Causes of Cost Overrun in Construction Projects in Auckland

Hemant Kumar, Otago Polytechnic

Dr. Lorraine Skelton, Otago Polytechnic

Dr. Indrapriya Kularatne, Otago Polytechnic

Abstract: Cost is a key indicator in measuring the success of projects. It is also a significant cause of project failures. The construction industry is overwhelmed with failures experiencing big losses due to project cost overruns throughout the country. The effects of this are not limited to individual project with huge losses occurring in public projects and potentially affecting the economic growth of the country. This research identified the factors responsible for project failures due to cost overrun in the construction industry in Auckland, New Zealand. The study also aimed to identify the current methods employed to avoid such losses. The research identified 15 primary factors further broken down into 51 sub-factors, potential to affect cost in construction project. The results showed that three main factors that caused project failures due to cost overruns, were namely optimism bias, procurement method and scope change. The interrelationships between cost overrun factors were identified and illustrated using the construction project cost influencers and contributors model.

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