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The ASOCSA 14th Built Environment Conference IOP Publishing
IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

The impact of cost overruns and delays in the construction

business
M Dlamini 1 and R Cumberlege2

1
Department of Quantity Surveying, Nelson Mandela University,
s217013406@mandela.ac.za, P O Box 77000, Port Elizabeth, 6031, South Africa
(+27 63 234 6244)
2
Department of Quantity Surveying, Nelson Mandela University,
Roy.Cumberlege@mandela.ac.za,PO Box 77000, Port Elizabeth,6031, South
Africa (+27 41 504 3020)

Abstract: The construction industry is negatively affected by cost and time overruns which further negatively
impacts the contractual stakeholders. Construction delays and cost overruns are a global phenomenon since one of
the major problems in the construction industry involves unexpected incurred costs and late delivery of projects.
The success and failure of any project depends upon many factors and the Project Manager is considered to be the
key contributor to the success of any project, as well as to guide the team members to achieve the client satisfaction.
In addition, the roles, responsibilities, duties, and competencies of Project Managers have a direct impact on
successfully completing construction projects on time and within budgeted cost. The study aimed to find the key
competency skills that the Project Manager must possess to mitigate time and cost overruns. A quantitative
research approach was adopted to determine the key competency skills of a Project Manager with respect to cost
and time delays. A web-based questionnaire was published in the Eastern Cape Masters Builders Association
(MBA) bulletin aimed at contractors registered with the association. The results revealed that the key competencies
required to mitigate for cost overruns are comparable to those required to mitigate against time overruns. The study
investigated the need for project managers to better equip themselves with key competency skills to perfom
optimally to reduce the occurrence of cost and time delays on construction projects. The aim of this research was
to assist Construction Managers to choose the right candidate as a Project Manager. It would also assist inspiring
Project Managers to acquire the key competency skills. The paper responds to the conference theme given that the
reduction of cost and time overruns promotes the sustainability of the Built Environment.

Keywords: Contractor, Construction industry, Cost overruns, Project manager,Time overruns

1. Introduction
The construction industry is a good indicator of economic performance and growth in a country, it also
contributes significantly to the Gross Domestic Product (GDP) of many countries, South Africa
included. Hansen-Addy [1] noted that the construction industry significantly contributes to job creation
in many economies, which therefore places much importance of its impact on a nation’s GDP.
Despite the progressive economic potential, the construction industry faces challenges of cost and
time overruns which has an undesirable impact on the contractual parties involved in the project.
Construction delays and cost overruns are a world-wide phenomenon since one of the major problems
in the construction industry involves unexpected acquired costs and the late delivery of projects [2].
Flyvbjerg [3] studied 258 projects across the world and concluded that 90% of construction projects
are experiencing cost increases and delays. The award of the 2010 FIFA World cup in South Africa
resulted in ten stadia being upgraded or newly constructed. Almost all the projects experienced time and
cost overruns [4]. The initial budgeted cost of the Johannesburg Soccer City was R 2.2 billion and the
final cost amounted to R 3.7 billion. Moses Mabhida stadia experienced a 68% increase in cost while
Mbombela stadia had an increase of 66%. The results of the study indicated that the increase in material
cost was the largest single contributor for the delays and cost overruns.
Researchers have investigated the significant factors that lead to time overruns and time delays. It
was found that design changes, cash flow, and poor management are the most significant factors. The

