Simulation Modeling of Cost Overrun in Construction Project in Ethiopia

Abstract

Cost is an essential part of any construction project. It was observed that cost overrun is one of the most frequently occurring issues in construction projects of Ethiopia and it is more severe in different parts of the country. The aim of this research has identified the factors that influence cost overruns of construction projects, quantified the percentage of identified factors, established probability distribution of identified factors and develop simulation modeling of cost overrun. The study was conducted based on the desk study and questionnaire survey. Questionnaire surveys were analyzed by using Relative Important Index (RII) ranking and significance of data checked by using a t-test at a 95% confidence level. Based on the desk study of 19 projects, a simulation model of cost overrun was developed by using the Monte Carlo simulation method. Simulation models showed a higher frequency of cost overrun occurring up to 10%. This indicates that the actual cost of most construction projects runs up to 10 % over the budgeted cost of work performed.