Determinants of cost overruns in rural roads infrastructure projects in Kenya

Abstract

The increasing frequency and magnitude of cost overruns in the road infrastructure projects over the years as well as its strenuous effects on the scarce resources has been a cause of concern to project stakeholders and researchers across the globe. This research sought to establish the nature and extent of cost overruns in the rural roads infrastructure projects in Kenya, and the determining factors. The study employed a mixed method explanatory design to gain deeper understanding of the concept. Contract data for 68 projects was reviewed and cost overruns computed based on the initial contracted sums against the actual cost and revised contract sums. A survey involving 100 respondents from the subsector was carried out through the use of structured questionnaires. A five point Likert scale was used to capture the significance of various determinants of cost overruns identified from the literature. Multiple regression analysis was carried out on the project data to determine the predictors of cost overruns with Relative Importance Index (RII) and factor analysis being deployed on the survey data in ranking other latent determinants to establish their perceived contribution level to cost overruns. A mean cost overrun of 5.31% and maximum of 24.92% was established. Project size and nature of work were found to have a significant positive relationship with cost overrun. Financial management factors ranked highly with an RII of 0.7373 with labour and equipment group ranking lowest with RII of 0.5839. Factor analysis resulted in extraction of 15 factors from the initial 65 determinants. The findings point to interrelationship among the various determinants implying that no one factor can explain wholly the frequency and occurrence of cost overruns in the road infrastructure. The study recommends a collaborative approach among the stakeholders directed towards effective project management practices with the objective of minimizing time and cost overruns in the projects. Improved contract management practices by the implementing agencies and contractors are vital as the consultants are advised to review their methodologies to minimize design changes mid-stream. The findings of this study are limited to the 68 projects reviewed. The reported frequency and magnitude may be affected if the ongoing projects with zero cost overruns were to experience cost overrun at their completion. The study provides a basis for future research into cost overruns in the road infrastructure sector while acting as a motivation for further study on cost overruns from an earned value perspective.