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The ASOCSA 14th Built Environment Conference IOP Publishing
IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

circle of investigation into overruns cannot be complete unless established critical factors are matched
against respective mitigation strategies to control the occurrence in which the overruns occur. That is
why Roslan and Zainun [5] investigated the factors of cost and time overruns due to their existence in
the various stages of the project lifecycle. The main causes were then aligned with possible matching
mitigation strategies. Another study conducted by Olawale and Sun [6] further categorised the
mitigation measures according to the broad function they measure; Preventive, Predictive, Corrective
and Organisational measures respectively.
The success and failure of any project depends upon many factors. Speculand [7] noted that nine
out of ten projects failed due to incompetent project managers. Project Managers are considered to be
the key contributor to the success of any project, as well as to guide the team members to achieve the
client satisfaction. In addition, the Project Managers’ roles, responsibilities, duties, and competencies
have a direct impact on the success of construction projects. Abdulsamadi- Ali and Chiseshe [8] study
show that there is an extremely strong correlation between the Project Manager and the success of the
construction projects.
There are several competency skills that a Project Manager must have in order to prevent cost
overruns and to control time delays. A quantitative research approach was adopted for this study to
determine the key competency skills for a project manager to adopt in order to mitigate the occurrence
of cost and time overruns. A web-based questionnaire was published in the Eastern Cape Master
Builders Association (MBA) bulletin, targeting contractors that are registered with the association. The
average scores from the respondents were calculated, tabulated and used to determine the key
competencies. Based on the results from the respondents, it was found that the key competency skills
needed to mitigate cost overruns were comparable to those required to manage time overruns.

2. Literature review
2.1 Cost Overruns defined
A cost overrun is simply defined as an excess of actual cost over budget [6]. A cost overrun may also
be referred to as "cost escalation," "cost increase," or "budget overrun". According to Singh [9] cost
overruns are unforeseen costs incurred in excess of an estimated amount due to an under-estimation of
the actual cost. Shakantu [10] views cost overruns as simply an incidence, where the final or actual cost
of a project surpasses the original or initial estimates. Furthermore, cost overruns may be viewed as the
percentage of actual or final costs over the estimated or tender cost of a project.
In construction, cost overruns are considered as one of the most important problems that impede
projects progress, since it reduces the contractor’s profit leading to enormous losses, and leaving the
project in great troubles. Construction cost is one of the peak criteria of success of a project throughout
its lifecycle and is of high concern to those who are involved in the construction industry.

2.1.1 Significant factors causing cost overruns

Allahaim and Liu [11] conducted a study on various infrastructure projects which spanned five
continents to investigate the causes of cost overruns. The aim of the research was to develop an empirical
based classification of the major causes of cost overruns. The major causes were identified and classified
by the author as follows;

• Planning and control uncertainty – The author identified planning as key in project planning.
Similarly, a study by Buba and Tanko [12] identified that a project to succeed, proper planning must
be developed in order to improve cost controls. Panthi, Farooqui and Ahmed [13] stated that
construction businesses should look at utilising four basic management tools which are; planning,
organizing, leading and controlling to improve their cost controls and reduce cost increases
problems. Furthermore, the causes under planning were the lack of experience by project managers,
strategic misrepresentation, changes in materials and equipment, design error, poor financial control
on site, waste on site, shortage of site workers, poor site management and communication, lack of
coordination, equipment availability and lack of implementation of technology.

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The ASOCSA 14th Built Environment Conference IOP Publishing
IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

