YOM POSTGRADUATE COLLEGE

DEPARTMENT OF PROJECT PLANNING AND MANAGEMENT

A STUDY ON
FACTORS INFLUENCING PROJECT TIME AND COST OVERRUN ON GUTEMA FIRISA
CONSTRUCTION PROJECTS

Prepared by: Biruktawit Getachew (GSPRA/011/14A)

Submitted to: Dr. Solomon (PhD)

August 22, 2022

Table of Content
s
1. Introduction.................................................................................................................................................... 1
1.1. Background of the study.................................................................................................................. 1
1.2. Statement of the problem................................................................................................................1
1.3. The objective......................................................................................................................................... 2
2. Literature review......................................................................................................................................... 3
2.1. Theoretical literature review.........................................................................................................3
2.2. Empirical Literature review........................................................................................................... 5
2.3. Conceptual framework..................................................................................................................... 8
3. Methods of the study.................................................................................................................................. 9
3.1. Study site/Area.................................................................................................................................... 9
3.2. Study population and sampling................................................................................................. 10
3.3. Methods of Data analysis.............................................................................................................. 10
References.................................................................................................................................................................. 11
1. Introduction

1.1. Background of the study

The project will be successful if it is completed on schedule, within budget,

and with the intended quality. projects specifically The backbone of an economy and
a source of employment for locals are construction projects related to urbanization.
The building industry is increasingly responsible for a nation's growth. Construction
projects are contributing significantly to the socioeconomic development of the
county and are growing economically. Due to several problems, the project does not
go as planned. Cost and time overruns are the most frequent problems that prevent
a construction project from being completed. When a project is finished for more
money than expected, it is referred to as a cost overrun. And if assignments aren't
completed on time
Gutema Firisa Construction Company is the subject of this study. There are
now 14 ongoing projects for the company, which has more than 12 years of
expertise. this report is based On ten building construction projects, Eight of the ten
building construction projects, or 72.2% of the total, are behind schedule by a
minimum of 7 months and a maximum of 5 years, increasing both the time and cost
of the project. Due to the delay, the majority of work items are now being completed
at a loss, and the unit price specified in the contract agreement is insufficient to even
cover the cost of the material.

1.2. Statement of the problem

Every project has a time and budget component, and construction projects are no
exception. The cost of materials, labor, and equipment (rental and purchase) is
rapidly rising in our country, Ethiopia.

In Ethiopia, construction project delays are common. To pinpoint the root reason
and offer suggestions for lessening the impact, it is critical to look at the factors that
affect project time and cost because many projects, especially those in the
construction industry, encounter time and expense overruns. Almost all

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 construction projects are delayed by cost inflation (labor, materials, and
equipment), which also increases the project's overall cost. The project owner and
the consultant, who are in charge of monitoring and controlling the progress,
quality, and on-time delivery of the construction project, are also at risk from time
and cost overruns. As a result, because time and cost are connected issues, they
cannot be regarded in isolation.

Client-related factors: Financial hardship, approval of design changes and change

orders, inadequate feasibility and project analysis, late payments to contractors, and
changes in the scope of the work are the main issues on the client's side.

Consultant-related factors: mistakes in design, inadequate drawings, subpar

supervision, insufficient expertise, and subpar contract management.

Contractor-related factors: Poor planning, ineffective construction techniques, a

lack of experience, money problems, subpar material and equipment management,
inaccurate cost estimates, failure to account for hidden costs, mistakes made during
construction, use of subcontractors and designated suppliers, and inappropriate or
inadequate procurement

Market-related factors: Changes in foreign exchange rates, a lack of cutting-edge

equipment, a scarcity of materials, and price inflation for labor, equipment, and
materials are a few market-related issues that have an impact on building costs and
timelines.

The nation's political climate has an impact on how projects are progressing as well.
The economy will also be impacted by a nation's unpredictable political climate,
which will lead to cost inflation and delays if there is conflict or war. Construction
projects will also be halted.

