Simulation modelling of cost overruns in building projects: a panel data analysis

Cost overrun is often a challenge in the construction industry due to its complex nature and inefficient project management. Despite extensive research, cost overruns persist in construction. Hence, to minimise these challenges, factors attributing to the cost overrun need to be identified. A country-based assessment is needed since these factors vary from nation to nation. Research conducted almost two decades ago has identified the key cost-related factors influencing cost overrun of Sri Lankan building projects as variation, extra work, fluctuation of price and currency, day works and others. However, given the significant developments and technological advancement in the Sri Lankan construction industry since then, it is crucial to reassess the factors influencing cost overrun in the current context. Therefore, this research intends to re-evaluate the cost-related factors contributing to cost overrun in Sri Lanka. Further, a panel data analysis was conducted to analyse how the influence of the cost-related factors that cause cost overrun has changed over time. This research adopted a survey strategy and used document review on the final BOQ, tender document, and final statement as the data collection technique. Mote-Carlo simulation was adopted to analyse the data collected from twenty random building projects in the western province of Sri Lanka. The findings concluded that work sections measured as ‘item’ in the BOQ and variations and extra work cause overruns in Sri Lankan construction. Hence, clients, contractors, and consultants should give more priority to these factors to minimise the cost overrun by reducing the errors in BOQ, making accurate estimations, and reducing changes over time. However, as the simulation model was derived based on cost-related factors, this study recommends considering other factors influencing the cost overrun of buildings in future research.