• Change in scope – Scope change occur due to alterations in design of architectural, structural or
service components. This is often the results of the client’s change of plans or scope [14]. According
to Allahaim and Liu [11] the main causes of scope change resulted from unrealistic designs from
owners and changes due to omissions. Smith [15] also identified that scope changes are client related
cost overruns that usually occur due to variations made by the consultants.
• Site conditions – These are causes related to environmental issues, social and culture impact. This
issues can lead to increases to the uncertainty of tasks and outcomes, which can make planning and
estimating difficult. The increasing of the environmental requirements impacts on construction
operations [11] for example, environmental issues such as unexpected geological conditions can
lead to increases in the uncertainty task and outcomes which can make planning and estimating
difficult. Khoshgoftar, Bakar and Osman [16] identified site conditions as major impact of cost
overruns in Iranian building projects. The author said that the measurement of environmental issues
has many consequences in the construction industry which results mainly the increase of costs of
construction projects and the time taken to process design, planning and construction life cycle. The
public exposure of the project over their environmental impact had adverse impact on the project
itself which can lead to the abandonment or cancellation of the project itself. According to Allahaim
and Liu [11] the British Rail’s high-speed link to Channel Tunnel had cost overruns of up to US$
1.4 billion as a result of changes in site conditions.
• Market Flactuation – The author mentioned that such conditions can be experienced when the prices
of labour and materials required to construct a project fluctuate unpredictably, or when government
regulations change unpredictably, which leads to increase in cost construction. Market related
uncertainties affect both project duration and cost [17]. The researcher said that the manager must
consider all kinds of resources in the design of construction to ensure that the resources match each
other and adjust other types of resources when the availability of any resource is raised or lowered
by uncertainty. This classification of cost overruns includes monthly payment difficulties by the
client, slow payments of completed works, cashflow during construction, market conditions,
fluctuation in money exchange rates, high interest rates charged by banks, fraudulent practises,
political complexities, practise of assigning contract to lowest bidding, laws and regulatory
framework.

2.2 Time Overruns

Time overruns are defined as extra time required to finish a given project beyond its original planned
duration, whether compensated for or not [18]. According to Singh [9] time overruns are defined as the
difference in time between the actual and the initially planned dates of completion. Time overruns can
also be defined as an act or event that extends the time to complete or perform an act under the contract
[19] The author also defined time overruns as simply the time overrun either beyond the completion
date specified in a contract or beyond the date that the parties agreed upon for delivery of a project. It is
a project slipping over its planned programme and is considered a common problem in construction
projects globally.
Delivering projects within the contract stipulated time is one of the yard sticks of measuring a
successful project. Despite its proven importance, it is not uncommon to see construction projects failing
to achieve their objectives. However, construction projects schedule overruns have negative impacts on
all construction parties including the client. The factors of delays studied in a project development
project were typically classified as time delays. In the study, it was found that the top ten major factors
that contributed to project delays was, poor site management by the contractor, weather conditions, poor
site conditions, incomplete documents from the consultant, lack of experience on the part of the
consultant’s site staff, financial problems of the contractor, contract modifications by the client,
construction mistakes and defective work by the contractor, delay in approving major changes in the
scope of work by the consultant and lastly, contractor having coordination problems with other parties
[20].

2.2.1 Significant factors causing time overruns

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The ASOCSA 14th Built Environment Conference IOP Publishing
IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

Enshassi, Kumaraswamy and Jomah [21] classified the construction delays into compensable delay,
critical delay, non-critical delay, excusable delay and concurrent delay. They were classified as follows;
• A compensable delay is one where a contractor is entitled to financial recovery in the form of direct
and indirect time related costs arising from an employer risk event. These are delays due to late
instruction by the project manager or chief consultant, variation due to owner and late
commencement of construction works due to the owner.
• Critical delay is a delay to the progress of any activity on a critical path of a project, which causes
delay to the project completion. Critical delays depend on the project itself, contracts plan, contracts
sequence and all the physical constraints of the project.
• Excusable delay is a delay for which a contractor will have relief from damages and potential
financial entitlement depending on contractual circumstances. The types of delays under this
category includes labour strikes, natural disasters (fires, floods, earthquakes), changes initiated by
the owner errors and omissions in plans.
• Non-excusable delay is a delay caused by contractor. Under this category is delays caused by
mobilisation, late performance by suppliers, faulty workmanship by contractor and late performance
by subcontractors.

