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The Challenges of Cost Control Practice in the Construction Industry: A


Literature Review

Conference Paper · March 2018

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Page 14 International Coference on Applied Sciences and Technology (ICAST), 2017

The Challenges of Cost Control Practice in the


Construction Industry: A Literature Review
*1Adjei, K. O., 2Aigbavboa, C. O. And 2Thwala, W. D.

Department of Building Technology, Faculty of Built and Natural Environment, Kumasi


1

Technical University, Kumasi, Ghana


Dept. of Construction Management and Quantity Surveying, Faculty of Engineering and Built
2

Environment, University of Johannesburg, Johannesburg, South Africa


*Corresponding author: [email protected]

Abstract
Construction project cost control practice is one of the difficult tasks in cost management of
which most contractors have not fully enjoyed its benefits. The aim was to identify current
challenges of project cost control practice in the construction industry. The methodology
followed literature searching, and selecting and analysing the selected papers. Thirty-three
challenges were identified. Out of the thirty-three challenges, eleven were thoroughly elaborated
whereas the rest lacked detailed literature. The eleven challenges are; using obsolete methods
and concepts, lack of knowledge on the use of available tools and technology, overemphasizing
on results while ignoring the cost control process, lack of project cost control processes and
systems suitable to the enterprise, abandonment of complicated strategies, lack of consistency
in cost management by managers, serious decision failure, exorbitant marketing expenses,
poor attitude towards information communication technology (ICT) usage, difficulty in
monitoring different sources of day-to-day cost data, variations in contract and lack of
financial commitment in projects. It was realised that the challenges can be grouped under
managers’ personal characteristics, knowledge of cost control process and technology used in
the practice of cost control. Attitudinal change is required for the successful implementation
of project cost control practice in organisations.
Key words: challenges, cost control practice, cost management, construction project,
construction industry.

Introduction
Construction project cost control (PCC) practice is one of the difficult tasks in the
current project cost management faced by most contractors and have not fully enjoyed its
benefits. The practice of cost control is a required task for the survival and growth of every
construction organization in every nation. The practice of PCC assists organizations to
eliminate and/or reduce unnecessary wastage of resources in the execution of construction
projects (Bahaudin et al., 2012; Adjei et al., 2017). According to Cleland and Ireland (2002)
cost control is the process of monitoring; evaluating and comparing planned results with
actual results to determine the status of the cost of the project, schedule and technical
performance objectives of the project. It is therefore essential that, every construction

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Page 15 International Coference on Applied Sciences and Technology (ICAST), 2017

company operates in an effective way by practicing cost control procedure during the post
construction stage of the construction project, to keep the cost of executing the project
within the budgeted cost as initially prepared and approved for (Adjei et al. 2017; Adjei et
al. 2015; Sanni and Hashim 2013; Olawale and Sun 2010). Bahaudin et al. (2012) have also
explained that when construction work commences, the budgeted cost of the construction
project serves as the baseline for the contractor or whoever is undertaking cost control to
use it to check and control the construction costs. A broader understanding of the various
aspect of cost control principles are vital to enable project managers or cost engineers to
effectively prepare their PCC and in the development of future cost forecasting techniques
for effective project delivery (Skitmore and Marston 2005).
The cost control principles are also expected to act as telltale or offer early warning
system, notifications of possible budget difficulties at predetermined periods for corrective
measures to be decided to solve the cost variances. The project quantity surveyor or the
cost engineer needs to apply the cost control methods to develop a series of options for
the other project members to consider and select one of the best options that fit within the
approved budget limit (Adjei et al., 2017; Khamidi et al., 2011; Dikko 2002).
There exist high numbers of projects that fail to meet critical success factors like cost and
time over the years. Both private and public sectors in the construction industry have
lost substantial amounts of money as a result of failed projects in cost and time. In the
developing and Sub-Saharan countries, project cost overrun is severe which indicate
that PCC is a challenge to contractors and also among project team members handling
construction projects.
In the construction industry, very little study has been conducted on the challenges of
cost control. Researchers such as Kirun and Varghese (2015); Sanni and Hashim, (2013)
and Ademola, (2012) identified challenges of PCC but with very limited literature review.
The aim of the study is to identify current challenges of project cost control practice in the
construction industry. This study therefore assessed the current challenges of project cost
control practices that are related to the construction industry. It will enable construction
project members or cost engineers develop mitigating measures in order for construction
organisations to fully enjoy the benefits of the practice of cost control.

