk/-docs/proceedings/ar2000-073-081_Proverbs_Holt_and_Cheok.pdfAccessed 8 Dec.
2017. · Arxiv.org.
(2017). online Available at:https://arxiv.org/ftp/arxiv/papers/1303/1303.6604.pdf Accessed 10 Dec.
(2002). Project Performance Assessment. Masters in Project Management Course,10th-15th June, Paris, France. UTS/ESC-Lille. http://citeseerx.ist.psu.
com/What-were-the-engineering-challenges-in-building-the-Burj-Khalifahttp://www.globalconstructionreview.com/perspectives/centurys-most-troublesome-construction-pr8oje8ct8s/ Table 1: Minimising construction delays. Method of minimising construction delays Parties Method Client · Ensure satisfactory and definite source of finance. · Trusted nominated sub-contractor.
· Common project progress consultation. · Experienced consultant advice. Contractor · Commitment to the project. · Adopting Design-Build and Construction Manager type of contract.
· Strategic planning. · Use of BIM. · Allocation of sufficient time and money at the design phase. Consultant · Solve discrepancies · Good communication in management team · Adequate advise to the client In construction,there are many factors that cause late completion due to delay. These delaysare split into direct and indirect actions. Direct action delays are delays thatcould be controlled and usually involves parties. Indirect delays on the otherhand, cannot be controlled and only reduced to a minimum.
Researched carriedout by Verma (1995, 1996) writes that communication, teamwork, and leadershipare vital components of effective management of project human resources and arenecessary to accomplish project objectives successfully. Crawford (2002)recommends methods on how to improve future projects from late completion. Below is Table 1: Minimising constructiondelays.4.2: How ToPrevent Future Projects From Late Completions? 3. Delays from thecontractor –The contractor is liable to pay liquidatedand ascertained damages if he/she is responsible for any delays affecting thecompletion date. It is inevitable for delays to occur due to the contract’sperformance, hence contractors should consider that errors arise in designregularly and therefore, these errors and delays need to be anticipated toavoid late completion.
2. Delays from theclient – Most delays are caused by the contractor; however, somedelays can be cause by the client and these include the client instructingvariations in work and delays from the clients nominated sub-contractor. Thesedelays allow the contractor to claim direct loss and expense incurred due tothe client’s fault of delaying the project. 1. Concurrent delays – Concurrent delays are defined as instantaneous delays caused by thecontractor and project manager, affecting the project completion date.Therefore, it is essential that both parties ensure records are kept, todemonstrate how the event occurred and methods of avoiding major impact on thecompletion date. However, a critical path analysis can be carried out todemonstrate the effects on events mainly on the completion date. In construction, contracts tend to be characterised inthe following three delays: 2.
Delaysthat will impact on the completion date. 1. Delaysin activities for which there is programme floatavailable. Generally, there are two types of delay 4.
1: Why Do Late Completions Occur And What Are TheCauses?It is not always the contractor’s liability for these delays. The otherparties involved in the construction stage are, clients, consultants andexternal influences e.g. suppliers and machinery etc. Any postponement will generatedifficulties between some of the parties involved.Late completions in construction projects is commonly referred to as theperiod between the actual deadline, to the period the project is completed.This delay effects the client, contractor and shareholders, hence if delaysoccur, the contractor will be subjected to immediate termination of contractand reduced profit.
Chapter 4: What Are Late Completions? Risks and uncertainties increase the budget of anyproject. Thus, a 10% of the estimated cost contingency plan is usually addedinto projects to avoid delays and budget overruns. Though 10% may seem trivial,the value of adding other control systems for the project performance mightincrease significantly. Nevertheless, an upright project management estimate ismore desirable and efficient than a contingency plan.A successful project depends on the project managerand contractor working as one to get the best proficiency from a task and tendto be based on time, performance and cost. There are many sorts of keystandards and activities which ought to be taken after for a project to bemarked as successful and they are suitable decision of project plan, strongsupport for the project and its manager from higher management, technicalcompetence and good project communications.3. Monitor andcontrol the above 2 stages continuously till the completion of the project.
2. Certify that scopeis adhered to strictly 1. Classify the scaleof the project,To keep future projects from being unsuccessful interms of budget, the management of costs should be separated to indicateprecisely where expenses will be greatest and littlest. In my opinion theestimating, scheduling, booking, gathering and investigating costs, andactualising measures to remedy construction costing must be adhered to entirely,as this will keep any disappointments in terms of the budget. There is a three-stageprocess which can be utilised amid the arranging stage through to the constructionstage,3.1: How To Prevent Future Projects From Budget Overruns? Generally, the media sees the construction industryas a failing industry without a well organised scope. Most clientswill be careful prior to investing in large construction projects, which will resultin a decrease in the construction industry’s reputation. Many constructionprojects which are accepted by the client will come with a superior risk to thecontractor.
