Time and Cost Overruns in the UAE Construction Industry: a Critical Analysis

International Journal of Construction Management ISSN: 1562-3599 (Print) 2331-2327 (Online) Journal homepage: https://www.tandfonline.com/loi/tjcm20 Time and cost overruns in the UAE construction industry: a critical analysis Reshma Mary Johnson & Robin Itty Ipe Babu To cite this article: Reshma Mary Johnson & Robin Itty Ipe Babu (2018): Time and cost overruns in the UAE construction industry: a critical analysis, International Journal of Construction Management, DOI: 10.1080/15623599.2018.1484864 To link to this article: https://doi.org/10.1080/15623599.2018.1484864 Published online: 13 Nov 2018. Submit your article to this journal Article views: 82 View Crossmark data Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=tjcm20 INTERNATIONAL JOURNAL OF CONSTRUCTION MANAGEMENT https://doi.org/10.1080/15623599.2018.1484864 ARTICLE Time and cost overruns in the UAE construction industry: a critical analysis Reshma Mary Johnson and Robin Itty Ipe Babu School of Energy, Geoscience, Infrastructure and Society, Heriot-Watt University, Dubai, United Arab Emirates ABSTRACT KEYWORDS Time and cost are the two main indicators of success in a construction project as it affects all Budget overrun; causes; the project participants with equal positive and negative effects. Yet, poor time and cost per- construction sector; cost formance have been a critical issue prevailing in the global construction market and UAE have overrun; schedule overrun; not been an exception. This research adopted a concurrent mixed-methods approach, utilizing a time overrun; UAE questionnaire and an interview with UAE construction professionals, to analyse the major causes of this poor time and cost performance. The top five causes for time overrun were concluded as design variation from client and consultant, unrealistic schedules and completion dates projected by clients, delay in obtaining government permits and approvals, inaccurate time estimation by the consultants and change orders from clients. Whereas, the top five causes of cost overrun were summarized as design variation, poor cost estimation, delay in client’s decision- making process, financial constraints of client and inappropriate procurement method. Introduction economy with about 8.3% share in the total GDP during the first quarter of 2014 (Emirates NBD 2014). Construction sector have been distinctive and dynamic However, time and cost overrun are frequently and in nature, constantly dealing with uncertainties and tem- unceasingly faced in construction projects irrespective porary teams from multi-lingual and multi-cultural background (Chan and Chan 2004;Puspasari2005; of its size, nature and complexity (Faridi and El- Acharya et al. 2006;El-Sayegh2008). According to Sayegh 2006; Ren et al. 2008). About 50% of the UAE Puspasari (2005)andBertelsenandSacks(2007), con- projects were analysed with time and cost overrun struction sector’s low performance is a world-wide phe- because of approval delays, delay in client-decision nomenon. Time and cost are the main factor of making and poor initial planning (Faridi and El- concern as failure to achieve this can equally affect cli- Sayegh 2006; Motaleb and Kishk 2010). A study done ents, contractors, stakeholders and other project partici- by The Chartered Institute of Building (CIOB) identi- pants (Assaf and Al-Hejji 2006;Nega2008;Toorand fied Dubai metro as the third most troublesome pro- Ogunlana 2008). The study on 450 private residential ject with 5 years delay and 85% increase in cost from projects in Kuwait by Koushki et al. (2005), identified the estimated schedule and budget mainly due to sub- thetopthreecausesoftimedelayaschangesinthe stantial number of disputes from design and scope agreed scope of work, financial difficulties faced by the changes (Wilks 2015). The 29 stations across red line owners and the lack of experience of the owner. The and 20 across green line were initially planned to be causes of 70% delay of Saudi building projects were sum- completed by September 2009 and March 2010 marized by Assaf and Al-Hejji (2006)asissueofvaria- respectively, but due to major disputes, only 10 stations in design, payment delays, poor planning and tions in the red line were completed by September scheduling, lack of site management by contractor, labour 2009 (Harnan 2009) and the entire project was even- deficiency and financial difficulties of contractors. tually completed by March 2014 delaying the project Construction sector ropes the progress and growth by 5 years (Libo-on 2014). Whereas, due to problems of a country (Faridi and El-Sayegh 2006; Ahady et al. in monetary resources, contractual differences, appro- 2017). A study by Motaleb and Kishk (2010) points vals and licensing, Maceda (2016) points out that 70% out that construction sector constitutes about 14% of of projects in Dubai are subjected to time overrun. the GDP of UAE. The construction sector was identi- Understanding the causes of time and cost overrun fied as the fifth largest sector serving Dubai’s that can affect the