1.3. Objective

1.3.1. General objective

the main goal of this study is to investigate the elements that lead to time and
expense overruns in building construction projects. The findings of this study will

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 aid in understanding the reasons that cause building projects to be delayed and
expensive.

1.3.2. Specific objective

This study's goal is to look at the causes that cause Gutema Firisa Construction
building construction projects to cost and schedule more than expected. This study
will look into the factors that affect the overall time and cost of the Gutema Firisa
Construction company's building construction projects.

1. To determine the reasons behind time and expense overruns in

construction projects
2. To determine how to prevent time and expense overruns in construction
projects

2. Literature review
2.1. Theoretical literature review
2.1.1. Project cost management

Project cost management is a method that uses technology to measure the cost and
productivity of projects based on the baseline cost. PCM includes several specific
project management processes including estimating, data collection, scheduling,
accounting, and design. Its main goal is to complete the projects within the approved
budget. There are four steps of project cost management and they are:-

 resource planning
 estimation
 budgeting and
 control

In managing the cost of projects, we have to know what are the types of costs that
need management. The types are fixed costs, which stay the same and do not change
throughout the life of the project life cycle, variable costs which means costs that
change with the amount of work involved with a project, direct and indirect costs

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 which are expenses that are billed directly and indirectly to the project respectively.
There are many benefits of cost management in project management among them,
(wrike.com)

 It prevents cost overrun by assigning costs in the early planning stage,

project managers ensure they do not overspend on specific areas.
 It avoids risk because a good budget has a risk allowance to ensure project
success is affected by the unforeseen cost
 Helps future planning in which cost reports can help with resource
utilization

2.1.2. Cost management tools

Many tools can assist cost management in project management, here are some tools
which are important for managing the cost of projects. (wrike.com)

 Cost Budgeting: the process of computing the total cost of the project to
determine the amount of funding that the project needs to carry out. For
efficient project cost management, an accurate budget is required. There are
some inputs needed for estimating the total cost of projects are scope
baseline, project schedule, resource calendars, risk register, organizational
process assets, and soon.
 Cost estimating: its objective is to show a realistic estimate to complete the
project. The cost management plan, scope baseline, project schedule, human
resource management plan, risk register, historical records, and project
management costs are the main inputs of project cost estimation.
 Cost control: is concerned with cost variance against the cost baseline. It is
ensuring a process that costs are carefully monitored and controlled. It is
performed regularly throughout the project lifetime and frequently as
project costs increase.
2.1.3. Project time management

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 Analyzing and creating a timetable and timeframes for project completion are both
parts of project time management. The project's time management strategy
specifies which tasks should be adjusted as well as how to distribute and manage
resources. The quality, scope, and cost of projects are directly impacted by time
management. Time management ensures that projects are completed on schedule
and within budget. Project time management has many advantages, including
lowering stress levels, boosting output, reducing errors, enhancing proficiency,
maintaining budgets, and achieving project objectives.

2.1.4. Time management tools

According to (bulletin, 2014) time management happens in the planning phase of a

project. The project manager is responsible to plan project activities. Total duration has to
be defined to meet the project goals within the planned time and budget, some tools are
used to manage the time of construction projects.

 Define activities: the first step of managing the time of the project list each
activity to make the project meet its goal
 Work breakdown structure: it is a list of related activities; the breakdown of
works has to be broken down to the last stage of works.
 Estimate activity resources: assign resources that are needed to complete the
project activity
 Estimate activity duration: based on the item of work and available resources
time for each activity is defined. Estimation can be based on previous
experience with similar projects.
 Develop schedule: after estimation of time and resources of activity,
compiled work schedule has to be developed

2.2. Empirical Literature review

Several studies on time and expense overruns have been done by numerous
researchers in numerous nations. The literature on time and expense overruns of
various researchers from various nations is reviewed for this study. The effects on
the project are the same because of construction projects' delays and overruns.
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Below is a study of some literary works that address a topic that is relevant to my
study, which examines the factors that influence the length and expense of
construction projects.