2.2.2 Causes of cost and time overruns due to project managers’ incompetency
It is evident that Project Manager’s competency is key for any construction projects to succeed.
Competence refers to the skill and capacity required to complete assigned activities within the project’s
constraints [22]. Explained from a semantics perspective, ‘competence’ has been used to define a
particular knowledge or observable characteristics, whereas ‘skills’ are an amalgamation of expertise
and facilities, mixed together by organisation process and culture [22]. The author further explained that
if a project manager does not possess the required competences, performance can be jeopardised.
Major causes of cost overruns and delays are caused by poor project management practices.
Academic scholars equally noted the importance of project management competency noting that lack of
improvement in project performance would cause a tremendous stride in cost control, quality and time
taken to finish a construction project [23].
The responsibilities of project managers range from project administrators to construction team
leaders. To effectively execute a project, the latter needs to possess a unique set of knowledge and
competencies [24]. Project management professional competencies can be achieved through a
combination of knowledge gained during training, skills developed through working experience and
finally, the application of the previous knowledge acquired. The knowledge that a project manager has
is very distinctive from that of other construction professionals, such as critical path analysis and project
cash flow forecast.
Nkando and Meyer [25] identified the competencies of project managers under three distinct
categories as follows;
• Key competencies – the personal, interpersonal, financial control, leadership style, design abilities,
professional practice and business competencies common to all pathways and compulsory for all
candidates for planning costs and budgets. Risk management, planning, site organisation, decision-
making and coordination are key for the time management of a project.
• Core competencies – the primary competencies of your chosen APC pathway, which may include
business skills, law, measurement and practical project management.
• Optional competencies – a set of competencies selected by the candidate. These are mostly technical
competencies, but certain mandatory competencies also appear on the optional competency list and
candidates are permitted to select one of these at a higher level.

2.3 Effects of project delays

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The ASOCSA 14th Built Environment Conference IOP Publishing
IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

The impact of cost overruns has evident effects in the construction industry. Mukuka, Aigbavboa and
Thwala [18] investigated the consequences that will occur when the causes of cost and time are not
identified and worked on effectively. The authors identified the effects and ranked them as follows:

• Cost overrun: The effect of cost overruns to the client implies added costs to the agreed contract
sum, resulting in less returns on investment.
• Time overrun: Time delay might have the incapacitating effect on contracts and consultants in terms
of growth in adversarial growth.
• Dispute and Claims: Disputes and claims arise because of the losses incurred through schedule
overrun.
• Litigation: Disputes, due to schedule overruns, can lead to court cases for resolution especially when
large penalties are at stake.

3. Research methodology
A quantitative research method was carried for this study. A quantitative research examines the
relationships between variables, which are measured numerically and analysed using a range of
statistical and graphical techniques [26]. Data was obtained in the form of structured questionnaire
which allowed for precise, objective and reliable results. The research method used was the mono-
method. Data was collected using both the secondary data collection and primary data collection
methods. Secondary data was mainly used in the evaluation of literature, collected from peer-reviewed
journals, books and online sources. The primary data was made in the form Questionnaire which
supports the use of interval Likert scales to measure data and allows for use of descriptive statistics to
analyse data [26].
A structured questionnaire survey was designed in Microsoft excel with four sections namely;
demographics, the causes of cost overruns, the causes of time overruns and the general section. In
sections B and C, the respondents were allowed to voice out their opinions or outline further comments
not covered by the section. A 5-point interval Likert scale was used to obtain the opinions of the
respondents for the analysis of the data.
A pilot questionnaire was distributed to four Project Managers to validate the questionnaire’s
quality. The questionnaires were distributed electronically via the Eastern Cape Masters Builders
Association (MBA) bulletin targeting contractors that are registered with the association. There were
approximately 208 building contractors registered with the MBA. Responses were received from 54
contractors which represents a response rate of 26%.

4. Results and findings

4.1 Demographics of respondents
The majority of respondents were Project Managers as the study was only targeting Project Managers.
• 83% of the respondents were male.
• 37% of the respondents were 50 years and older.
• 33% of the respondents hold a National Diploma.
• 50% of the respondents have spent more than 15 years in the Built Environment.
• 41% of the respondents fall under the construction management constituency.

