Available online at www.sciencedirect.

com

ScienceDirect
International Journal of Project Management 32 (2014) 850 860
www.elsevier.com/locate/ijproman

An exploration into cost-inuencing factors on

construction projects
Ying-Mei Cheng
Department of Civil Engineering and Hazard Mitigation Design, China University of Technology, 56 Hsing-Lung Road, Section 3, Taipei 116, Taiwan, ROC
Received 22 May 2013; received in revised form 30 August 2013; accepted 3 October 2013
Available online 25 October 2013

Abstract
Construction cost overrun is a common problem in construction industries. The objective of this research is to extract the key cost-inuencing
factors with new concept and methods to help control the expenditure. Hence, this research adopts the Modied Delphi Method (MDM) with 2
groups and 2 rounds and Kawakita Jiro method (KJ) to consolidate the experts' opinions and identify and rank the key factors that affect project
costs. Ninety cost-inuencing factors are collected from literary review and interviews with experts with practical cost control experiences in the
construction companies (Group 1). The KJ method is used to consolidate these factors into 4 categories and down to a total of 42 factors. 2 rounds
of questionnaires are then conducted to lter the key factors. In order to verify views of those in the rst group, Group 2 consists of experienced
experts from the public sectors, consulting rms and construction companies as a comparison. Results of the analysis indicate that there are 16 key
cost-inuencing factors. Severity Index computation was then adopted to rank these key cost-inuencing factors. The study renders that clearly
dened scope of project in the contract and cost control are the major determinants for cost overrun.
2013 Elsevier Ltd. APM and IPMA. All rights reserved.
Keywords: Cost-inuencing factors; Cost control; Modied Delphi Method; KJ method

1. Introduction
It's customary in construction industries to win projects with
the lowest bids. Therefore, without controlling key costinfluencing factors, construction companies will not be able to
control the expenditure effectively, which will in turn increase
project costs and affect overall profit. In fact, construction cost
overrun is a common problem in construction industries.
Flyvbjerg et al. (2002) pointed out that historically, large
construction projects have been plagued by cost and schedule
overruns. Shane et al. (2009) stated that final project costs have
been higher than the cost estimates prepared in too many
cases. Doloi (2011) brought up that cost overrun is a chronic
problem for most projects. Love et al. (2013) calculated cost

Tel.: + 886 2 2931 3416x2476; fax: +886 2 2934 6117.

E-mail address: yingmei.cheng@msa.hinet.net.
0263-7863/$36.00 2013 Elsevier Ltd. APM and IPMA. All rights reserved.
http://dx.doi.org/10.1016/j.ijproman.2013.10.003

overruns from 276 construction and engineering projects and

revealed a mean cost overrun of 12.22%. No significant
differences for cost overruns were found among contract size,
project type, and procurement method. Kaming et al. (1997) also
discussed construction time and cost overruns in developing
countries such as Nigeria, Saudi Arabia and Indonesia. However,
construction overrun is not unique to developing countries. It is a
worldwide issue worsened by the global financial crisis due to
increasing price competition. As construction companies usually
rely on various financing approaches to meet their capital needs
during construction, the inherent financial constraint poses
further influence on the overall costs and the ultimate profit if
the key cost-influencing factors cannot be controlled. Therefore,
this paper takes the standpoint of the construction companies to
explore and discuss key factors that affect project costs during
construction. The methodology integrates literary review,
interviews, the KJ method (Kawakita Jiro method, affinity
diagram), and the Delphi Expert Assessment (with 2 groups and

