Causes and probability analysis of cost differencies in building projects

Prekoračenje troškova u građevinskim projektima smatra se jednim od najvažnijih problema koji se javljaju u životnom ciklusu projekta. Uspješnost projekta često je definirana upravo kriterijem prekoračenja troškova, a učinkovito upravljanje troškovima od vitalnog je značaja za zatvaranje projekta. Svi projekti, bez obzira na veličinu i složenost podliježu riziku prekoračenja troškova. Prekoračenjem troškova tijekom faze izgradnje neplanirano se opterećuje proračun projekta, te ovisno o prekoračenju, projekt može biti napušten ili završen manjim standardom od očekivanog. Investitor očekuje da konačni trošak projekta neće prelaziti ugovorenu vrijednost, te da će projekt biti izveden u dogovorenom vremenskom okviru uz jamčenu kvalitetu izvedenih radova. Svijest o faktorima prekoračenja troškova omogućuje identifikaciju potencijalnih problema i njihovu eliminaciju, odnosno ublažavanje negativnih efekata koji se javljaju kao posljedica prekoračenja troškova. Ovim radom provodi se analiza faktora prekoračenja ugovorene vrijednosti projekta visokogradnje na način da se za detektirane kategorije troškova ispita ovisnost između ugovorene i realizirane vrijednosti, te vjerojatnost pojave prekoračenja prema vrsti građevinskih radova. Poseban osvrt dat je na fenomen optimistične pristranosti (eng. Optimism bias). Prvi korak provedbe analize je prikupljanje podataka i izrada baze podataka na temelju kojih su provedena statistička ispitivanja. Za metodu analize usvojena je regresijska i statistička analiza koja je provedena pomoću normalne distribucije. Nakon prikaza rezultata analize date su preporuke u okviru postupka smanjenja i eliminacije prekoračenja ugovorene vrijednosti.The problem of cost overrun in construction projects is considered to be one of the most important issues in the project life cycle. Project efficiency is often defined exactly by the cost overruns, and the effective project management is crucial for successful project closure. The phenomenon of cost overruns can occur on construction projects of all kinds, regardless the size and complexity. The changes associated with cost overruns can seriously devastate budget to the point where the project could not be finished with required quality standards, or it could even have to be abandoned. The client expects that the final cost of the project will not exceed contracted value. Also, it is expected that the execution of the project would be at required time frame and required quality assurance. An awareness of factors that can cause cost escalations enables to identify potential problems of cost overrun negative effects and to take appropriate action to eliminate, or at least minimize them. This study performs an analysis of the cost overrun factors in construction projects. A study was undertaken to investigate the correlation between committed cost and total cost of the project depending on cost category and probability of cost overruns depending on the type of construction work. The special focus is given on phenomenon of „Optimism bias“. The first step of analysis was collecting the data and creating a database for making a statistical model. Linear statistical regression and normal distribution are adopted for estimating the relationships among mentioned variables. After reviewing the results of analysis, recommendations are given to reduce and prevent cost overruns

Causes and probability analysis of cost differencies in building projects

Prekoračenje troškova u građevinskim projektima smatra se jednim od najvažnijih problema koji se javljaju u životnom ciklusu projekta. Uspješnost projekta često je definirana upravo kriterijem prekoračenja troškova, a učinkovito upravljanje troškovima od vitalnog je značaja za zatvaranje projekta. Svi projekti, bez obzira na veličinu i složenost podliježu riziku prekoračenja troškova. Prekoračenjem troškova tijekom faze izgradnje neplanirano se opterećuje proračun projekta, te ovisno o prekoračenju, projekt može biti napušten ili završen manjim standardom od očekivanog. Investitor očekuje da konačni trošak projekta neće prelaziti ugovorenu vrijednost, te da će projekt biti izveden u dogovorenom vremenskom okviru uz jamčenu kvalitetu izvedenih radova. Svijest o faktorima prekoračenja troškova omogućuje identifikaciju potencijalnih problema i njihovu eliminaciju, odnosno ublažavanje negativnih efekata koji se javljaju kao posljedica prekoračenja troškova. Ovim radom provodi se analiza faktora prekoračenja ugovorene vrijednosti projekta visokogradnje na način da se za detektirane kategorije troškova ispita ovisnost između ugovorene i realizirane vrijednosti, te vjerojatnost pojave prekoračenja prema vrsti građevinskih radova. Poseban osvrt dat je na fenomen optimistične pristranosti (eng. Optimism bias). Prvi korak provedbe analize je prikupljanje podataka i izrada baze podataka na temelju kojih su provedena statistička ispitivanja. Za metodu analize usvojena je regresijska i statistička analiza koja je provedena pomoću normalne distribucije. Nakon prikaza rezultata analize date su preporuke u okviru postupka smanjenja i eliminacije prekoračenja ugovorene vrijednosti.The problem of cost overrun in construction projects is considered to be one of the most important issues in the project life cycle. Project efficiency is often defined exactly by the cost overruns, and the effective project management is crucial for successful project closure. The phenomenon of cost overruns can occur on construction projects of all kinds, regardless the size and complexity. The changes associated with cost overruns can seriously devastate budget to the point where the project could not be finished with required quality standards, or it could even have to be abandoned. The client expects that the final cost of the project will not exceed contracted value. Also, it is expected that the execution of the project would be at required time frame and required quality assurance. An awareness of factors that can cause cost escalations enables to identify potential problems of cost overrun negative effects and to take appropriate action to eliminate, or at least minimize them. This study performs an analysis of the cost overrun factors in construction projects. A study was undertaken to investigate the correlation between committed cost and total cost of the project depending on cost category and probability of cost overruns depending on the type of construction work. The special focus is given on phenomenon of „Optimism bias“. The first step of analysis was collecting the data and creating a database for making a statistical model. Linear statistical regression and normal distribution are adopted for estimating the relationships among mentioned variables. After reviewing the results of analysis, recommendations are given to reduce and prevent cost overruns

Predicting buildings construction cost overruns on the basis of cost overruns structure

In construction practice, contractually agreed costs are often exceeded, which interferes with the sustainable realization of construction projects. The research described in this paper covers 24 new construction, renovation and reconstruction projects in the Republic of Croatia realized in the years 2006 to 2017, in order to analyse the occurrence of cost overruns more precisely with regard to the source of the overruns. It was found that additional work is the main source of cost overruns: firstly, additional work as a result of the client’s change orders and then unforeseen construction work as a result of unforeseen circumstances. As for the additional works, they are carried out at the client’s request and are not necessary for the safety and stability of the building. Using linear regression and “soft computing” methods, the possibility of modelling the relationship between contractually agreed and realized construction costs with satisfactory accuracy was tested. The model with the values of the natural logarithms of the variables, modelled according to the time–cost model of Bromilow, proved to be of the highest accuracy