Construction Industry Case Study

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1.1Background In India, Construction Industry plays a key role in both economic growth and poverty reduction. The industry consumes about 40 to 50% of the national five year plan outlay and contributes to nearly 20% of GDP. Construction industry is the second largest industry next only to agriculture in terms of providing employment in India (Construction Industry Development Council). Government is targeting an economic growth of around eight per cent during the Eleventh five year Plan (2008-12). Construction projects entail high risk, long gestation period, high costs and budget constraints. India is the second most populous country in the world with over one billion people accounting for around 16% of the world’s population. It is estimated…show more content…
Internationally a few scientific and systematic studies have been carried out on cost overruns in building construction projects. Poor site management and supervision, unforeseen ground conditions, low speed of decision making involving all project teams, client-initiated variations and necessary variations of works have been identified as causes of time overruns in Hong Kong construction project (Chan et al 1997). In Nigeria, shortage of materials, methods of financing and payments for completed works and poor contract management are the three major reasons for high construction costs. Price fluctuation and improper planning were identified as the most important factors responsible for the escalation of project costs (Okpala et al 1988; Elinwa et al 1993). In Indonesia, inflationary increases in material cost, inaccurate material estimating and project complexity are the main causes of cost overruns. The predominant causes for delay are design changes, poor labour productivity and inadequate planning (Kaming et al 1997). Akinci et al (1998) identified that cost overruns creates a significant financial risk to both contractors and owners. Uncontrollable risk sources that affect the cost estimate and the final cost of a project include factors specific to the cost estimator, the project design, construction, and the project environment. Frimpong et al (2001) concluded that poor contractor management, monthly payment difficulties from agencies, material procurement, poor technical performances, escalation of material prices were the important causes of delay and cost overruns in construction of groundwater project in Ghana. Knight et al (2002) developed a risk assessment model using fuzzy logic for predicting potential cost overrun in engineering design building projects. Lo et al (2006) studied construction delays in Hong Kong civil engineering

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