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PROJECT
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International Journal of Project Management 23 (2005) 538–545
www.elsevier.com/locate/ijproman
a
School of Mechanical, Aerospace and Civil Engineering, University of Manchester, P.O. Box 88, Manchester M60 1QD, UK
b
School of Architecture and Building Engineering, University of Liverpool, Liverpool L69 3BX, UK
c
School of Construction Management and Engineering, University of Reading, P.O. Box 219, Reading RG6 6AW, UK
Received 19 October 2004; received in revised form 7 December 2004; accepted 12 April 2005
Abstract
Identification of cost-determinant variables and evaluation of their degree of influence play an essential role in building reliable
cost models and enhance the competitive edge of quantity surveyors as well as contracting organisations. Sixty-seven variables
affecting pre-tender construction cost estimates are identified through literature and interviews. These factors are grouped into
six categories and a comparison analysis of their impact is conducted. Priority ranking of cost-influencing factors is carried out using
a questionnaire survey commissioned amongst quantity surveyors based in the UK. Findings of this survey indicate that there is a
strong agreement between quantity surveyors in ranking cost-influencing factors of construction projects. Comparisons between the
outcomes of this research and other related studies are presented.
Ó 2005 Elsevier Ltd and IPMA. All rights reserved.
Keywords: Cost-influencing factors; Pre-tender cost estimates; Severity index; Concordance analysis; Construction projects
linking various project performances with different char- A number of other studies investigated factors affect-
acteristics of construction projects. The study concluded ing cost overruns. Dissanayaka and Kumaraswamy [4]
that there was not enough evidence to suggest that man- evaluated the relative influences of critical procurement
agement contracting can reduce the overall cost. Fur- and non-procurement related factors on cost perfor-
thermore, the study concluded that in order to deliver mance in a sample of Hong Kong based building pro-
better project performance and success, relationships be- jects. Using multiple linear regression, they found that
tween procurement methods on one hand and type of cost overruns are influenced by; levels of client confi-
client and project type, size, complexity and cost on dence in the construction team, risk retained by client
the other hand need to be realised. However, this study for quantity variations, levels of construction complex-
fell short of investigating the underlying critical determi- ity related new technology and payment modality. These
nants of unit costs of building or of factors affecting cost factors were then used to develop artificial neural net-
overruns under each procurement scheme. work models for predicting cost indices.
Moselhi et al. [10] developed an analogy-based model Factors influencing construction cost overruns on
for bidding strategy which mainly estimates an optimum high-rise projects in Indonesia were investigated by
mark-up percentage and a win/lose probability. The deci- Kaming et al. [8]. Project managers were consulted, via
sion support system also anticipates project profitability a questionnaire survey, to assess the different variables.
in Canada and USA. The model depends on 30 attri- The identified variables were then ranked according to
butes, which significantly influence decision-making at their perceived importance and frequencies of occur-
the tendering process stage. A detailed comparison be- rence. Using factor analysis techniques, causes of delay
tween these attributes and cost-influencing factors reveals and cost overrun were successfully grouped into factors
that a number of attributes are highly relevant, albeit in a (main categories). Inflationary increases in material cost,
different way, in the estimation of construction costs. inaccurate material estimating and project complexity
Okpala and Aniekwu [13] investigated causes of high were found to be the main causes of cost overruns. This
costs of construction in Nigeria. The study revealed 27 study relied on the judgements of project managers for
factors contributing to high costs and delays in comple- the identification of factors associated with cost over-
tion time. A questionnaire survey was conducted which runs. However, no attempt had been made to consult
included engineers, architects and quantity surveyors. cost estimators or quantity surveyors who primarily deal
The rankings of the influencing variables by the three pro- with costs.
fessions were found to be fairly similar, despite some dif- This paper assesses and ranks cost-influencing fac-
ferences in their views. The professionals generally agreed tors of construction projects at the pre-tender stage
that shortage of materials, methods of financing and pay- for building projects in the UK. A questionnaire meth-
ments for completed works and poor contract manage- odology was adopted to extract the views of a ran-
ment were the three major reasons for high construction domly selected sample of quantity surveyors in the
costs and delays. The top ranked factor was identified UK. The questionnaire was sent to 218 UK quantity
as price fluctuations. The factors identified in this study surveyors and 31% response rate was achieved. In
are largely influenced by the locality of the country in addition, the paper describes statistical analyses of
which the research was conducted. As discussed later in the survey, which include severity index and KendallÕs
this section, under-developed economies tend to exert dif- concordance test. The results indicate that there is a
ferent influences on construction costs compared to strong agreement between quantity surveyors in rank-
developed economies such as the UKÕs. This has a major ing cost-influencing factors.
impact upon critical determinants of construction costs.
