| Author | Ingirige, Mahapatabendi Janak Bingunath |
| Call Number | AIT RSPR no. SM-99-56 |
| Subject(s) | Infrastructure (Economics)--Sri Lanka
|
| Note | A research study submitted in partial fulfillment of the requirements for the degree of Master
of Business Administration, School of Management |
| Publisher | Asian Institute of Technology |
| Abstract | In many developing economies construction investments account for almost half of all
the other investments. Therefore the effects of cost overruns are not confined to the
construction industry but are reflected in the state of the overall economy of a country. The
research study was undertaken to investigate ยท the extent and causes of cost overruns in
infrastructure projects in Sri Lanka.
By conducting a survey of 19 infrastructure projects and 11 building projects it was
found that during 1995 - 1998 the extent of cost overruns in infrastructure projects was
significantly high in Sri Lanka. Road projects recorded cost overruns of 60% and water
supply projects 44%. Comparing with studies done elsewhere on project cost overruns found
that infrastructure projects presented very high cost overrun figures.
In a bid to further analyse the causes of cost overruns phenomena in infrastructure
projects another independent survey was conducted to determine the different views among
senior executives in contracting and consulting companies involved in infrastructure projects.
The significance level of contractors' and consultants' perspectives were rated on twelve
causes for cost overruns identified from previous studies and author's own experience. It was
found that both contractors and consultants agreed on "inadequate site investigations" as a
significant cause for cost overruns. Hence sufficient time should be devoted on pre-contract
planning to minimise cost overruns irrespective of political or other short-term considerations.
Contractors claimed that most of the materials specified in infrastructure projects turned out to
be very expensive and are not appropriate for use in the Sri Lankan context and cause very
high construction costs. However very few consultants agreed to that and the few who agreed
put the blame on foreign consultants for inappropriate specifications.
Recommendations were focused on minimising the acute cost overrun problem in
infrastructure projects and they were based on causes of cost overruns and construction
contract types. A major recommendation was to improve coordination among all parties to the
contract to minimise cost overruns. Complex infrastructure projects in Sri Lanka should
therefore move away from traditional contract types to construction management and
management contracting types to minimise cost overruns as they ensure proper coordination
and contractor involvement from the design stage itself. Finally the study suggests that the
Government should promote more private sector participation in infrastructure projects as
they transfer the burden of cost overruns on to the developer and it resolves the acute cost
overruns problem, due to commercial considerations of developers. The findings of the study
should be of interest for most of the developing economies that are engaged in expanding the
infrastructure of their countries. |
| Year | 1999 |
| Type | Research Study Project Report (RSPR) |
| School | School of Management (SOM) |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Do Ba Khang |
| Examination Committee(s) | Ogunlana, Stephen O.;Igel, Barbara |
| Scholarship Donor(s) | Netherlands TCDC |
| Degree | Research Studies Project Report (M.B.A.) - Asian Institute of Technology, 1999 |