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

2 rounds) to locate the key cost-influencing factors from various

layers, and to assist the construction companies with effective
cost control both during the preparation stage and after the
construction proceeds in order to reduce risks derived from costs
or escalating expenditure.
2. Literature review
Kaming et al. (1997) identified factors influencing construction time and cost overruns in Indonesia and analyzed
the correlation between the two. The scope of this particular
research only focuses on the high-rise projects. Dissanayaka and
Kumaraswamy (1999) identified and grouped factors significantly related to time and cost performance and then developed
the time and cost overrun models. Chang (2002) identified the
reasons for cost and schedule increases and classified them into 3
aspects owner's control, consultant control, and beyond
control. Although Chang used case studies to analyze the reasons
and qualify their contributions, he only focused on engineering
design projects. Elhag et al. (2005) mainly takes the standpoint
of the quantity surveyors to explore cost-influencing factors. He
identified 67 variables which affect pre-tender construction cost
estimates through literature and interviews. These factors are
divided into 6 categories client characteristics, consultant and
design parameters, contractor attributes, project characteristics,
contract procedures and procurement methods, and external
factors and market conditions. Questionnaires were then used to
evaluate and rank these factors. Chen and Hsu (2008) identified
and quantified the factors that influence corporate financing. He
concluded 4 component groups with corresponding weight and
14 significant factors. Shane et al. (2009) proposed escalation
factors for construction project costs through case studies. He
identified 11 internal factors and 7 external factors and verified
them with over 20 U.S. state highway agencies through interviews. Chan (2012) investigated the principal factors affecting
project overheads with questionnaire. Eight factors were
extracted from 27 variables. Doloi (2013) identified 48 major
factors affecting cost overruns and analyzed the relationship
among the factors and 3 key stakeholders client, consultant,
and contractor. The previously referenced studies successfully
utilized literature, interviews, questionnaire or MDM to determine the critical factors which impact the project cost. Therefore,
based on the success of the above-mentioned studies and with
new concepts introduced to existing methods, this study will
identify the key cost-influencing factors with a more deliberate
process. This research is conducted in 2 stages. During the first
stage, cost-influencing factors are deduced from the construction
company's perspective. The perspectives of the public sector and
consulting firms (client) are then introduced to further identify
the key factors. The research process is explained in the following section.
3. Research process
The Delphi method is suitable for extracting usable data
from personal experiences which can be transformed into
empirical data for future studies. As shown in the flowchart in

851

Fig. 1, this study adopts the Modified Delphi Method (MDM)

with 2 groups and 2 rounds to identify the key cost-influencing
factors. The reasons for adopting 2 groups are to verify the
construction company's view from a different perspective and
to give the study more objectivity. Literary review is first
conducted on local and international literatures concerning
project cost control. Experts with years of cost control experiences in the industry are then interviewed to provide an
understanding of the actual cost control process and issues as
well as a preliminary list of cost-influencing factors recognized
by the industry or in the literatures. Meanwhile, the KJ method is
adopted to organize the factors collected at this point and
develop a more refined list. The factors are then categorized and
used in the questionnaires for the MDM, and the questionnaires
are distributed to 2 groups of experts in 2 separate rounds. The
cost-influencing factors obtained from expert assessments are
then ranked by Severity Index (SI).

4. Research methodology
4.1. KJ method
The KJ method is a qualitative technique developed by
Kawakita Jiro in 1953. It adopts the bottom-up sorting process
and is very useful for classifying data. It is used to organize data
into useful categories, or in other words, transform data into

Determine the Research Direction

Collection and Organization of cost-influencing factors

Interview with experts (Group 1)

Literary Review

Organize the factors using the KJ method

Design the first round of questionnaire

MDM 2 -group and 2 -round Questionnaire

Group 1

Group 2

First round

First round

Questionnaire Analysis

Questionnaire Analysis

Design the second

round of questionnaire

Design the second

round of questionnaire

Second round

Second round

Questionnaire Analysis
Filter the key factors
Rank the key factors
Conclusion and Recommendations

Fig. 1. Research process.