Elinwa and Buba [7] investigated construction cost fac-
tors in Nigeria. A questionnaire survey was conducted, 2. Methodology of study
which involved architects, engineers and quantity survey-
ors. Thirty-one variables were assessed, and analyses of A two-stage research methodology was adopted:
results showed good agreement between the responses. First, literature survey and interviews with quantity sur-
The top ranked factors, which contributed to construc- veyors in the north of England were conducted to iden-
tion cost, included: cost of materials, fraudulent practices tify factors affecting the cost of construction projects.
and fluctuation in prices of materials. These semi-structured interviews were regarded as pilot
Some of the factors which ranked high amongst those study to adjust and modify the questionnaire manu-
affecting construction costs in Nigeria [13,7], such as script before posting it to quantity surveyors nation-
fraudulent practices and fluctuation in prices of materi- wide. Sixty-seven factors were selected; they were
als, are not always relevant in other countries particu- grouped into six different categories:
larly in the UK where there are tight control of
procurement systems, mature regulations and a stable client characteristics,
economy with low inflation. consultant and design parameters,
540 T.M.S. Elhag et al. / International Journal of Project Management 23 (2005) 538–545
Table 1
Ranking of client characteristics
Factors Coefficient of variation Severity index Category ranking Overall ranking
Client characteristics
Type of client (public/private/developer) 24.99 80.53 4 16
Financial ability/payment record 37.32 65.73 8 53
Project finance method/appropriate funding in place on time 32.53 75.07 5 28.5
Partnering arrangements 30.61 69.80 6 41.5
Priority on construction time/deadline requirements 15.59 92.17 1 3
Experience of procuring construction 30.46 67.63 7 49
Client requirements on quality 20.39 82.87 3 11
Certainty of project brief 23.38 86.17 2 10
Table 2
Ranking of consultant and design parameters
Factors Coefficient of Severity Category Overall
variation index ranking ranking
Consultant and design parameters
Completeness and timeliness of project information (design, drawings, specifications) 15.96 91.67 2.5 4.5
Buildability of design 25.07 79.60 5 18
Working relationships with client/contractors/other design team consultants (previous/present) 24.62 75.07 7 28.5
Variation orders and additional works (magnitude, timing, interference level) 18.18 91.67 2.5 4.5
Quality of design and specifications 17.92 88.90 4 7
Inspection, testing and approval of completed works (toughness/requirements) 42.28 61.10 8 58
Submission of early proposals for costing/cost planning 28.97 76.87 6 25
Absence of alterations and late changes to design (no ‘‘design-as-we-go’’ on site philosophy) 13.34 94.43 1 1
Table 3
Ranking of contractor attributes
Factors Coefficient of Severity Category Overall
variation index ranking ranking
Contractor attributes, firmÕs ability and site management
Management team (suitability, experience, performance) 14.29 93.53 1 2
Management/labour relationships and Confidence in work force 27.09 77.80 4 22
Financial capability 32.16 72.20 6 34
Experience on similar projects 22.83 81.97 2 13
Current work load 31.98 70.50 8 40
Level of communications within the contractor organisation 30.46 67.63 10 49
Estimation method and cost control technique (accuracy and reliability) 41.56 60.80 11 59
Planning capability and level of resource deployment/utilisation/optimisation 25.37 78.43 3 20
Productivity effects (managerial, organisational, labour, technology) 34.65 71.57 7 35
% of main contractor direct work and % of subcontracted work 37.05 58.83 12.5 61.5
Number of subcontractors 37.48 54.23 15 64
Mark up policies and % (general and project wise) (special or normal conditions applied) 33.16 50.97 17 66
Record of payments to subcontractors 37.05 58.83 12.5 61.5
Previous claims record i.e., assessment of ‘‘low tender’’–‘‘high claims’’ performance 33.05 77.47 5 23
Present claims (size and quantity) 39.06 69.80 9 41.5
Accidents on sites record 51.77 48.03 18 67
Bond/warranty arrangements 44.75 58.10 14 63
CDM regulations awareness 44.19 53.33 16 65
5. Discussion of results 67%. This indicates that the quantity surveyors perceive
that the architects and designers have more influence on
A comparison of average severity indices is portrayed construction project costs than the contractors. This
in Fig. 2 [5]. The top ranked category is found to be con- outcome is consistent with many literature views that
sultant and design parameters with an average severity the project costs are more determined by decisions at
index of 82%. On the other hand, the contractor attri- the briefing, feasibility and initial design stages rather
butes group scored the least average severity index of than by later construction stages [2,14,3]. The following
