Chapter million USD. The construction started in 2004

Chapter 5: Examples
of Budget Over-runs And Late Completion Projects

Many construction projects have experienced budget overruns and late
completion, hence, three examples of projects that have undergone budged
overruns and late completion are:

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·        
Burj Khalifa

·        
Sydney Opera House

·        
Scottish Parliament
Building

 

5.1: Burj Khalifa

The Burj Khalifa
was built to serve the king of Dubai and provide offices and hotels. This
project was planned to start construction in 2003 and estimated to cost $876
million USD. The construction started in 2004 and the end value at completion
was a staggering $1.5 billion USD. The following were the causes for these
staggering rising costs:

·        
Fatalities
– this caused 2,500 labourers
to quit their jobs causing late completion and budget overruns.

·        
Adverse
weather – workers regularly
felt faint and had to have time off to recover.

·        
Changes
in design due to failures – due to its
complicated design, many parts of the structure had to be altered for the
environment such as façade.

Due to the above
factors the completion date was set-back to a 9-month delay and almost double
in the original estimated budget.

 

 

5.2: Sydney Opera House

The Sydney Opera
House was designed by Jorn Utzon and built as a performing arts centre. The
project was estimated to cost $7 million AUD and to start in 1957, henceforth
expected to be finished in five years. The project didn’t start until 1959 with
a completion cost $105 million AUD, completed in 1973. The project’s budget was
overrun by 15 times the initial budget and took 16 years to complete. The cause
of the late completion and budget overrun was due to the main factor which was,
insufficient planning during the design stage.

Due to inadequate planning during the design stage, it has
affected the construction stage, which all accumulates to late completion and
budget overrun.

5.3: Scottish Parliament Building

 The Scottish Parliament Building was engineered
by Ove Arup and Partners to serve the Scottish Parliament.  This project was planned in 1999 and estimated
to cost £50 million. The project finished three years late and the cost
increased to an astonishing £414 million, that’s a 730% increase in cost. The
main cause for the late completion and staggering budget overruns was due to
scope creep- the project scope was constantly increasing causing multiple
effects on other tasks.

 

 

 

 

 

 

 

 

 

 

Chapter 6: Conclusion                                                       

Previous research conducted, reveals that budget overruns and late
completions are significant to the construction industry. Furthermore, it appears that not all projects
affected by budget overruns and late completion are foreseeable, however, the
tendering process considerably impacts on budget overruns and late completion.
Budget overruns and late completion seem to work parallel with each other,
hence these crucial influences require addressing. The greatest influence for
budget overruns and late completion are delays, clients making controversial
decisions and reduced reputation of contractor.

Therefore, it is essential that the actions listed previously are to be
adhered to, however, there are some endorsements which must be followed to
ensure a flowing project. The main endorsements are for the parties involved
are:

Client – The client must ensure the availability of sufficient funds,
understand the feasibility of last minute decisions and effects it would have
on the project, and the client must suggest a realistic deadline accounting for
anticipated delays.

Contractor – The contractor must submit a realistic tender and not one at a bare
minimum not accounting for delays and budgeting overruns just to win the
contract. The contractor should employ trustworthy sub-contractors who have a
good track history of previous construction projects. Finally, it is essential
that the contractor must have a consistent and firm management skills as well
as a good reputation in completing successful projects.

Consultant – The consultant should have a good communication skills with other
parties, comprehend the project goal and client’s duties. Also, the consultant
should solve and discrepancies between parties before and during the
construction phase, as this will reduce premature complications such as budget
overruns.

Bibliography                                                               

·        
UKEssays. (2017). Budget Over Runs And Late Completion Of
Projects. online Available at:
https://www.ukessays.com/essays/construction/budget-over-runs-and-late-completion-of-projects-construction-essay.php
Accessed 2 Dec. 2017.