852

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

information (Lance, 2006). Zaphiris et al. (2005) employed the

KJ method to study a set of age-centered and research-based
web design guidelines. Cheng and Leu (2011) integrated data
mining with the KJ method to analyze bridge construction
defects. To create an affinity diagram, a group of people, index
cards or sticky notes, and a physical space are required. The
steps in the KJ method are as follows: (1) determine the theme;
(2) gather the data; (3) sort the data into groups; (4) create
header cards, and (5) draw the finished diagram. In step
(3), people first transfer the data onto the index cards or sticky
notes, scatter the cards on a table or post the notes on a wall,
and then arrange the cards according to related ideas, issues, or
topics of data (Plain, 2007). The factors collected during the
initial stage come from different experts and literatures and may
be interrelated or with similar wording. The KJ method may
effectively filter and consolidate the factors into independent
factors for the use of follow-up questionnaires.
4.2. Modified Delphi Method
The Delphi concept was developed by the American defense
industry (Chan et al., 2001). Its characteristics include
anonymity, iteration with controlled feedback and statistical
response (Yeung et al., 2009). It collects the opinions of the
experts in the related field through questionnaire to deal with
complex issues. To keep the experts from influencing each
other's opinions, the traditional Delphi utilizes one to several
rounds of questionnaires anonymously. The most significant
drawback is that the reiterations are time-consuming. Murry
and Hammons (1955) modified the Delphi method based on
special considerations. They omit the complex process of open
questionnaire and replace the first round of questionnaire with
literary exploration or interviews with the experts. Besides,
there are innumerable applications for the Delphi method in
recent years. Chan et al. (2001) used the criteria and
utility factors derived from the Delphi survey technique to
develop a multi-attribute procurement selection model. Yeung
et al. (2009) applied the Delphi survey technique with
four rounds of questionnaires with 22 experts from the
construction industry to formulate a model to assess the success
of relationship-based construction projects in Australia, and
eight key performance indicators were selected. Hallowell and
Gambatese (2010) explored the application of the Delphi
method in Construction Engineering and Management (CEM),
which consists of some of the researches that are applied
toward CEM with recommendations on the procedures of the
traditional Delphi and parameters for each stage. Ma et al.
(2011) adopted the Fuzzy Delphi method and Grey Delphi
method to construct three sets of road safety performance
indicators. The above-mentioned Delphi applications all received
decent results. In addition, the process of arriving at the
cost-influencing factors from the open questionnaire is complex
and difficult during the initial stage of traditional Delphi. Existing
studies on similar subject matters provide ample references for
this study. Many of those on the subject of cost-influencing
factors adopt literary review and interview with experts to identify
the factors in the initial stage (Dissanayaka and Kumaraswamy,

1999; Elhag et al., 2005; Elinwa and Buba, 1993). Considering

the limited resources and weighing in the value of existing studies
to this research, it seems more feasible to modify the first round of
traditional Delphi (MDM) instead of that with an open-ended
questionnaire and starting from scratch. Therefore, MDM (Murry
and Hammons, 1955) is adopted for this study. In addition, this
study is built on the foundation of existing studies to be on the
cautious side and thus adopts the approach of identifying the
cost-influencing factors from the literatures supplemented with
interviews with experts.

