Identifying causes of cost ·overruns in non- traditional contracts in Kenya

Abstract

Cost overruns in construction projects in Kenya frustrate the process of development for it ties finance in unfinished projects, diminishes returns to developers and causes problems of mortgage servicing. The causes of cost overruns and their significance in traditional building contracts have been established by various studies carried before but the causes of cost overruns in nontraditional building contracts have not been established. Numerous benefits have been claimed to accrue from the use of the traditional building contracts particularly with regard to the three pillars of project performance namely, cost, quality and time. The author found it therefore necessary to study a number of construction projects where the non- traditional contract have been used and determine whether the causes of cost overruns and their significance in traditional contracts are similar or not to non- traditional contracts. The findings have shown that the causes and significance of cost overruns in nontraditional contracts are different from traditional contracts and that non- traditional contracts performed better in terms of adherence to budgets. These findings have been validated by statistical test of hypothesis. It was observed that the major causes of cost overruns in non- traditional contracts are, variation in the cost of building materials, changes in the design of the building, changes in finishes by the client, contractor running out of money to run the project for sometime, hiring of extra tools during construction not anticipated, under estimation of the cost of construction by the quantity surveyor ( in that order of merit). The study also observed that causes by the contractor, client, quantity surveyor, architect, structural engineer and clerk of works in that order have the greatest influence on cost overruns among the project implementation team in non- traditional contracts. In view of this, it was concluded that the choice of the contractor is the most important part of project planning in non- traditional .contracts. If a competent, financially able contractor is awarded the contract, the risk of cost overruns is reduced substantially. It is recommended that the use of non-traditional contracts be encouraged.