542 T.M.S. Elhag et al. / International Journal of Project Management 23 (2005) 538–545
Table 4
Ranking of project characteristics
Factors Coefficient of Severity Category Overall
variation index ranking ranking
Project characteristics
Type/function (residential, commercial, industrial, offices) 35.75 68.63 13.5 44.5
Size/gross floor area 33.15 74.53 8 30
Height/no. of stories 31.35 75.50 7 27
No. of basement levels 31.89 82.30 3 12
Level of uncertainty of soil conditions 25.11 81.37 4 14
Complexity 24.77 87.87 2 8
Type of structures (steel, concrete, brick, timber, masonry) 33.71 68.63 13.5 44.5
Location (regions/rural; urban) (inner city/outskirts) 31.99 69.63 12 43
Site conditions/site topography 25.24 76.47 6 26
Construction method/technology 25.99 71.50 9 36
Type of foundations (pile/raft/pad/etc.) 30.24 71.43 10.5 37.5
Off-site pre-fabrication 29.70 66.60 17 52
Type of cladding and external walls (brick, double glazing, etc.) 32.10 66.67 16 51
Access to site 30.24 71.43 10.5 37.5
Intensity/complexity of building services 18.68 91.20 1 6
Phasing requirements (areas to be handed over first or initial non-availability) 25.03 80.97 5 15
Quality of finishing 29.95 68.00 15 47
Table 5
Ranking of contract procedure and procurement method
Factors Coefficient of Severity Category Overall
variation index ranking ranking
Contract procedure and procurement method
Type of contract/use of standard form of contract 31.06 68.60 5 46
Tender selection method (open, selected, negotiation, single or two stage, etc.) 22.90 77.20 2 24
Payment modalities (fixed price, cost plus, BOT, PFI-DBFO, etc.) 28.77 72.53 4 32
Method of procurement (traditional, design and build, project management, etc.) 23.00 78.07 1 21
Spread of risk between construction parties (client/consultant/contractors) 32.68 73.27 3 31
Claims and disputes resolution methods (litigation/arbitration/others) 35.84 62.83 6 55
Interviewing of selected prospective contractors 37.26 61.83 7 57
Table 6
Ranking of external market conditions
Factors Coefficient of variation Severity Category Overall
index ranking ranking
External factors and market conditions
Material prices/availability/supply/quality/imports 25.17 80.00 2 17
Labour costs/availability/supply/performance/productivity 27.25 79.03 3 19
Plant costs/availability/supply/condition/performance 32.29 71.37 5 39
Weather condition 32.36 61.90 8 56
Government regulations/policies (health and safety, fire, CDM, etc.) 29.50 60.00 9 60
Level of competition and Level of construction activity 21.27 86.73 1 9
Number of bidders on competitive projects 36.82 67.63 6 49
Interest rate/inflation rate 33.69 65.70 7 54
Stability of market conditions 30.58 72.37 4 33
sections are devoted for a more detailed discussion of and 92%. However, their overall ranking ranges between
statistical analysis and main findings regarding each 3 and 53. With the exception of two variables, quantity
individual category. surveyors perceived most of these factors as not highly
significant. The category maintained coefficient of varia-
5.1. Client characteristics tions ranging between 15% and 37% which are relatively
low and indicate a good agreement level between respon-
This category contains eight factors, Table 1. These dents. KendallÕs statistical analysis supports this result
variables achieved high severity indices between 66% even better. Table 7 shows this category maintaining a
T.M.S. Elhag et al. / International Journal of Project Management 23 (2005) 538–545 543
Table 7
KendallÕs concordance analysis using SPSS
Category ID Degree of freedom (DF) Chi-square KendallÕs coefficient (w) Significance
Category 1 7 19.8889 0.9471 0.0058
Category 2 7 19.6734 0.9368 0.0063
Category 3 17 48.3423 0.9479 0.0001
Category 4 16 42.5310 0.8861 0.0003
Category 5 6 15.7952 0.8775 0.0149
Category 6 8 23.4667 0.9778 0.0028
5.5. Contract procedure and procurement method There was a similarity in ranking project size/area in
this study and in NkadoÕs research [12]; it was ranked as
There are seven factors in this category, Table 5. This 30th out of 67 and 13th out of 28, respectively. How-
group maintained severity indices between 62% and ever, project size/area is one of the most determinant
78%. This category achieved the lowest KendallÕs coeffi- factors of project costs, and it is widely used in practice
cient of 0.88, Table 7, which still indicates high agree- for building cost models [2,14]. One explanation for
ment between respondents in the ranking of factors. these findings might be that the respondentsÕ views were
The top ranked factors in this group are the procure- based on the unit cost per area when they considered the
ment system which ranked 21st overall; the selection effects of project size on cost in these two studies,
method which ranked 24th overall; and the spread of respectively.