project at distinct phases is CONTACT Robin Itty Ipe Babu [email protected] ß 2018 Informa UK Limited, trading as Taylor & Francis Group 2 R. M. JOHNSON AND R. I. I. BABU important to recognize the mitigation measures to management and even availability of appropriate diminish the effect on the project performance. The resources that further leads to failure in abiding performance of construction industry has always to the schedule. The experience of client is also remained a matter of concern and UAE have not essential for proper selection of qualified and been an exception to this case. Hence, the objective of experienced contractors to avoid frequent this study is to analyse the major causes of time and reworks and variations that leads to project cost overrun in the UAE construction industry. delays (Saeed 2009; Sunjka and Jacob 2013). The poor technical performance of the contractor is Literature review often linked to the deficiency of proper forecast- ing and management experience of the contrac- Causes of time and cost overrun tor which leads to errors and reworks The factors analysed by various researchers across dif- throughout the construction phase of the project ferent countries points out that some causes for delays escalating project cost (Frimponga et al. 2003; and cost overruns are common in all the areas, but Shanmugapriya and Subramanian 2013; Sunjka some may vary due to the changing culture and prac- and Jacob 2013). ’ tices followed within the country (Dolage and 4. Delay in client s decision-making process and Rathnamali 2013). The major causes of time and cost involvement: Sunjka and Jacob (2013) points out overrun can be therefore summarized as below: that delay in decision-making by clients can delay site works and progress. Further, the deci- 1. Design variation and change orders: The scope sion-making process can also be affected by the of works is generally not finalized during the internal politics, improper communication chan- planning stage and is frequently subjected to nels and bureaucracy of an organization (Sunjka variation as per the interests of the parties and Jacob 2013). The client has the obligation to involved (Saeed 2009). Change in scope and ensure that the project purposes and require- design is likely to occur due to the uniqueness, ments are clearly conveyed and understood by tight schedule and budget allocated during the all the project participants (Saeed 2009). planning stage (Hanna and Ruwanpura 2007). 5. Poor planning, scheduling and management: It Sunjka and Jacob (2013) identifies design vari- is vital to plot the work before the implementa- ation and change orders to even cause tempor- tion of the project for successful completion ary halt of the project that can further add on to (Saeed 2009). The contractors often fail to pro- delay of the project. Memon et al. (2011) points vide practical construction programmes and out that project cost is mainly affected by poor work plans at the initial stage and due to which and delayed design. More often, these claims monitoring project progress becomes a time- can lead to disputes and affect the clients’ cost consuming task (Sambasivan and Soon 2007; and contractors’ profits (Baloi and Price 2003). Sunjka and Jacob 2013). Sunjka and Jacob 2. Payment delays and financial constraints: Delay (2013) identifies that unrealistic contractual dur- in payment for completed works is sometimes ation projected by clients affect the time per- considered as an outcome of bureaucracy that formance due to inadequate time provided to exist in the organization (Frimponga et al. 2003; the project managers to plan and forecast. Sunjka and Jacob 2013). Payment delays to con- Further, Sambasivan and Soon (2007) identifies tractors will affect the progress of the project that contractor’s incompetent site management due to postponement in material and equipment delays the mitigation of on-site issues. conveyance on-site and delay in paying worker’s 6. Delay in providing instructions and response: salary (Frimponga et al. 2003; Enshassi et al. Lack of proper communication and coordination 2009; Sunjka and Jacob 2013). The financial leads to misunderstanding and conflicts that capabilities of both contractors and clients are require more time for resolving the disputes very essential for the uninterrupted project flow (Sunjka and Jacob 2013). The delay in flow of (Le-Hoai et al. 2008). information and instructions affect the timely 3. Lack of experience: Frimponga et al. (2003) problem resolution process which further delays identifies that low bidders are encouraged for the project works (Le-Hoai et al. 2008). Sunjka public construction projects which may lead to and Jacob (2013) points out that proper coord- deficiency of experience and skills for ination and communication is essential between INTERNATIONAL JOURNAL OF CONSTRUCTION MANAGEMENT 3 the main contractors and sub-contractors for Subramanian (2013) states that change of con- timely delivery of assigned works. tract often leads to variations in material specifi- 7.

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