· Client– loses confidence in the construction industry, but specifically the clientwill have lost faith with his/her consultant. This increases the budget as theclient may have employ another consultant. · Contractor – badreputation is given to the contractor due to failure of not completing theproject.It is obvious that budget overruns occur often. During the tenderingstage, there are many causes which are not considered and cause a badimpression on the contractor and client. The effect on the contractor andclient is as follows,Chapter 3: What Are The Overall Effects From BudgetOverruns? Each site has different ground conditions, thus,testing the ground prior to the construction phase is significant.
This can bedone through trial pits and/or bore holes, hence this ensures no issues ariseduring excavation. Bore holes and trial pits give informationon ground conditions only in a specific area and not area that hasn’t beentested, therefore, the true ground conditions of a construction site will berevealed once the contractor is onsite proceeding excavation works, and hence,it is the contractor’s responsibility to manage these unexpected groundconditions. Ground conditions change over time and therefore it isn’t uncommonfor ground conditions to change from the trial bits or bore hole data. Thiswill cause major delays in the program of works of the project and possibleredesign. It is obvious that unexpected ground conditions are a noteworthyfactor that may increase cost in a construction project. 2.1.6: Unexpected GroundConditionsExchangerates are very temperamental can seriously influence whether a project will gothrough a budget overrun or not for example Brexit, which essentiallydiscontinued relationships between UK and EU traders and had an impact on theGreat British Pound.
Due to the change in the foreign exchange rates, therecould be a drastic alteration in the budget. Thus, it is essential toanticipate these unexpected changes in foreign exchange rates as this willproduce a more accurate budget. 2.1.5: Change in ForeignExchange Rates A vast amount of materials isused to complete a construction project; hence some materials may be morepopular than others such as concrete.
Thus, locally ordered materials mayperhaps be in great demand. Some materials will be in greater in demand thenothers, which causes possible delays to the project. There may be specialmaterials such as Egyptian tiles, that needs to be pre-ordered before-hand andcould cost significantly more as it will need to be shipped in, which couldcause delays in the materials delivery schedule. It is essential that a trustedsupplier is used to supply the relevant materials for the construction and alsospecialist materials that are shipped around the world need to be anticipatedin terms of possible delays. Therefore, the mentioned above factors that mayaffect the supply of materials in a construction project needs to beanticipated to prevent any material shortages and a supplementary cost added tothe over cost to avoid budget overruns. 2.
1.4: Shortage ofConstruction Materials · Failure to classifypremature complications in design and changes in the program of works· Poorcommunication between members of the project team and the client· Lack of planningand co-ordinationIt is essential thata project has a firm management team as this ensures that a project will besuccessful in terms of not exceeding the budget and completing the project withthe correct quality. The project manager/management team may or may not beinvolved with the finance of a project, but usually the quantity surveyoroverseas all the finance of a construction project. As mentioned previouslythat a successful project foreshadows a good management team, User Guide (2005)suggests signs of poor project management are the following:2.1.
3: Poor Project ManagementInflation in general is the rise in prices and fall in the purchasingvalue of money. The increase in inflation results in increase of value inaspects of a project e.g. salary, material costs, plant hire etc. Due to risein inflation, the budget will be influenced on extend of this increase ininflation. To counteract these additional costs, a more detailed understandingof the market should be conducted out in the tendering process, by members ofthe project i.
e. quantity survey and contractor. 2.1.2: InflationContractors usually submit lowtenders to increase the likelihood of winning the tender. This usually resultsin the project being completed to a low standard, thus, this ultimatelyincreases the overall cost of a construction project and possibly causes the clientto retender. 2.
1.1: Underestimations· Actual costs are on average 28% higher than estimatedcosts· In construction projects, statisticsreveal that the probability of definite costs being larger than estimated costsis 86%· 90% of construction projects are overrun (Project Smart. 2017)Therefore,it is obvious that even what seems most insignificant types of causes of budgetoverruns can dramatically increase the overall cost of a project. Subsequently,previous research suggests that:· Scope· Planning process· Changes in designs· Unrealistic estimation of project during tenderingstage · Late completion · Climate change The forms of budget overruns are instigatedby,2.
