Rethinking construction cost overruns: cognition, learning and estimation

Abstract

Purpose – Drawing on mainstream arguments in the literature, the paper presents a coherent and holistic view on the causes of cost overruns, and the dynamics between cognitive dispositions, learning and estimation. A cost prediction model has also been developed using data mining for estimating final cost of projects. The paper aims to discuss these issues. Design/methodology/approach – A mixed-method approach was adopted: a qualitative exploration of the causes of cost overrun followed by an empirical development of a final cost model using artificial neural networks. Findings – A conceptual model to distinguish between the often conflated causes of underestimation and cost overruns on large publicly funded projects. The empirical model developed in this paper achieved an average absolute percentage error of 3.67 percent with 87 percent of the model predictions within a range of ±5 percent of the actual final cost. Practical implications – The model developed can be converted to a desktop package for quick cost predictions and the generation of various alternative solutions for a construction project in a sort of what-if analysis for the purposes of comparison. The use of the model could also greatly reduce the time and resources spent on estimation. Originality/value – A thorough discussion on the dynamics between cognitive dispositions, learning and cost estimation has been presented. It also presents a conceptual model for understanding two often conflated issues of cost overrun and under-estimation.

Improving the cost estimates of complex projects in the project-based industries

“…Afterwards, researchers argue that 'iron triangle' is not the exclusive criteria for project performance measurement and they proposed many additional factors (Atkinson, 1999;Chan & Chan, 2004;De Wit, 1988;Meng, 2012). However, cost performance of a project still remains as one of the main measures of the project success as it is linked with objectives of most of the projects (Ahiaga-Dagbui & Smith, 2014).…”

Attributes That Determine the Building Information Modelling Capability Maturity of Quantity Surveying Practice

“…The majority (circa 80%) of construction projects overrun their budget [1,2], thereby making it imperative for more efficient management of financial resources expended annually for the delivery of construction. Global initiatives on IT adoption for construction envisage significant cost savings from the implementation of novel digitally driven processes.…”

Project Team Perception of Causes of Building Cost Overruns: A Reflection in Tanzania

“…Amoa-Abban and Allotey [15] citing Cox (2007), on the other hand, gave a view of project owners of causes of cost overrun as: incomplete drawings, poor pre-planning process, escalating cost of materials, lack of timely decisions and excessive changes. Qualitative factors affecting project cost such as client's priority on construction time, contractors' organizational ability, procurement methods and market conditions, have been also identified [20]; so is improperly managed risk and uncertainty [8].…”

“…Whilst the extant literature provides insight into factors leading to cost overruns and their effects on construction projects in various countries [8][9][10][11][12][13], the studies however have not considered key actors' perception with regard to causes of cost overruns. The studies have not recognized the significance of collective cognitive thinking and the project team performance.…”

“…This, however, is debated in Refs. [8,23,24] that had mentioned political and economic motives in intentional underestimation typical of large public projects. Flyvberg [23,25], on the other hand, had cautioned on the "Machiavelli factor" as typical for mega projects.…”