Research Methods
This study was conducted using research papers from the literature search and successively
processing and analyzing the papers gotten. Well-known texts relating to cost control and
other cited publications in referred journals but limited to papers that relates to issues
focusing on the challenges of cost control.
The following steps were used:
i) Searching for titles, keywords and abstracts with words like ‘challenges’, ‘cost control’,
‘cost management’ through the electronic databases since such platform has a lot
of collection of texts and therefore provides an extensive coverage of texts than of
individual journals.
The electronic databases used includes Google scholar, Google search engine,

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Ebscohost ASCE, Emeralds, Taylor and Francis, Sage, Wiley online library, DOAJ,
AJOL, and Science Direct. Different papers identified were scanned with the
keywords above. The papers included research articles that principally focused on
the challenges of cost control and others that relate to cost control practice.
ii) An appraisal of the abstracts of these papers were conducted to sieve out the less
related papers. This was attained by means of selecting technical papers and reviews,
eliminating duplicate articles, and doing away with papers which were not directly
related with the topic of the study.
iii) All the outstanding papers were read, analyzed and numerous descriptive words were
identified. The part of the paper that relate to challenges of cost control were singled
out for further examination for the purpose of this study.

Conceptualization of Cost Control in Construction


Definition of Cost Control
According to Cleland and Ireland (2002) cost control is the process of monitoring;
evaluating and comparing planned result with actual results to determine the status of the
project cost, schedule and technical performance objectives.

Challenges of Project Cost Control


The following are challenges of PCC practice:

• Using obsolete Methods and Concepts


Small and medium construction firms are currently using primitive PCC processes which
rely mainly on manual, paper-based information, instinct, and former work experiences
(Benjaoran, 2009). Ademola, (2012) citation of using the manual and paper-based means
for cost control is where site managers, quantity surveyors or cost engineers prefer to use
calculators and notebooks or writing pads to arrive at cost control analysis instead of using
the appropriate tools and technology available. Song, (2014) added that most owners of
construction firms have little level of education or no knowledge on cost management
which hinders practises in the knowledge of cost control. This make them rely on previous
work experiences acquired from previous projects undertaken. The limitation of current
cost management competences, and self-learning narrowed knowledge, continuous
development of organisations, and the changing of work environment have turned their
previous work experiences and methods into unfashionable ones. The challenge is that
these outdated cost management practices cannot be used to solve current real-world
situation of cost variances.
In situations where construction firms do not develop themselves further to be acquainted
with the constantly changing work environment, their problems will get worse and cost
control issues will be tough for them. So, using obsolete methods and concepts without
constantly upgrading members knowledge and practices do not help in the practice of cost
control (Song, 2014).

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• Lack of knowledge on the use of available tools and technology


Knowledge is considered as the key element for every construction organisation to do
well and to be competitive in the construction sector (Martin, 2010; Ademola, 2012). The
‘knowledge’ of cost control can be considered as technical and managerial knowledge and
the lack of it affects the practice of PCC (Ademola, 2012). It is quite surprising most times
to see current graduates who are site managers, quantity surveyors or cost engineers using
mostly calculators and notebooks to arrive at the cost control analysis of the project rather
than using current technology and complicated methods available for use for cost control
practice. The battle to always study and understand complex procedures and steps of cost
control using appropriate tools is a challenge for some professionals. (Ademola, 2012).

• Over emphasizing on results while ignoring the process of PCC


Managers of construction companies are very mindful of cost control issues, and have
repeatedly stressed it as a necessity. The managers are only concerned about the cost
variances in a particular or predetermined period. The managers fail to examine the
sources of cost change(s) and how to handle the change management process. This means
that some managers of organisations just disregard the method of cost control in the
construction project execution (Song, 2014). The PCC process should not be inactive, but
it should always be active, alive and operational particularly during the execution of the
construction project. Nevertheless, the basis of real time PCC is monitoring and reporting
cost variances at regular periods, hence the PCC process demands not just a series of
records of costs changes but also the probability of subsequent cost commitments in the
construction project (Bahaudin et al, 2012; Ferry et al, 1999). Most contractors are not
willing to invest in cost management methods or not ready to pay a professional to handle
cost issues for the organisation. It is considered as a waste of money to the company or a
way to cut down unnecessary expenses during the execution of the construction project,
although it could have saved the organisation huge money loss with the practice of cost
control. Cost managers necessarily need to undertake PCC processes right at the beginning
of the construction project and keep the PCC practice active always (Song, 2014).