5. Collection and organization of cost-inuencing factors

At this stage, according to the first stage of MDM, literary
review (Dissanayaka and kumaraswamy, 1999; Elhag et al.,
2005; Elinwa and Buba, 1993; Kaming et al., 1997; Shane et
al., 2009) and individual interviews are conducted with
engineers from various construction companies to identify the
initial cost-influencing factors. Besides, the KJ method is also
applied to help organize these factors and develop them for the
questionnaire for the later stages. Chan et al. (2001) once
stressed that the success of Delphi lies in the careful selection of
the panel members. In order to identify eligible participants for
the current Delphi study and to appropriately reflect the current
conditions of the construction company, the following three
criteria were devised: (1) practitioners having extensive
working experience in cost control; (2) experts having a
sound knowledge and understanding of cost control concepts in
the construction companies; and (3) experts having current,
recent or direct involvement in the management of cost control
in the construction companies.
Therefore, all panel members selected for this study were
once or are currently employed in the Grade A comprehensive
construction enterprises (with a capital over NT$225 millions)
in Taipei, Taiwan. They include cost control managers and
senior engineers who are involved in the cost control process,
among which 1 has over 20 years of experience, 3 with 10 to
20 years of experience, and 8 with 5 to 10 years. According to
Hallowell and Gambatese (2010), most studies incorporate 8
and 16 panelists while a minimum of 8 is recommended and 12
are selected, which is within the reasonable range. 90 initial
cost-influencing factors are compiled at this stage. They are
further consolidated into 42 factors under 4 categories with KJ
method. The KJ processes are discussed by the researcher and
some of the experts of Group 1. For example, in Fig. 3, user
demand, structure type, project type and project location are
factors that are relevant to each other. Therefore, scale of
construction is used instead of these 4 factors. Project scope
specified in the bid belongs to clearly define the scope of project
in the contract, so they are combined as one factor. All of the
factors: scale of construction, clearly define the scope of project
in the contract, contract types, and so on are all related to contract
scope, so the factor, Scope of Contract is used instead. According
to the organization by the KJ processes, the results are shown in
Figs. 25, the category of Environmental and Circumstantial
Influence includes 8 factors, Scope of Contract includes 8,

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

853

Environmental and circumstantial influence

Interest rate on bank loans

The fluctuations in labor cost is too great

Natural disaster

Changes in mortgage rates

Climate factor

Political environment
The fluctuations in commodity price is too great

Geology, topography

The real estate prospect

Gross domestic products (GDP)

Fig. 2. Affinity diagram for environmental and circumstantial influence.

Project Risks contains 10, and Management and Technique

contains 16 factors.

Group 2 is no longer being employed in the construction

companies. The purpose is to compare and verify the views and
perspectives between members working in the construction
company (Group 1) and those who do not (Group 2). 5 panel
members in Group 2 have over 20 years of experience, 3 with
10 to 20 years of experience, and 3 with 5 to 10 years of
experience, a total of 11 members. The questionnaire assigns a
five-point Likert scale to each of the 42 factors under the 4
categories. Separate surveys were conducted for Group 1 and
Group 2 where 12 questionnaires were sent to Group 1 and 11
to Group 2. The results of the first round of questionnaire are
shown in Tables 1.1 to 1.4. The means from Group 1 and
Group 2 for the first round are used as the feedback for
the second round of questionnaires and shown to the panel
members so that they can quickly reach consensus according to
the significance of the factors. The analysis of the feedback is
shown in Tables 2.1 to 2.4, in which the mean values for Group
1 and Group 2 for each of the 4 categories are quite close.

6. Analysis and ranking of cost-inuence factors

6.1. Modified Delphi Method with 2 groups and 2 rounds
There are 2 groups of recipients for the questionnaire and 2
rounds of questionnaires were conducted to obtain the key
factors. The panel members for one of the groups are those
from whom the 90 initial factors were obtained (Group 1). To
cross-reference the influence of these factors during construction, another group of experts (Group 2) with no involvement
in selecting the factors in the initial stage were chosen for
the two rounds of MDM. Group 2 consists of engineering staff
or officials who are involved in cost control. 3 of them are
employed in the public sector, 6 are employed in the consulting
firms, and 2 in the construction companies. The emphasis for

Scope of
of contract
contract
The level of demand on quality

Contract types

Modifications of project schedule

( ahead of schedule or stop in mid -construction )

Project quality
Contract dispute (unclear drawings or guidelines/regulations)
Modifications to the scope of construction

Clearly define the scope of project in the contract

The client applies/requests for modifications

Project scope specified in the bid

Scale of construction

The types of clients

User demand

Structure type

The client's way of dealing with key decisions

Project type

Project location

The client asks that the project be done ahead of schedule

Fig. 3. Affinity diagram for scope of contract.