4.2 Causes of cost overruns

Hypothesis 1 stated that the lack of key competency skills by Project Managers is a direct result of cost
overruns. Project Managers were asked to determine the level of importance and evidence relating to
the Project Managers' key competencies concerning the causes of cost overruns. Tables 1 and 2
examined the data by ranking the level of importance and evidence on the Project Managers' key
competencies. The mean for each factor was recalculated as a percentage and ranked based on the level
of importance and evidence of each factor.

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The ASOCSA 14th Built Environment Conference IOP Publishing
IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

Table 1 Competencies of a Project Manager (Importance)

Ref Project Managers' key competencies % Rank

Q2-1 Planning and control 98% 1
Q2-3 Financial control on site 94.4% 2
Q2-2 Application of project budget techniques 94.1% 3
Q2-4 Management of cashflow 92.2% 4
Q2-10 Strategic implementation 87.4% 5
Q2-12 Decision making 77.0% 6
Q2-11 Leadership style 73.1% 7
Q2-5 Communication on site 73.0% 8
Q2-8 Implementation of technology 70.0% 9
Q2-13 Negotiation skills 68.9% 10
Q2-15 Business skills 67.4% 11
Q2-6 Coordination 67.0% 12
Q2-14 Personal and interpersonal skills 66.7% 13
Q2-7 Design abilities 63.0% 14
Q2-9 Arbitration and dispute resolution 57.0% 15

Table 2 Competencies of a Project Manager (Evidence)

Ref Project Managers' key competencies % Rank

Q2-1 Planning and control 97.0% 1
Q2-2 Application of project budget techniques 95.2% 2
Q2-4 Management of cashflow 93.3% 3
Q2-3 Financial control 92.2% 4
Q2-10 Strategic implementation 85.2% 5
Q2-12 Decision making 71.9% 6
Q2-8 Implementation of technology 71.5% 7
Q2-5 Communication on site 71.1% 8
Q2-11 Leadership style 70.0% 9
Q2-15 Business skills 68.1% 10
Q2-13 Negotiation skills 67.4% 11
Q2-14 Personal and interpersonal skills 66.7% 12
Q2-6 Coordination 64.8% 13
Q2-7 Design abilities 63.0% 14
Q2-9 Arbitration and dispute resolution 57.8% 15

Results in Tables 1 and 2 revealed that:

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The ASOCSA 14th Built Environment Conference IOP Publishing
IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

• Planning and control was ranked highest in terms of level of importance and evidence. A score of
98% was achieved for level of importance and 97% for the level of evidence.
• Financial control on site was ranked second place with a score of 94.4% and ranked fourth place for
the level of evidence with a score of 92.2%.
• Ranked number three was the application of project budget techniques with a score of 94.1% and
second place for the level of evidence with a score of 95.2%
• Ranked fourth place for the level of importance was the management of cashflow with a score of
92.2% and third for the level of evidence with a score of 93.3%.
• Ranked fifth for the level of importance was the strategic implementation with a score of 87.4% and
also fifth for the level of evidence with a score of 85.2%.

Based on the findings, financial control, planning and control, application of project budget techniques,
management of cashflow and strategic implementation were recommended as the key competency skills
by the Project Managers.

4.3 Causes of time overruns

Hypothesis 2 stated that the lack of key competency skills by Project Managers is a direct result of time
delays. Project Managers were asked to determine the level of importance and evidence relating to the
Project Managers' key competencies concerning the causes of time overruns. Tables 3 and 4 examined
the data by ranking the level of importance and evidence on the Project Managers' key competencies.
The mean for each factor was calculated and ranked based on the level of importance and evidence of
each factor.