 

·        
Project Smart. (2017). Why Over 90 Percent of All
Projects Finish Late. online Available at:
https://www.projectsmart.co.uk/why-over-90-percent-of-all-projects-finish-late.php
Accessed 2 Dec. 2017.

 

·        
Smallbusiness.chron.com. (2017). What Are Reasons
for Cost Overruns in Project Management?. online Available at:
http://smallbusiness.chron.com/reasons-cost-overruns-project-management-63225.html
Accessed 3 Dec. 2017.

 

·        
Arcom.ac.uk. (2017). online Available at:
http://www.arcom.ac.uk/-docs/proceedings/4cbaa2ca1021ce2bc010658d11b15190.pdf
Accessed 3 Dec. 2017.

 

·        
Who’s Who Legal. (2017). Death, Taxes and Cost
Overruns – The Latest Legal Features, Research and Legal Profiles – Who’s Who
Legal. online Available at:
http://whoswholegal.com/news/features/article/32342/death-taxes-cost-overruns
Accessed 3 Dec. 2017.

 

·        
Irbnet.de. (2017). online Available at:
https://www.irbnet.de/daten/iconda/CIB_DC22746.pdf Accessed 3 Dec. 2017.

 

·        
Arcom.ac.uk. (2017). online Available at:
http://www.arcom.ac.uk/-docs/proceedings/ar2000-073-081_Proverbs_Holt_and_Cheok.pdf
Accessed 8 Dec. 2017.

 

·        
Arxiv.org. (2017). online Available at:
https://arxiv.org/ftp/arxiv/papers/1303/1303.6604.pdf Accessed 10 Dec. 2017.

 

https://www.designingbuildings.co.uk/wiki/Delays_on_construction_projects

Crawford,
L. (2002). Project Performance Assessment. Masters in Project Management Course,
10th-15th June, Paris, France. UTS/ESC-Lille.   
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.668.4600&rep=rep1&type=pdf

https://www.quora.com/What-were-the-engineering-challenges-in-building-the-Burj-Khalifa

http://www.globalconstructionreview.com/perspectives/centurys-most-troublesome-construction-pr8oje8ct8s/

 

Table 1: Minimising construction delays.

Method of minimising construction delays

Parties

Method

Client

·        
Ensure satisfactory and definite
source of finance.
·        
Trusted nominated sub-contractor.
·        
Common project progress consultation.
·        
Experienced consultant advice.

Contractor

·        
Commitment to the project.
·        
Adopting Design-Build and
Construction Manager type of contract.
·        
Strategic planning.
·        
Use of BIM.
·        
Allocation of sufficient time and
money at the design phase.

Consultant

·        
Solve discrepancies
·        
Good communication in management
team
·        
Adequate advise to the client

 

In construction,
there are many factors that cause late completion due to delay. These delays
are split into direct and indirect actions. Direct action delays are delays that
could be controlled and usually involves parties. Indirect delays on the other
hand, cannot be controlled and only reduced to a minimum. Researched carried
out by Verma (1995, 1996) writes that communication, teamwork, and leadership
are vital components of effective management of project human resources and are
necessary to accomplish project objectives successfully. Crawford (2002)
recommends methods on how to improve future projects from late completion. Below is Table 1: Minimising construction
delays.

4.2: How To
Prevent Future Projects From Late Completions?

 

3.      Delays from the
contractor –The contractor is liable to pay liquidated
and ascertained damages if he/she is responsible for any delays affecting the
completion date. It is inevitable for delays to occur due to the contract’s
performance, hence contractors should consider that errors arise in design
regularly and therefore, these errors and delays need to be anticipated to
avoid late completion.

2.      Delays from the
client – Most delays are caused by the contractor; however, some
delays can be cause by the client and these include the client instructing
variations in work and delays from the clients nominated sub-contractor. These
delays allow the contractor to claim direct loss and expense incurred due to
the client’s fault of delaying the project.