• Lacking PCC processes and systems suitable to the enterprise


As previously explained, managers of construction companies are very mindful of cost
control issues, and have repeatedly stressed it as a necessity. The managers always prefer
an easy way of performing cost control processes without following due process which
eventually become a bad practice. Most cost managers are always mindful of the need
to focus and keep construction cost on track but are not prepared to spend much time
in developing a cost control template for very construction project for use in the PCC
process, this is because of the fact that, formulating the cost control process for a project
takes much time. Notwithstanding that fact, only specific attention is given to some aspects
of the construction project activities where variances of cost have or are likely to occur.
The procedural and systematic structures can be executed for a long time by corporate
managers at all levels. The PCC flow is to be undertaken for a long term instead of just
once when the construction project commences. It is also very important for simplifying

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the management of cost; specifically cost control in construction project delivery (Song,
2014; Adjei et al., 2015).

• Abandonment of complicated strategies


Most often than not, most site managers, quantity surveyors or cost engineers find it difficult
to combine residual knowledge with experiences from previous endeavours (Ademola,
2012). The systematic strategies where one uses mathematics with computerised base is a
problem for some professionals in the day-to-day activities in managing cost (Ademola,
2012).

• Lack of consistency in cost managementby managers


Many construction companies will take the initiative to perform or undertake PCC process
only when there exist cost problems, predicaments, or thoughtful cost issues. This is a
common phenomenon with most construction managers. conversely, the organisation
will only be executing or delivering the construction project as planned. Although cost
manager recognises the essence of performing PCC process, they fail to pass the concept to
the other members of organisation to accomplish the cost objectives of the project. Instead
of being constitent in the practice of cost control during construction project execution,
managers mostly do so irregularly or occasionally when the need arises. Not only is there
a lack of PCC processes and systems, but also the many cost managers’ maladies, which is
a lack of continuous engagement of PCC processes in the delivery of construction projects
(Song, 2014; Adjei et al., 2015).

• Serious decision failure, exorbitant marketing expenses


This is also an important aspect of PCC practice. The project quantity surveyor or the
cost engineer needs to apply the cost control practice to develop a series of options for
the other project members to consider and also select the best option that fits within
the approved budget limit (Khamidi et al, 2011; Dikko, 2002). Corrective measures are
therefore considered as a decision-making concept to be used to solve the variances that
occur in the construction cost. Alternative solutions must be undertaken to solve the
cost problems identified (Adjei et al, 2017). The failure in effective decision making and
corrective actions affects the organisation leading to a high cost of project. This depends
on whether cost managers of the organisations are knowledgeable and experience in the
practice of PCC in decision-making and cost management. Decision failures, including
malapportioning of funds or loss of opportunities caused by decision delays, will indirectly
affect the organisational cost expenses. Initial slight decisions failures made by managers
will eventually be catered for by the organisation (Song, 2014; Adjei et al., 2015).

• Poor attitude towards Information Communication Technology (ICT) usage


ICT tools and knowledge are widespread for use in the construction industry. Regardless of
the existence of numerous advantages ICT offers to construction firms, the organisations
are still very slow in exploring its potential benefits (Egbu and Botterill, 2002). The barriers
of ICT adoption in the construction industry include cultural, psychological, technical and
financial factors (e.g. of technical and financial factors are continuous call for advancement

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and high investment budgets) (Ba¨ckblom et al., 2003; Bjo¨rk, 2003). Construction
professionals are also very satisfied with using traditional methods and tools in managing
cost which makes it a barrier in cost control (Samuelson, 2002; Achar et al., 2005). One
of the key critical factors for the successful use of ICT is the individual and organisation’s
attitude to communication. In most construction firms, individual attitude and behaviour
towards technology usage and attitudinal change have always become a problem in the
delivery of construction projects (Brewer and Gajendran, 2009; Brewer and Gajendran,
2006; Davis and Songer, 2008).

