Several factors have been identified in the literature, as accounting for cost overruns in construction works (Chang 2002; Lo et al., 2006; Kaming et al., 1997; Memon et al., 2011). Typically, most studies have identified technical risk and uncertainty related issues in all forms of construction works, which lead to cost overruns:
Design in terms of client related changes, incompleteness, or incorrectness of information;
Estimating and financial risk containment methods; Managerial incompetency and team work related factors; Time constraints and delays;
Unexpected ground conditions; Organisational;
Skills related;
Contractual and procurement related; Exogenous variables.
Scholars from developing countries, in Asia (Morris 1990; Long, et al 2004) and Africa (Aibinu and Odeyinka, 2006; Kaliba, et al., 2008; Mansfield et al., 1994: Ubani, 2015), in addition to these commonly listed factors, have also listed issues with the sourcing of imported building materials;
payment inconsistency by highway agencies; high inflationary trend leading to the soaring of material prices, and lack of technical skills, as accounting for higher cost overruns. The average cost overrun found by Morris (1990) in a study of highway projects in India was 82%. Price escalation due to inflation over lengthy delays in the implementation of public sector projects in developing countries accounted for 20 - 25% of cost overruns, while the complementary 75 -80% were attributed to lack of planning foresight and technical factors.
However, Lundmark (2011), Tan and Wakmasha (2010) and Brunes and Lind (2014) have identified the pre-contract phase of project preparation, as having the dominant impact on the level of cost overruns in transportation projects. Tan and Wakmasha (2010) attributed the significantly higher levels of cost overruns experienced in highway projects to the complex nature of infrastructure projects, which often creates a propensity of projects to run over budget. They opined that the accuracy of estimates is affected by uncertainties and risks inherent in projects. Inaccuracies in the assumptions or technical data used as inputs to cost estimating at the pre- contract phase, was posited to be a major source of risk in projects, leading to cost overruns. Incompleteness of preliminary designs, engineering uncertainties and quantity surveys, inadequate site investigation of project locations, are some of the technical factors evident at the pre-contract phase, which trigger off post contractual issues leading to cost overruns.
Evans and Peck (2008) were of the opinion that the diverse range of project types in the engineering field, including highway projects, which require cost estimates, necessitated formal estimating skills apart from the technical knowledge, and the ‘on the job training’ acquired by engineers in organisations. This was compared to the building sector, serviced by the quantity surveying profession, which subscribes to standards set out by the relevant professional bodies. As such the engineering background of, and the methodologies used by most estimators in highway agencies, which provided the technical know-how, were described as being insufficient to generate accurate estimates.
Some other authors (Ogunlaya, 1989; Baccarani, 2004 and Sodikov, 2007), have also emphasized on the deficiencies in the approaches used in estimate preparation by highway agencies. These authors were of the opinion that it is the estimating methodologies and technical details used in generating estimates, that basically influence the accuracy of construction estimates. Inaccuracies in the assumptions or technical data used as inputs, thus form a major source of risk in project cost estimation for highway projects. Turouchy et al. (2001), Evans and
Peck (2008), Romero and Stolz (2009), as well as Tan and Wakmasha (2010), reiterated that early estimates, were often based on judgment, expertise, and experience, and less on rigorous technical investigations. Thus, as the project is developed, inconsistencies in the estimating method often led to marked differences in subsequent estimates.
Young (1996), Chapman and Ward (1997), Creedy (2006) and Smith et al. (2006) views of cost overruns, emphasised the multiplicity of risk in projects, which they assert often lead to financial/economic loss, thus curtailing the realisation of project cost objective. Chapman and Ward (2006) extensively discussed the nature of the technical risks inherent in highway projects, and the need for adequate risk management and containment in project preparation, to subvert cost overruns. Whilst, Smith et al. (2006) stated, that in construction works, the output performance indices of time, cost and quality, are subject to risk and uncertainty, as the nature of highway construction works involves a high level of uncertainty, with a wide range of risk factors established as fundamentally affecting the accuracy of highway project cost estimates. The views of both Chapman and Ward (1997) and Smith et al. (2006), are further corroborated from a predominantly engineering perspective by the technical press. The body of literature on geotechnical risks underscores that irrespective of projects details, ground condition is a factor that has to be contended with in highway projects, and accounts for higher levels of cost overruns, due to the more complex interfaces of transportation projects with the ground. (ICE, 1999, 2001; Whitman, 2000; Clayton, 2001; Venmans, 2006). The United States Department of Transport (USDOT, 2002: 23) in recognition of this, used the maxim: “all transportation projects are carried on earth, with earth or in the earth” to emphasize the importance of ground conditions in the construction of highway projects. Rao and Ranade (2013:58) thus stated that:
“In the early stages of large infrastructure projects, a significant proportion of the risk exposure comes from the unknown unknowns. These may derive from complex interfaces with the physical environment into which the infrastructure is to be built such as the route of the transport link”.
The Institution of Civil Engineers (ICE, 2001:12) equally underscored this, and further drew attention to the paradox that:
“Ground conditions constitute the highest element of risks in construction works, yet it is the element of construction work about which much remains to be known”.
The ICE (2001), further explained, that this is largely due to the fact that, unlike material requirements in construction which can be specified, ground conditions are predetermined and
therefore beyond human control. Figure 3.4 represents the circle of concern on matters relating to ground conditions, showing the circle of influence for factors that can be controlled and exogenous ground related variables that can only be controlled within the limited decision interface.
Figure 3.4: Circle of Concern for Ground conditions (Source: ICE, 2001)
Along similar lines, Clayton (2001) stated that issues relating to ground conditions therefore need to be clearly defined early on in the project, resolved at the pre-tender stage, and not allowed to spill into the contractual and construction phase, if significant cost overruns are to be avoided.