1.0 INTRODUCTION OF COST OVERRUN

The problem of cost overrun, especially in the construction industry, is a worldwide

phenomenon, and its effects are normally a source of friction between owners especially

government owners, project managers, and contractors in terms of project cost variation

subsequent to the owner’s decision to build. Although, in theory, it might be expected that

cost overruns have the same probability of occurring as cost underruns, cost overruns have a

much higher frequency

Project success can be defined as meeting goals and objectives as prescribed in the

project plan. A successful project means that the project has accomplished its technical

performance, maintained its schedule, and remained within budgetary costs. Project

management tools and techniques play an important role in the effective management of a

project. Therefore, a good project management lies in the management tools and techniques

used to manage the project. Project management involves managing the resources—workers,

machines, money, materials and methods used. Some projects are effectively and efficiently

managed while others are mismanaged, incurring much delay and cost overruns

2.0 DEFINITION

2.2.1 COST

According to LONGMAN Dictionary of Contemporary English (2003), cost is

defined as the amount of money that you have to pay in order to buy, do, or produce

something.

2.2.2 COST OVERRUN

Basically, cost overrun is defined as actual budget is more than the planning budget.

More than that, it is an unexpected cost incurred in excess of a budgeted amount due to an

under-estimation of the actual cost during budgeting.

3.0 OBJECTIVE OF THE PROJECT

The main objective of this study is to understand the practices of construction cost

management in various construction projects in Malaysia.

4.0 SUMMARY OF THE PROJECT

In construction works, cost always becomes the ‘X-factor’ in deciding the quality of

the works done. However, eventhough the budget of the work is extremely high, but without

a proper project management, the project won’t succeed too. A construction works normally

consist of various workers and equipments, so it need a well organize team to handle all of

these property as well as to ensure the project achieved the goal set up by the owner.

This project mainly focused on to understand the practices of construction cost

managements in various projects in Malaysia. For this task, our group chose only one site

study but we interviewed two different persons with different construction background.

Firstly we interviewed a senior Quantity Surveyor from UTHM with 27 years old

experienced in construction as our representative from owners and the second one is a sub-

contractor with 30 years old experienced in construction as representative of contractors. We

took UTHM new mosque and as our case study. There are some reasons of choosing that

particular building. One of it due to the delay of the finishing time as well as lead to the cost

overruns. With the budget of almost RM30 million, it is very important to have a good cost

management technique to ensure the project achieved its objective.

5.0 BACKGROUND OF THE PROJECT

Actual works on site

Actual works on site

Actual works on site

Model of the mosque

Model of the mosque

6.0

7.0 RESULT AND DISCUSSION

For this section, we interviewed two different people with different construction

background. The reason for conducted two different interviewed is to get the opinions from

various views. The interviewed was conducted with a senior quantity surveyor and a sub-

contractor. The senior quantity surveyor talked for behalf of owners and contract and the sub-

contractor talked behalf of contractors. There are five scale used in the questionnaire.

Below are the scale used in the questionnaire:-

1. Extremely significant (100%)

2. Very significant (75%)

3. Moderately significant (50%)

4. Slightly significant (25%)

5. Not significant (0%)

1 2 3 4 5

Ordinal Scale One To Five In Ascending Order

Respondent A (Senior quantity surveyor, behalf of client)

From 59 questions, she chose 9 questions as the main factors of cost overrun. They

are as listed below:

i. Poor contract management

ii. Frequent design changes

iii. Poor design and delays in design

iv. Mistakes and error in design

v. Change in scope of the project

vi. Owner interference

vii. Additional works

viii. Inaccurate quantity take-off

ix. Lack of experience of technical consultants

Most of these factors lay in contract management issues. Besides that, she also

mentions that this project which is UTHM mosque trapped in this kind of problems due to

interference of the owner. In general, if too much interference comes from the outsider,

obviously it will bring bad effects to the constructions.

At the same time, she also said that a contractor, once they won the tender, they must

work their best to ensure the project run smoothly. No matter how the won the tender, but the

must important thing is do the job seriously. If the management failed, delayed will followed

and this will lead to cost overrun.

Besides that, she also indicated the important of having a good design. If the design

keep changing, this not only brings difficulties to all parties but surely it will add an extra

cost to the budget.

Respondent B (sub-contractor, behalf of contractor)

8.0 RECOMMENDATIONS AND SUGGESTIONS

In construction, cost always played a great influence. Without a properly cost

management, a construction surely wont be successful. Therefore, there should always be

adequate contingency allowance in order to cover increase in material cost due to inflation.

At the same time, long life learning must also be adapted in both contractors and

workers. They must be familiar with the project management techniques and process. By

doing so, it will lead to effective and efficient performances.

9.0 CONCLUSSION

Cost and construction are always link together. Without a proper cost planning, a

construction will surely get a huge problem. In addition, project planning also played a great

role in deciding the quality of the construction. A good project planning will able to minimize

any unwanted things that might lead to cost overrun .

The most commonly used explanations for cost overruns found in literature are

economical rational behavior, strategic behavior, optimism bias, structure of

the organization, relation between actors and values of actors and their relation to the

environment. The explanations can be grouped in four different categories: technical,

economical, psychological, and political explanations.

10.0 REFERENCES

Surihartati Murni Lestari Sutekno, Senior Quantity Surveyor UTHM, 15 March 2011

Che ku Din bin Che Ku……., Sub-contractor , 19 March 2011

Yaw Frimpong, Jacob Oluwoye, Lynn Crawford (2003),

Causes of delay and cost overruns in construction of groundwater projects in a developing

countries; Ghana as a case study. International Journal of Project Management. 21 : 321–32

Jin-Kyung Lee (2008),

Cost Overrun and Cause in Korean Social Overhead Capital

Projects: Roads, Rails, Airports, And Ports, Journal Of Urban Planning And Development ©

ASCE.pp 59-62

Chantal C. Cantarelli, Bent Flyvbjerg, Bert van Wee, and Eric J. E. Molin

Cost overruns in large-scale transportation infrastructure projects:Which explanations can be

given?

LONGMAN Dictionary of Contemporary English 7th edition (2003).Pearson Education

Limited