1.      Concurrent delays – Concurrent delays are defined as instantaneous delays caused by the
contractor and project manager, affecting the project completion date.
Therefore, it is essential that both parties ensure records are kept, to
demonstrate how the event occurred and methods of avoiding major impact on the
completion date. However, a critical path analysis can be carried out to
demonstrate the effects on events mainly on the completion date.

In construction, contracts tend to be characterised in
the following three delays:

 

2.     
Delays
that will impact on the completion date.

1.     
Delays
in activities for which there is programme float
available.

Generally, there are two types of delay

4.1: Why Do Late Completions Occur And What Are The
Causes?

It is not always the contractor’s liability for these delays. The other
parties involved in the construction stage are, clients, consultants and
external influences e.g. suppliers and machinery etc. Any postponement will generate
difficulties between some of the parties involved.

Late completions in construction projects is commonly referred to as the
period between the actual deadline, to the period the project is completed.
This delay effects the client, contractor and shareholders, hence if delays
occur, the contractor will be subjected to immediate termination of contract
and reduced profit.

Chapter 4: What Are Late Completions?                         

 

 

 

 

Risks and uncertainties increase the budget of any
project. Thus, a 10% of the estimated cost contingency plan is usually added
into projects to avoid delays and budget overruns. Though 10% may seem trivial,
the value of adding other control systems for the project performance might
increase significantly. Nevertheless, an upright project management estimate is
more desirable and efficient than a contingency plan.

A successful project depends on the project manager
and contractor working as one to get the best proficiency from a task and tend
to be based on time, performance and cost. There are many sorts of key
standards and activities which ought to be taken after for a project to be
marked as successful and they are suitable decision of project plan, strong
support for the project and its manager from higher management, technical
competence and good project communications.

3.      Monitor and
control the above 2 stages continuously till the completion of the project.

2.      Certify that scope
is adhered to strictly

1.      Classify the scale
of the project,

To keep future projects from being unsuccessful in
terms of budget, the management of costs should be separated to indicate
precisely where expenses will be greatest and littlest. In my opinion the
estimating, scheduling, booking, gathering and investigating costs, and
actualising measures to remedy construction costing must be adhered to entirely,
as this will keep any disappointments in terms of the budget. There is a three-stage
process which can be utilised amid the arranging stage through to the construction
stage,

3.1: How To Prevent Future Projects From Budget Overruns?

 

 

 

Generally, the media sees the construction industry
as a failing industry without a well organised scope.   Most clients
will be careful prior to investing in large construction projects, which will result
in a decrease in the construction industry’s reputation. Many construction
projects which are accepted by the client will come with a superior risk to the
contractor.

·        
Client
– loses confidence in the construction industry, but specifically the client
will have lost faith with his/her consultant. This increases the budget as the
client may have employ another consultant. 

·        
Contractor – bad
reputation is given to the contractor due to failure of not completing the
project.

It is obvious that budget overruns occur often. During the tendering
stage, there are many causes which are not considered and cause a bad
impression on the contractor and client. The effect on the contractor and
client is as follows,

Chapter 3:  What Are The Overall Effects From Budget
Overruns?

 

 

 

 

Each site has different ground conditions, thus,
testing the ground prior to the construction phase is significant. This can be
done through trial pits and/or bore holes, hence this ensures no issues arise
during excavation. Bore holes and trial pits give information
on ground conditions only in a specific area and not area that hasn’t been
tested, therefore, the true ground conditions of a construction site will be
revealed once the contractor is onsite proceeding excavation works, and hence,
it is the contractor’s responsibility to manage these unexpected ground
conditions. Ground conditions change over time and therefore it isn’t uncommon
for ground conditions to change from the trial bits or bore hole data. This
will cause major delays in the program of works of the project and possible
redesign. It is obvious that unexpected ground conditions are a noteworthy
factor that may increase cost in a construction project.