• Difficulty in monitoring different sources of day-to-day cost data


Charoenngan and Sriprasert, (2001), advocate that “accurate and realistic estimate”
helps organisations to win a construction contract, it also will offer a path to attain
maximum return and finally aids as an effective idea for PCC. The method used in the
monitoring of construction cost might be seen as the most problematic function to be
accomplished. It is the responsibility of the staff who are dealing with the main cost data at
the construction site to monitor them in their routine dynamic construction operations.
As the construction work advance, earned value of each work element must be monitored
to permit the identification of cost status at any given progress. The monitoring process
may be involved with a vast amount of data collection from many different sources or
parties. Well-established standard procedures can assist smoothen the advancement as
well as guarantee completeness of data for the PCC practice (Sanni and Hashim 2013;
Charoenngam and Sriprasert, 2001).

• Variations in contract
Ashworth and Hogg (2002) stated “that the initial estimate of variations to the contract is
likely to be of a budgetary nature and it is important that such estimates be progressively
updated as more detailed information becomes available in the form of measurement
quotations or day work records”. Charoenngam and Sriprasert (2001) recommended that
some decision support systems must be provided at all levels of management with updated
information about the various aspects of the project cost performance. Besides, exception
reports can enhance the management’s productivity by concentrating on the most critical
subset of performance information. Moselhi et al (2004), added that “the earned-value
method is widely used for reporting project status with consideration of two performance
indicators (time and cost) in an integrated manner”. The competencies of the personnel
in the contracting organization should be high in construction PCC practices. The more
efficient the cost managers are, the better for the progress and growth of every construction
organisation. Pries et al. (2004) stated that, the construction businesses today are about
fulfilling client satisfaction through efficient production and delivery of construction
projects. So, if the contractor’s cost managers are very efficient in discharging their work, it
may result in high cost-effective construction project delivery by the organization (Sanni
and Hashim, 2013).

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• Lack of financial commitment in projects


The most important factor that is being considered by every contractor is the opportunity
to remain in business by taking up some construction projects. Most contractors are always
concerned with profit or turnover before taking up a new construction project. Contractors
are well aware of the need to maintain a flow of cash for the day-to-day activities in project
delivery and also maintain a cash flow for the survival of the company. Additionally, some
contractors have suffered liquidation or bankruptcy not because their construction work
was unprofitable but because of cash flow problem in the short term during construction
project delivery (Sanni and Hashim, 2013).

Summary of Findings from Literature


The table 1 below shows the summary of the challenges of cost control identified from
different countries.
Table 1: Summary of findings from literature
S/No. Source Country Challenges of cost control
1 (Kirun and Var- India Improper planning and scheduling, ineffective planning,
ghese, 2015) reworks due to errors, due to defective work, wastage of
materials, design changes, additional works, currency
value, fluctuation in material cost and increase in interest
rate

2 (Sanni & Nigeria Improper contract document, engagement of inexpe-


Hashim, 2013) rience staff, unstable market condition, complexity of
the project, unstable government regulations, choice of
procurement method, lack of research and innovation,
price and design risk, quality factors of cost information,
non-provision of training of young professionals, inade-
quate access to software packages, non-clarity of exclu-
sions, and ineffectiveness of professional bodies.

3 (Ademola, 2012) South Lack of knowledge on the use of available tools and tech-
Africa nology,
Abandonment of complicated strategies
4 (Song, 2014) China Using obsolete methods and concepts
Over emphasizing results, and ignoring the process of
PCC
Lacking PCC processes and systems suitable to the
enterprise
Lack of consistency in cost management by managers
Serious decision failure, exorbitant marketing expenses.