construction risks which ranked 31st overall. From the
statistics computed for this category, it is evident that
quantity surveyors regarded the factors contained within 6. Summary and conclusions
the category as having little effect upon construction
estimates. This seems to support the findings of Naoum Factors affecting costs of construction projects were
[11] which concluded that no evidence was found to reviewed based upon research work undertaken in differ-
favour the management contracting procurement system ent countries. The analysis and findings of these studies
over the traditional contracting method in reducing the varied on the one hand according to the different aims
overall construction costs. and objectives they addressed and on the other, accord-
ing to the economic environment under which the stud-
5.6. External factors and market conditions ies were conducted.
The study presented and discussed in this paper, con-
This category contains nine factors, Table 6. The sulted UK-based quantity surveyors via interviews and
severity indices obtained by this category are in the questionnaire survey. The main aim was to evaluate
range 60–87%. The majority of the factors in this group and rank cost-influencing factors of construction pro-
are amongst the most insignificant variables in the over- jects considered at the pre-tender stage. Sixty-seven vari-
all ranking. There is a strong agreement between quan- ables affecting construction cost were identified through
tity surveyors in ranking this group; this is due to a high literature and pilot interviews. These factors were
KendallÕs coefficient of 0.98 and a significance level at grouped into six broad categories: client characteristics;
0.0028, Table 7. consultant and design parameters; contractor attributes;
The top variable in this category is level of construc- project characteristics; contract procedures and procure-
tion activity which ranked 9th overall. This is an indica- ment methods; external factors and market conditions.
tion that the cycles of boom and bust in the construction Statistical analysis revealed that a strong agreement
industry have a clear effect on tender prices, and partic- between quantity surveyors existed in the ranking of
ularly on mark-up and profit margins. the cost factors. This was proven by high KendallÕs coef-
Material prices, labour costs, and stability of market ficients of concordance achieved within each category
conditions represent the remaining top ranked factors and also by low coefficients of variation for each variable.
within the group. However, according to their overall The average severity index computed for each cate-
ranking, they exert little influence in the preparation of gory ranged between 82% and 67%. This result sug-
construction estimates. gested that there is no significant variation in the
ranking of each group. However, the category contain-
5.7. A comparative view ing consultant and design parameters was ranked top
followed by client characteristics with four out of the
Comparing the findings of this study with other re- 10 top factors being related to this category. The third
search projects, there are some agreements as well as and forth ranks were occupied by project characteristics
some differences in ranking the construction cost fac- and external market conditions, respectively. On the
tors. For instance, inflation rate/fluctuation in materials other hand, the fifth group of factors included contract
prices ranked very low as 54th in this study Table 6, in procedures and procurement methods. The contractor
contrast to Elinwa and Buba [7] Nigerian study where attributes group scoring the least index occupied the
it was ranked 3rd. The reason would be the difference bottom of the list. These findings indicated that con-
between the economies in the industrial and developing struction project costs were more affected by architects
countries where the inflation rate in the latter is very and consultants than by contractors. This outcome is
high compared to the former countries. These kinds of consistent with many literature views that the project
divergence contribute to the complexity of evaluating costs are more determined by decisions at the briefing,
the degree of influence of different factors on tender cost feasibility and initial design stages rather than by later
estimates at diverse situations. construction stages.
T.M.S. Elhag et al. / International Journal of Project Management 23 (2005) 538–545 545
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