Uncontrollable budgetoverruns1. Controllable budgetoverrunsMost construction projects experience budget overruns. Project managementis a solution to budget overruns as it avoids budget overruns(Smallbusiness.chron.com, 2017). It is certain that poor project managementresults in budget overruns, therefore, there are two characterised aspects ofarranging budget overruns, and they are:2.
1 Why DoBudget Overruns Occur and What Are The Causes?Budgetover-runs can merely be defined as when the project exceeds the initialapproximated cost. Theconstruction industry uses a standard logical procedure to classify whether aproject has undergone budget overruns or not; this is (final cost – initial estimatedcost during tendering stage). If the value is negative, then the project hasn’treceived any profit, hence, gone through a budget overrun. However, if the endvalue is positive, it means that the project is successful providing a budgetand avoiding budget overruns.
Chapter 2: What Are Budget Overruns? It is useful to analyse previous construction projects to extract what thecommon failures were as this will be helpful to eliminate possible futurefailures. This technical essay will significantly rely on preceding research onunsuccessful projects by optimising the use of resources such as books and casestudies. The constraints of thistechnical report will be dependent massively on data analysed on previousresearch and their conclusions. Finally, this technical report will emphasis onbudget overruns and late completions. These uncertain characteristics that affect the progress of a project canbe mitigating from occurring regularly, the types of failures must be targetedso that upcoming construction projects can have a greater likelihood ofcompleting successful projects. On the other hand, some failures are inevitableto occur even through precise planning due to unforeseen and uncontrollablecircumstances such as climate change, delayed deliveries, recession etc.Consequently, it is obvious that due to the inability to control uncontrollableconditions, the controllable conditions must be addressed and so Contractorsand designers can liaise and produce a more proficient specification. Projects in construction are deemed assuccessful if the project is completed within the budget and estimatedtimeframe required for the project.
Conversely, in reality most constructionprojects are guilty of late completion and over budged; in fact, 90% of UKconstruction projects are unsuccessful (Project Smart. 2017). Many constructionprojects undergo failure in completing a project largely due to uncertainties suchas adverse weather conditions and fluctuation of material production. Chapter1: Introduction Table of Contents Chapter 1: Introduction 4 Chapter 2: What Are Budget Overruns? 4 2.1: Why Do Budget Overruns Occur and What Are The Cause? 5 2.1.1: Underestimations 6 2.
1.2 Inflation 7 2.1.3 Poor Project Management 7 2.1.4 Shortage of Construction Materials 6 2.1.
5 Change in Foreign Exchange Rates 6 2.1.6 Unexpected Ground Conditions 6 Chapter 3: What Are The Overall Effects From Budget Overruns? 4 3.1: How To Prevent Future Projects From Budget Overruns 5 Chapter 4: What Are Late Completions? 4 4.1: Why Do Late Completions Occur And What Are The Causes 5 4.2: How To Prevent Future Projects From Late Completions? 5 Chapter 5: Examples of Budget Overruns And Late Completion Projects 4 5.1: Burj Khalifa 5 5.
2: Sydney Opera House 5 5.3: Scottish Parliament Building 5 Chapter 6: Conclusion 4 Conclusionsshow that budget overruns have significantly diminished in the alteration anddevelopment area. Also, it has generally been superficial and repetitive,hence, an effective methodological example showing excellent control in budgetoverruns and on time completion, could be required to address this recurrentand complex issue faced in most construction projects. Constructionprojects often overrun the budget. The causes of budget overruns are due to arange of poor understanding of the impact of complex projects and impracticalcost estimations.
Despite the vast amount of research on budget overruns, therehave been partial evidence to support the fact that budget overruns are asignificant factor effecting the overall timeframe of a construction project. Anevaluation of the literature review reveals it may not be a huge concern ofbudget overruns in simple construction projects, rather large complex projects.This technical report outlines an analysis of current budget overruns andsuggests possible approaches to reduce or even mitigate budget overruns wherepossible. This technical essay will explore some methodological flaws in themethods adopted in most budget overrun projects.
ABSTRACT Depart of School of Mathematics, Computer Science & EngineeringCITY UNIVERSITY OF LONDON Topic:Some construction projects suffer from budget overruns and late completion.Discuss possible causes of these problems and measures that could be taken toavoid their recurrence on other projects. Illustrate your discussion with appropriate projects. PART 3BACHELOR OF ENGINEERING (HONS) INCIVIL ENGINEERING Bishoy Fakhuri (ACSK393) TechnicalReport