Table 3 Competencies of a Project Manager (Importance)

Ref Project Managers' key competencies Mean Rank

Q3-4 Planning and scheduling 4.87 1
Q3-1 Time management techniques 4.85 2
Q3-3 Application of construction methods 4.67 3
Q3-13 Risk management 4.57 4
Q3-6 Decision making 4.56 5
Q3-9 Timeous material ordering 4.50 6
Q3-11 Strategic implementation 4.43 7
Q3-5 Communication skills 3.59 8
Q3-8 Site organisation 3.50 9
Q3-2 Conflict management techniques 3.41 10
Q3-10 Management of cashflow 3.35 11
Q3-7 Management of labour 3.33 12
Q3-12 Procurement and financial management 3.30 13

Table 4 Competencies of a Project Manager (Evidence)

Ref Project Managers' key competencies Mean Rank

Q3-1 Time management techniques 4.85 1
Q3-4 Planning and scheduling 4.81 2
Q3-3 Application of construction methods 4.67 3
Q3-6 Decision making 4.53 4

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The ASOCSA 14th Built Environment Conference IOP Publishing
IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

Q3-13 Risk management 4.52 5

Q3-9 Timeous material ordering 4.50 6
Q3-11 Strategic implementation 4.24 7
Q3-2 Conflict management techniques 3.52 8
Q3-5 Communication skills 3.44 9
Q3-10 Management of cashflow 3.44 10
Q3-7 Management of labour 3.37 11
Q3-12 Procurement and financial management 3.30 12
Q3-8 Site organisation 3.28 13

Results in Tables 3 and 4 revealed that:

• Planning and scheduling and were ranked first and second place respectively for the level of
importance with a mean of 4.87%. Time management techniques was rated second place for the
level of importance and first place for the level of evidence with a mean of 4.85, planning and
scheduling was ranked second place with a mean of 4.81.
• Application of construction methods was ranked third place for the level of importance with a mean
score of 4.67 and in the same way for the level of evidence.
• Risk management was ranked fourth place for the level of importance with a mean score of 4.57
and fifth place for the level of evidence with a mean score of 4.52.
• Decision making was ranked fifth for the level of importance with a mean score of 4.56 and fourth
place for the level of evidence with a mean score of 4.53.

Based on the findings, planning and scheduling, time management, application of construction methods,
decision making and risk management were recommended as key competency skills by the Project
Managers.

5. Conclusion
Cost overruns are one of the critical problems faced in the construction industry. A project may be
considered to be a successful project only when it is completed within the budgeted cost. Studies
revealed that the success and failure of any project depends upon many factors. It is noted that the Project
Manager is considered the key contributor to the success of any project. Thus, the objective of the study
was to investigate the main causes of cost and time overruns. The study also aimed to determine the key
competency skills necessary for Project Managers to mitigate against cost and time overruns. The study
further investigated the effects of project delays and mitigation measures thereof. Based upon the various
literature reviews, key competency factors required by the Project Manager to control cost and time
overruns were identified. A quantitative research approach was followed using a structured
questionnaire. Based upon the findings it can be concluded that the key competencies needed for cost
overruns are comparable to the key competencies needed to manage time overruns. The study discovered
that the key competencies for preventing cost overruns were financial control, planning, and control,
application of project budget techniques, management of cashflow and strategic implementation. The
key competencies for time overruns was planning and scheduling, time management, application of
construction methods, decision-making and risk management.

6. Recommendations
It is recommended that the South African Council of Project and Construction Management
Professionals (SACPCMP) be encouraged to focus and emphasise on the key competency that which
affect cost and time delays. It is suggested that the Project Managers need to equip themselves with
knowledge of cashflow, budgets, planning and scheduling, risk management and strategic
implementation. This will positively benefit construction firms, clients and other key stakeholders

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The ASOCSA 14th Built Environment Conference IOP Publishing
IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

involved in construction industry. Contractors should look at appointing Project Managers with a proven
track record of completing projects within the allocated time and budget.

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IOP Conf. Series: Earth and Environmental Science 654 (2021) 012029 doi:10.1088/1755-1315/654/1/012029

Education 2016; 60:111–127.

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