There has been a lack of research, particularly within the New Zealand (NZ) context, focusing on the identification and assessment of risk factors for construction projects, leading to a wide variation between design-phase elemental cost plans (ECPs) and the outturn tender sums (OTS). Still to be investigated is how risks interact to produce such variability. This study aims to determine the risk-influencing factors, identified through risk measurement, during design development.
This study adopted literature review and online questionnaire survey. The literature review was used to identify the factors affecting project budgetary performance, which was used to design the questionnaire survey culminating in data analysis. The questionnaire was administered to 64 practising project managers (PMs) in NZ. Their responses were analysed using descriptive statistics, mean ranking analysis, degree-of-risk measure and correlational analysis, to find the top-five risk factors impacting the variability observed, through ranking the mean and degree of risk values that produce such variability.
Significant risk factors were identified from the questionnaire survey analysis, such as changes in project owner/stakeholder requirements, experience of project team, site condition information, competency of consultants and information flow and quality. These provided some insights in explaining the variability between the design-phase ECPs and OTS based on risk impacts from PMs’ viewpoints.
Findings revealed a drift of 23.86% in budgeted costs (inflated risks), which seems significant. Prioritising top risk factors may provide handy information for researchers on the variables that could be relied upon for the development of a forecasting model for application in NZ.
The study findings have implications for PMs seeking to provide information on mitigation strategies by using risk management approach, considering the influence of development risks on building project delivery and, consequently the project owner’s financial position. To guard against wide variation between design-phase ECPs and OTS, the main contribution of this study is to raise consultants’ awareness of the important risk factors for their planning at the outset, thus assisting PMs in pro-actively managing their clients' budgets.
This study creates value by synthesising literature on construction project budgeting and highlighting areas for further research. By giving adequate attention to key risks associated with budget overruns in commercial projects, variability between ECPs and OTS, a common phenomenon in NZ, can be controlled to achieve cost savings. Based on this, further study suggests the development of a model that could assist the stakeholders in NZ to more reliably predict OTS from the design-phase ECP and pro-actively avoid unfortunate budget/cost overruns, disputes and even project abandonment.
The authors gratefully acknowledge the research fund provided by the University of Auckland, New Zealand through its PReSS account to facilitate data collection for this study. The authors would also like to express their thanks to the same university for the award of doctoral scholarship to the corresponding author for his PhD research. This was accompanied by the award of Postdoctoral research fellowship to the corresponding author by the University of Auckland for his Post-PhD research, which has been funded by the New Zealand government. Our profound appreciation goes to them.
Adafin, J., Rotimi, J.O.B. and Wilkinson, S. (2020), "An evaluation of risk factors impacting project budget performance in New Zealand", Journal of Engineering, Design and Technology, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEDT-03-2019-0056Download as .RIS
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