Managing the Drivers of Cost Escalation in the Road Development Sector: An Overview

Abstract

The management of construction cost escalation requires that proponents understand the drivers of project cost. The aim of this research was therefore to evaluate the causes of project cost escalation with a case study in Ghana. The research was carried out using quantitative approach by distributing questionnaires to built-environment professionals and stakeholders in the road sector. Findings suggest that fluctuations in cost indices, variation in work due to incomplete scope definition, corruption, unstable exchange rate, schedule delays, and poor risk management are the major key drivers affecting cost escalations on road projects in Ghana. The study held that the lead times allowed between base dates of estimates, actual award and commencement date of the project has a contributing factor for cost escalations. To manage cost escalation, the challenge of incomplete scope definition and instability in micro economic indicators must be managed by the players of the economy. To curtail corruption, the procedures for the awarding of contracts which are subjective with public officials having discretions to determine the least evaluated bidders even though there are procedures for determination, must be reviewed. The use of such discretionary powers accounts for perceived corruption along with contractor behaviour resulting in under dealings. The bidding and award stage of projects mark the beginning of interaction between public official and contractors and hence, the hatching point for project corruption. It is recommended that the management of cost escalation would require the improvement of the governance structures and procurement process for public sector projects. The conclusion of the survey suggests that a holistic approach is required to control the trend but more importantly, on attitudes of officials involved which would require improved ethical commitment.