2.1.6: Unexpected Ground
Conditions

Exchange
rates are very temperamental can seriously influence whether a project will go
through a budget overrun or not for example Brexit, which essentially
discontinued relationships between UK and EU traders and had an impact on the
Great British Pound. Due to the change in the foreign exchange rates, there
could be a drastic alteration in the budget. Thus, it is essential to
anticipate these unexpected changes in foreign exchange rates as this will
produce a more accurate budget. 

2.1.5: Change in Foreign
Exchange Rates

 

 

A vast amount of materials is
used to complete a construction project; hence some materials may be more
popular than others such as concrete. Thus, locally ordered materials may
perhaps be in great demand. Some materials will be in greater in demand then
others, which causes possible delays to the project. There may be special
materials such as Egyptian tiles, that needs to be pre-ordered before-hand and
could cost significantly more as it will need to be shipped in, which could
cause delays in the materials delivery schedule. It is essential that a trusted
supplier is used to supply the relevant materials for the construction and also
specialist materials that are shipped around the world need to be anticipated
in terms of possible delays. Therefore, the mentioned above factors that may
affect the supply of materials in a construction project needs to be
anticipated to prevent any material shortages and a supplementary cost added to
the over cost to avoid budget overruns.

2.1.4: Shortage of
Construction Materials

 

 

 

 

·        
Failure to classify
premature complications in design and changes in the program of works

·        
Poor
communication between members of the project team and the client

·        
Lack of planning
and co-ordination

It is essential that
a project has a firm management team as this ensures that a project will be
successful in terms of not exceeding the budget and completing the project with
the correct quality. The project manager/management team may or may not be
involved with the finance of a project, but usually the quantity surveyor
overseas all the finance of a construction project. As mentioned previously
that a successful project foreshadows a good management team, User Guide (2005)
suggests signs of poor project management are the following:

2.1.3: Poor Project Management

Inflation in general is the rise in prices and fall in the purchasing
value of money. The increase in inflation results in increase of value in
aspects of a project e.g. salary, material costs, plant hire etc. Due to rise
in inflation, the budget will be influenced on extend of this increase in
inflation. To counteract these additional costs, a more detailed understanding
of the market should be conducted out in the tendering process, by members of
the project i.e. quantity survey and contractor.

2.1.2: Inflation

Contractors usually submit low
tenders to increase the likelihood of winning the tender. This usually results
in the project being completed to a low standard, thus, this ultimately
increases the overall cost of a construction project and possibly causes the client
to retender.

2.1.1: Underestimations

·        
Actual costs are on average 28% higher than estimated
costs

·        
In construction projects, statistics
reveal that the probability of definite costs being larger than estimated costs
is 86%

·        
90% of construction projects are overrun (Project Smart. 2017)

Therefore,
it is obvious that even what seems most insignificant types of causes of budget
overruns can dramatically increase the overall cost of a project. Subsequently,
previous research suggests that:

·        
Scope

·        
Planning process

·        
Changes in designs

·        
Unrealistic estimation of project during tendering
stage

·        
Late completion

·        
Climate change

The forms of budget overruns are instigated
by,

2.     
Uncontrollable budget
overruns

1.     
Controllable budget
overruns

Most construction projects experience budget overruns. Project management
is a solution to budget overruns as it avoids budget overruns
(Smallbusiness.chron.com, 2017). It is certain that poor project management
results in budget overruns, therefore, there are two characterised aspects of
arranging budget overruns, and they are:

2.1 Why Do
Budget Overruns Occur and What Are The Causes?

Budget
over-runs can merely be defined as when the project exceeds the initial
approximated cost. The
construction industry uses a standard logical procedure to classify whether a
project has undergone budget overruns or not; this is (final cost – initial estimated
cost during tendering stage). If the value is negative, then the project hasn’t
received any profit, hence, gone through a budget overrun. However, if the end
value is positive, it means that the project is successful providing a budget
and avoiding budget overruns.

Chapter 2: What Are Budget Overruns?                         