854

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

Project risks
Project
risks
Protest

Stagnant project

Neighbor protests

Policy change

Tilted neighboring structure

Delayed procurement

Unexpected technical difficulties

Labor protests

Disputes in opinions over the construction drawings

The project scale is too big and the project itself too complex

Inadequate construction techniques

Material shortage or supply delay

The client's financial capability

Design modifications

The subcontractors bankrupted

Occupational hazards

Inadequate project listing

Add new construction activities
Add on to the number of activities

The gap between the construction plan and the reality is too great

Fig. 4. Affinity diagram for project risks.

Management and Technique

Time management

Project control meeting

Material management

Monitor and feedback

The timetable for the materials to be delivered on site

Arrangement of construction progress

The understanding of operational procedures

during project management

Project valuation does not

match the collected
payment

The client and engineer understand the difficulties

in the actual operation and made appropriate decisions

Procurement contract

The order of construction projects

Subcontractor's valuation

Regular budget update

Cost control

Personnel training
Project manager's capability
Budget exceptions

Labor attendance

Project manager's leadership

project manager's understanding of
the operational procedure

Whether the high-level management decentralizes the power

Project team (coordination capability and
the understanding of operational procedure)
Interactions among the
project participants

Coordination among
the team members

Project manager's practical experience

Job site safety and health management
Project manager's coordination capability
Carry out supervision
Project manager's risk management ability

Whether the monitoring is implemented

Coordination and mutual understanding
among the high-level management

Team work among

the subcontractors

Coordination between the project manager

and the high-level management
Conflicts that occur while the high-level
management manages the project

Practical experience
the lack of experience for this type of project

Construction methods

Subcontractors' construction techniques

Construction machinery and equipment

Subcontractors' financial difficulties

Replacement of construction equipment

Support from the high-level management

Terminate the contractor's contract
and re-issue the contract
Coordination between the project manager and subcontractors
Attitudes of the project manager and the subcontractors
Subcontractors' passive attitude toward project management

Knowledge and experience

Bid rigging

Quality of the labor and engineering staff

Competitive bidding
Construction personnel's real-time decision-making

Fig. 5. Affinity diagram for management and technique.

Bid preparation period

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

855

Table 1.1
First round results environmental and circumstantial influence.

6.2. Analysis

Factor

To further identify the significant cost-influencing factors

among the 42 known factors, the ones that fall out of the
measures of central tendency or with a measure of variation
that's too great are excluded. The qualifications include: (1) the
mean of the single factor is greater than 3 and larger than the
mean of the factors within that category; (2) the quartile range
is equal to or less than 0.5; and (3) the standard deviation of the
single factor is equal to or less than 1. Table 3 shows factors
from both Groups 1 and 2 that meet all three of the above
mentioned qualifications. There are 4 factors each under the
categories of Environmental and Circumstantial Influence and
Scope of Contract, 2 under Project Risks, and 6 under
Management and Technique. The radar charts in Figs. 6 to 8
show the comparison of the mean, standard deviation and
quartile ranges between the 2 groups. In terms of the mean (as
shown in Fig. 6), the two groups hold opposite views toward
factor A-4, High Fluctuations in Commodity Price. The mean
from Group 1 is 4.92 with a standard deviation of 0.3 and a
quartile range of 0. Among the 12 panel members, 11 gave the
maximum value of 5, and only 1 gave 4. A reasonable
explanation would be that the construction companies often
have to absorb the changes in cost as a result of fluctuating
commodity price. Therefore, 11 members held the same view

Group 1

Group 2

Mean Standard Quartile Mean Standard Quartile

deviation ranges
deviation ranges
Climate factor
Natural disaster
Geology,
Topography
Political environment
High fluctuation in
labor cost
High fluctuation in
commodity
Gross domestic
products (GDP)
Interest rate on
bank loans
Average