According to Worku Koshe, K.N Jha 2016, Construction delays occur in every phase
of the construction project. The major cause of project failure is a delay. A
construction project is commonly said successful when it is completed within the
schedule and agreed with the budget agreed upon. In the research, Delays are seen
from three directions, which are the major participants of the construction project.
it is from the client, consultant, and contractor's point of view. The cause of delay is
different for each party. From the client side, escalation of material price and
difficulties in financing projects by contractors is the cause of project delay. From a
consultant's point of view difficulties in financing contractors and poor project
planning, scheduling, and management of resources. From the contractor’s point of
view, projects are delayed because of delayed payments for completed work and
fluctuating labor availability from season to season.

The major cause of construction project cost overrun is Poor project management,
unexpected ground conditions, shortage of construction materials, change in foreign
exchange rates, inappropriate/inexperienced contractors, force majeure,
construction cost underestimation, change order or variation order, inflation,
acceleration costs, delay on completion on payments, late site hand over or change
of location of the construction site, provision of clauses in FIDIC and MoWUD
standard conditions of contract related to cost. ( Fetene Nega, March 2008)

From Jomin P Jose1, Annie Sonia Xavier2 1 Mtech student, civil engineering, Toc H
institute of science and technology, kerala, India 2018, cost overrun is considered
the most important problem that affects construction projects progress, it reduces
the profit leading to huge losses, and leaving the project in great troubles.
Construction cost is one of the major criteria for the success of a project throughout
its lifecycle and is of high concern to those who are involved in the construction
industry. Cost overrun is common and word wide in infrastructure, building, and

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technology projects. Cost overrun should be differentiated from cost escalation,
which is used to express likely growth in a budgeted cost due to factors such as
inflation. Construction industries play a critical role in the development of the
economic growth of a country. Currently, it has been shown that the construction
industry has become one of the leading industries in the world. The increasing
complexity of the construction projects shows greater demand for construction
managers to deliver projects on time, within the planned budget, and of high quality.

Inflation of material price, frequent change orders by the owner, inaccurate

estimation of time and budget, bureaucracy and politics in tendering, poor
monitoring and control, weather effect, lack of experience, delay for approval of
materials, and mode of financing are major findings for the cause of project time and
cost overrun.

Construction projects experiencing cost overrun have the potential to become loss
projects, with a resultant significant impact all over the projects’ parties. For
example, clients will be unable to use the facility, as the projects have not been
completed yet, and consultation and designing fees might increase. For contractors,
the impact could include loss of their name and being “trapped” in only one project
for a long time. The major cause of project cost overrun is a frequent design change
in the phase of construction, contractors financing, poor estimation, payment delay,
poor tendering document, poor material management, and poor experience of the
contractor, Abdulelah Aljohani, Dominic Ahiaga-Dagbui, and David Moore, April
2017

Most projects experience cost overruns and thereby exceed the initial contract
amount. In Ethiopia, the number of building construction projects is increasing from
time to time. However, it is common not to complete projects within the allocated
cost and time. Though there are scarce financial resources in the country, cost
overrun is one of the major problems in Ethiopia. Low initial contract amount,
inflation cost of material, and an increase in foreign exchange, (Fetene Nega, March
2008.)

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K Ullah1, A H Abdullah1, S Nagapan1, S Suhoo1, and M S Khan2, 2017, the goal of
any construction project is to complete within the estimated duration, budget, and
expected quality targets. The cause of cost and time overrun can be because of the
owner, consultant, contractor, or other external factors.

Client: financial difficulties, delay in making decisions and payments, change in

scope of work, and lack of coordinators.
Consultant: error and delay in design, lack of supervision, incomplete documents,
project time underestimation, and incompetent designs

Contractor: poor site management, improper planning and estimation, inadequate

experience, and incompetent sub-contractors.

