Cost performance is one of the basic criteria for measuring construction project success. Despite its proven importance it is not uncommon to see a construction project failing to achieve its objectives within the specified cost. The paper attempts to identify the major causes of cost overrun in Bahrain construction sector, and to assess the effect of these causes on cost overrun. A list of these causes was collected through an extensive literature review, historical construction projects records and expert opinions. In total 45 factors were short-listed to be made part of questionnaire used in a survey conducted with representatives from local contracting, consulting, and client firms. Findings are presented in form of tables that classify cost overrun factors, and their ranking. The overall results showed that frequent design changes, mistakes during construction, and schedule delay were considered as the most important factors of cost overrun causes in Bahrain construction industry.

In part 1 of the paper, cost overrun factors associated with the construction industry in Bahrain were identified, and risk maps were developed based on a survey and actual construction projects records. This part of the paper adopted structural equation modelling (SEM) approach to assess the effects of cost overrun factors on project cost in Bahrain. SEM is the graphical equivalent of a mathematical representation to study relationship between dependent variable to explanatory variable. SEM is regarded as extension of standardized regression modelling and is important tool to estimate the causal relationship between factors. The collected data from the questionnaire and actual projects of part 1 were modelled and analyzed using SmartPLS v3.0 software. Results showed that approximately 60% of cost overrun was influenced with the factors identified in part 1. The Global fit index (GoF) value of the developed model was 0.591, indicating that the model has enough power in explaining the relationship between identified factors and cost overrun.