 

 

It is useful to analyse previous construction projects to extract what the
common failures were as this will be helpful to eliminate possible future
failures. This technical essay will significantly rely on preceding research on
unsuccessful projects by optimising the use of resources such as books and case
studies.  The constraints of this
technical report will be dependent massively on data analysed on previous
research and their conclusions. Finally, this technical report will emphasis on
budget overruns and late completions.

These uncertain characteristics that affect the progress of a project can
be mitigating from occurring regularly, the types of failures must be targeted
so that upcoming construction projects can have a greater likelihood of
completing successful projects. On the other hand, some failures are inevitable
to occur even through precise planning due to unforeseen and uncontrollable
circumstances such as climate change, delayed deliveries, recession etc.
Consequently, it is obvious that due to the inability to control uncontrollable
conditions, the controllable conditions must be addressed and so Contractors
and designers can liaise and produce a more proficient specification.  

Projects in construction are deemed as
successful if the project is completed within the budget and estimated
timeframe required for the project. Conversely, in reality most construction
projects are guilty of late completion and over budged; in fact, 90% of UK
construction projects are unsuccessful (Project Smart. 2017). Many construction
projects undergo failure in completing a project largely due to uncertainties such
as adverse weather conditions and fluctuation of material production.

 

Chapter
1: Introduction                                                    

 

 

 

Table of Contents
Chapter 1: Introduction
4
 
Chapter 2: What Are Budget Overruns?
4
2.1: Why Do Budget Overruns Occur
and What Are The Cause?
5
2.1.1:
Underestimations
6
2.1.2 Inflation
7
2.1.3 Poor
Project Management
7
2.1.4 Shortage of
Construction Materials
6
2.1.5 Change in
Foreign Exchange Rates
6
2.1.6 Unexpected
Ground Conditions
6
 
Chapter 3: What Are The Overall Effects
From Budget Overruns?
4
3.1: How To Prevent Future
Projects From Budget Overruns
5
 
Chapter 4: What Are Late Completions?
4
4.1: Why Do Late Completions Occur
And What Are The Causes
5
4.2: How To Prevent Future
Projects From Late Completions?
5
 
Chapter 5: Examples of Budget Overruns
And Late Completion Projects
4
5.1: Burj Khalifa
5
5.2: Sydney Opera House
5
5.3: Scottish Parliament Building
5
 
Chapter 6: Conclusion
4
 
 
 
 

 

 

 

 

 

 

 

 

 

 

 

Conclusions
show that budget overruns have significantly diminished in the alteration and
development area. Also, it has generally been superficial and repetitive,
hence, an effective methodological example showing excellent control in budget
overruns and on time completion, could be required to address this recurrent
and complex issue faced in most construction projects.

Construction
projects often overrun the budget. The causes of budget overruns are due to a
range of poor understanding of the impact of complex projects and impractical
cost estimations. Despite the vast amount of research on budget overruns, there
have been partial evidence to support the fact that budget overruns are a
significant factor effecting the overall timeframe of a construction project. An
evaluation of the literature review reveals it may not be a huge concern of
budget overruns in simple construction projects, rather large complex projects.
This technical report outlines an analysis of current budget overruns and
suggests possible approaches to reduce or even mitigate budget overruns where
possible. This technical essay will explore some methodological flaws in the
methods adopted in most budget overrun projects.

ABSTRACT                                                     

 

 

 

 

 

Depart of School of Mathematics, Computer Science & Engineering

CITY UNIVERSITY OF LONDON

 

 

 

 

 

 

 

 

 

 

Topic:
Some construction projects suffer from budget overruns and late completion.
Discuss possible causes of these problems and measures that could be taken to
avoid their recurrence on other projects. 
Illustrate your discussion with appropriate projects.

 

PART 3

BACHELOR OF ENGINEERING (HONS) IN
CIVIL ENGINEERING

 

Bishoy Fakhuri (ACSK393)

 

Technical
Report

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