External factors: poor site and weather conditions, lack of material and equipment
on the market, unqualified workforce, and escalation of price

According to Hossam Mohammed, 2014, factors that influence the cost of the project
are an inaccurate or poor estimation of the initial cost of projects, improper
planning, inflation of costs, cost underestimation, unforeseen conditions, omission
and errors in the bill of quantities, a mistake in design, contractual claims, lack of
experience, force majeure and unsuitable construction equipment and methods.

We can infer from the literature that delays and budget overruns are the most
typical issues globally. Investigating the issues with consultants, clients, contractors,
and other market-related elements is necessary so that we can add fresh knowledge
about the causes of construction projects' delays and schedule overruns to the body
of existing literature.

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 2.3. Conceptual framework

Independent variable Dependent variable

Contractor related
 Lack of experience
 Poor material and
equipment management

Consultant related
 Poor supervision
 Design errors and
Time and cost overrun of
incomplete drawings
construction project

Client related
 Financial difficulty
 Poor project feasibility
study

Market/other related
 Change in foreign exchange
 Material Cost inflation
 Epidemic Disease

Figure 2.3.1 a conceptual framework for cost and time overrun

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3. Methods of the study

3.1. Study Area

The analysis is based on building construction projects completed by the Gutema

Firisa Construction Company. By keeping an eye on contract agreements, letters,
payment collections, and weekly and monthly reports from projects that provide
information about the amount of execution, to-date elapsed time, and expense/cost
of the projects, the focal area of projects is the delayed projects. additionally
gathering data through interviews with each project manager. Eight projects of the
company are the study area of the research and they are the 40/60 saving house
project, Ethiopian Biodiversity Two B+G+4 building project, Ethiopian civil service
President office, student dormitory, and store building project, Oromo cultural
Exhibition center building project from projects that are located in Addis Ababa and
Wollega University G+6 staff Apartment, Nekemt Integrated Bus Terminal Main &
Maintenance Building, Assosa University Administration Building and Jimma
University Main & Agricultural Campus Fence Project which are located outside of
Addis Ababa. Those projects are delayed more than seven months and the cost of
construction also increased because of so many reasons.

3.2. Study population and sampling

The primary players in the construction industry, including contractors, consultants,

and clients, were randomly chosen for the study samples based on their level of
direct exposure to the activities involved in building construction. According to their
availability, which means from Addis Abeba projects, clients and consultants are
chosen. Gutema Firisa Construction is the general contractor.

Methods of data collection

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 The collected and reviewed related literature. Additionally, the raw information is
gathered through interviews with the project managers and inspection of the
contracts and letters that are exchanged between the customer, contractor, and
consultant involved in a project. A review of the published literature was done to
determine where the study's gap existed. Therefore, certain actions will be taken,

1. Literature collection
2. Literature review
3. Interview question preparation
4. Data collection
5. Data analysis

3.3. Methods of Data analysis

The data will be examined using STATA software after all the relevant raw data has
been gathered for the factors that lead to project cost and time overruns. Results
will also be put into practice.

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References
1. K Ullah1, A H Abdullah1, S Nagapan1, S Suhoo1 and M S Khan2 (2017) Theoretical
framework of the causes of construction time and cost overruns
2. Werku Koshe1, *, K. N. Jha2, journal of Civil, Construction and Environmental
Engineering (2016) Investigating Causes of Construction Delay in Ethiopian
Construction Industries.
3. Fetene Nega (March, 2008) Cause and Effects of Cost Overrun on Public Building
Construction Projects in Ethiopia.
4. Abdulelah Aljohani, Dominic Ahiaga-Dagbui, and David Moore, (April 2017)
International Journal of Innovation, Management and Technology, Vol. 8, No.
2Construction Projects Cost Overrun: What Does the Literature Tell Us?
5. Jomin P Jose1, Annie Sonia Xavier (2018) literature review on cost overrun in kerala
based construction industry

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