CRITICAL FACTORS OF COST ESCALATION IN HIGHWAY PROEJCTS OF PAKISTAN
Creators: name: Abbasi, Suhail Ahmed
Publisher: name: figshare
Year: 2019
Subjects: subject: 90502 Construction Engineering
subject: FOS: Civil engineering
subject: FOS: Civil engineering

description: Construction projects, private and public alike, have a long history of cost escalation (Jennifer et., 2009). Escalation can account for a substantial part of construction costs. Therefore forecasts of the amount of escalation are required for budgetary and bidding purposes (Andrew et al.,1993). To compute the fluctuation rate, calculating the price fluctuation of overall articles was more desirable than using price indices. A bidding date was more reasonable as the initial date of change in price. Losses caused by price change should be shared between contractor and owner; therefore a deduction rate should be introduced in contract price escalation. Meanwhile, overhead and profit should be adjusted in proportion to the fluctuation rate; but advance payment or the delayed construction amount should be deducted from the adjusted amount (Minsoo et al.,2006).Budgeting for cost escalation is a major issue in the planning phase of these projects. Researchers introduce a system for modeling the escalation uncertainty in large multiyear construction projects. The system uses a Monte Carlo simulation approach and considers variability of project component durations and the uncertainty of escalation factor during the project lifetime and calculates the distribution for the cost. The system can be used by planners and cost estimators for budgeting the effect of cost escalation in large projects with multiyear schedules ( Ali &amp; Roman,2006). There are two main contributors to cost variation in such projects: (1) delays for each individual project that may have an impact on total program finish time, and (2) the uncertainty in the value of escalation factor, especially in multi-year projects (Ali &amp; Roman,2005). The wealth of any nation is gauged by its performance in infrastructure provision through its construction industry. The construction industry is large, volatile, and requires tremendous capital outlays. For developing economies, road construction constitutes a major component of the construction industry. This means that much of the national budget on infrastructure development is channeled to road construction projects. The aim of the study reported in this paper was to identify causes and effects of cost escalation and schedule delays in road construction projects. Using a detailed literature review, structured interviews and questionnaire surveys, the results of the study confirmed the prevalence of cost escalation and schedule delays in road construction projects in Zambia. The study established that bad or inclement weather due to heavy rains and floods, scope changes, environmental protection and mitigation costs, schedule delay, strikes, technical challenges, inflation and local government pressures were the major causes of cost escalation in Zambia’s road construction projects. On the other hand, delayed payments, financial processes and difficulties on the part of contractors and clients, contract modification, economic problems, materials procurement, changes in drawings, staffing problems, equipment unavailability, poor supervision, construction mistakes, poor coordination on site, changes in specifications and labor disputes and strikes were found to be the major causes of schedule delays in road construction projects. Appropriate project management practices are thus required to curb the causes and effects of cost escalation and schedule delays in road construction projects (Chaboota et al., 2009).