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5 (Charoenngan Thailand Difficulty in monitoring different sources of day-to-day


& Sriprasert, cost data
2001)
6 Authors con- Poor attitude towards ICT usage
struct, 2017 Lack of financial commitment in projects
Source: literature review

Lessons Learnt
Lessons learnt from the study include the classification of the challenges under managers’
personal characteristics, knowledge of cost control process and technology used in the
practice of cost control. Critically studying the challenges, some of the managers’ personal
characteristic challenges include poor attitude towards ICT usage, using obsolete methods
and concepts, and over emphasizing results, and ignoring the process of PCC. This shows
that cost mangers have a role to play in the practice of cost control in the organisation. Their
individual personal skills and characters will as much affect the practice of cost control.
Some of the cost control process challenges include serious decision failure, inadequate
access to software packages, difficulty in monitoring different sources of day-to-day cost
data. These challenges also clearly indicate that the cost control process and structures
should be considered by every organisation. The organisations should make good decisions
as well have a clear monitoring system.
Surprisingly, some of the challenges of cost control identified are really factors that affect
construction cost or barriers that make controlling of projects cost very difficult. It is not
directly connected to the practice of cost control. Most challenges identified by Kirun &
Varghese, (2015) and Sanni & Hashim, (2013) include unstable market condition, choice of
procurement method, non-clarity of exclusions, improper planning and schedule, reworks
due to errors, lack of research and innovation, price and design risk. It is quite debatable
that barriers of controlling construction cost could be considered as challenges of cost
control practice. This study draws challenges mainly for the practice of cost control.

Conclusion
PCC practice plays a key role for the successful delivery of construction project and also
enables contractors to remain in business. The aim is to identify current challenges of
project cost control practice in the construction industry. The source of data for conducting
this study was literature review. Current related literature was consulted and successively
processed and analysed.
The study has showed that challenges are plugging the way of the implementation of
effective cost control practices in the construction industry. The antecedents of these
challenges are to a large extent, the results of attitude of management and the people in
whose hands cost control practices lay. This has created the barriers preventing the adoption
and implementation of modern cost control practices in the construction industry.
Attitudinal change is required for the successful implementation of project cost control
practice in construction firms.

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References
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Acar, E., Kocak, I., Sey, Y. and Arditi, D. (2005). Use of information and communication
technologies by small and medium-sized enterprises (SMEs) in Building Construction,
Construction Management and Economics, 23, 713–722
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Their use and effectiveness, Electronic Journal of Information Technology in Construction
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Olawale, Y. and Sun M. (2010). Cost and time control of construction project: Inhabiting
factors and mitigating measures in practice, Construction Management and
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Theses
Ademola, W. O. (2012). Examining a new approach to cost control methods and
mechanisms for SMMEs in construction projects, MSc Thesis, University of
Johannesburg, South Africa
Martin, L. (2010). Transfer mechanisms of knowledge and skills in co-operations
between emerging and established civil engineering contractors, PhD Thesis,
University of Cape Town, South Africa

Conference Proceedings
Adjei, K. O., Aigbavboa, C. O. and Thwala, W. D. (2015). Contractors management
team roles for project cost control in Ghana In: Mojekwu, J. N., Nani G., Atepor,
L., Thwala, W. D., Ogunsumi, L., Awere E., Ocran, S. P., and Bamfo-Agyei, E.
(Eds) Procs 4th Applied Research Conference in Africa (ARCA) Conference, 27-
29 August 2015, Ibadan, Nigeria.
Adjei, K. O., Aigbavboa, C. O. and Thwala, W. D. (2017). Corrective measures for
construction project cost control, International Conference on Construction and
Real Estate Management (ICCREM 2017), Nov. 10th – 12th, 2017, Guangzhou,
China, Publishers: American Society of Civil Engineers (ASCE), Accepted paper
Bahaudin, A. Y., Elias, E. M., Dahalan, H. and Jamaluddin, R. (2012). Construction cost
control: A review of practices in Malaysia, The 3rd International Conference on
Technology and Operations Management, Sustaining Competitiveness through
Green Technology Management, Bandung – Indonesia, July 4-6, 2012.

Books
Ashworth, A. and Hogg, K. (2002). Practice and procedure for the quantity surveyors,
Oxford, Blackwell Science Ltd.

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Cleland D. I. and Ireland R. L. (2002). Project management, Strategic design and


implementation, 4th Edition, McGraw-Hill, Inc.
Ferry, D. J., Brandon, P. S. and Ferry, J. (1999). Cost planning of buildings, 7th ed. Blackwell
science Ltd.
Skitmore, R. M., and Marston, V. K. (2005). Cost modelling, e-Library. E & FN Spon: Taylor
& Francis Group

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