Causes and effects of cost underestimation on construction projects in South Africa

Abstract

The South African construction industry is faced with challenges which contribute to unsuccessful project delivery. Cost underestimation have negative contribution to construction projects, the effects and causes of cost underestimation have not been adequately explored with the objective of providing mitigating mechanisms. This study is aimed at investigating factors which contribute to cost underestimation, the prevalence of cost underestimation in relation to causes and effects of cost underestimation, with the final objective to establish mechanisms for efficient mitigation of cost underestimation. The study review literatures relating to cost estimation, and additional data were collected in form of a structured questionnaire. The questions highlight the following areas; project planning, method and techniques, and tools as factors contributing to cost underestimation; scope changes and risk associated with specialized building works as prevalence of cost underestimation; planning stage, design and material changes risk due to unforeseen factors as causes of cost underestimation; loss of reputation, exposure to risk and financial loss as effects of cost underestimation; and design requirements, effective techniques and planning as cost underestimation mitigation mechanism. A total of one hundred and forty two (142) emails were sent via the survey website to the selected respondents and seventy four (74) responses were received. A quantitative approach was used and a convenient purposive sampling of respondents was used by handpicking the respondents from the available register of the South African Council for Quantity Surveying Professions (SACQSP) and the general building contractors registered with Construction Industry Development Board (CIBD), construction professionals working in quantity surveying practice and construction firms within and around Cape Town.