4.00
4.00
4.42

1.10
0.70
0.80

0.60
0.30
0.50

4.09
4.09
4.18

0.70
0.8
0.6

0.30
0.8
0.3

2.92
3.83

0.80
0.90

0.10
0.60

3.64
3.55

1.2
0.8

1.3
0.5

4.58

0.50

0.50

4.55

0.5

0.5

3.58

0.90

0.50

3.27

1.1

0.8

3.67

0.90

0.60

3.82

0.9

0.8

3.88

0.83

0.46

3.90

0.83

0.66

Therefore, it can be concluded that the perspective of the

construction company match that of the client. The Scope of
Contract and Project Risks are the two categories with higher
influences on project costs. In contrast, the influence of the
Environmental and Circumstantial factors is relatively low.

Table 1.2
First round results scope of contract.
Factor

Clearly define the scope of project in the contract

Scale of construction
The types of clients
Contract types
Modifications to the scope of construction
Modifications of project schedule
(ahead of schedule or stop in mid-construction)
Contract dispute (unclear drawings or guidelines/regulations)
The level of demand on quality
Average

Group 1

Group 2

Mean

Standard deviation

Quartile ranges

Mean

Standard deviation

Quartile ranges

4.75
3.33
3.75
3.83
4.33
4.58

0.40
0.90
0.70
0.80
0.60
0.50

0.10
0.50
0.10
0.10
0.50
0.50

4.55
3.73
3.82
3.82
4.09
4.09

0.7
0.7
0.7
0.7
0.9
0.5

0.5
0.3
0.5
0
1
0

4.58
4.42
4.20

0.50
0.60
0.63

0.50
0.50
0.35

4.45
4.09
4.08

0.5
0.9
0.70

0.5
0.5
0.41

Table 1.3
First round results project risks.
Factor

Group 1

Group 2

Mean

Standard deviation

Quartile ranges

Mean

Standard deviation

Quartile ranges

Design modifications
Protest
The client's financial capability
Stagnant project
Occupational hazards
Inadequate project listing
The vendors/contractors/subcontractors went bankrupted
Inadequate construction techniques
The gap between the construction plan and the reality is too great.
Material shortage or supply delay
Average

4.33
3.75
4.42
4.42
4.67
4.17
3.75
4.08
4.42
4.58
4.26

0.70
0.70
0.60
0.50
0.50
0.70
0.60
0.80
0.80
0.60
0.65

0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.60
0.50
0.50
0.51

3.91
4.55
3.91
4.00
4.45
4.00
4.36
4.55
4.45
4.73
4.29

0.9
0.7
0.8
0.6
0.5
0.9
0.9
0.5
0.7
0.6
0.71

0.5
0.5
0
0
0.5
0.3
0.5
0.5
0.5
0
0.33

856

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

Table 1.4
First round results management and technique.
Factor

Group 1

Cost control
Project control meeting
Labor attendance
Carry out supervision/monitoring
Project valuation does not match the collected payment.
Whether the high-level management decentralizes the power.
Staff/personnel training
Regular budget update
Job site safety and sanitation/health management
Budget exceptions
Material management
Practical experience
Procurement contract
Time management
The project manager's capability
Project team (coordination capability and the understanding
of operational procedure)
Average

Group 2

Mean

Standard deviation

Quartile ranges

Mean

Standard deviation

Quartile ranges

4.75
4.00
3.67
4.17
4.08
4.50
4.08
3.75
4.33
3.83
4.17
4.33
4.50
4.50
4.67
4.58

0.40
0.70
0.70
0.70
0.60
0.50
0.60
1.00
0.90
0.70
0.60
0.50
0.50
0.50
0.50
0.50

0.10
0.30
0.50
0.50
0.10
0.50
0.10
0.60
1.00
0.50
0.10
0.50
0.50
0.50
0.50
0.50

4.64
4.18
3.91
4.18
4.36
4.09
3.91
4.09
3.91
3.91
4.18
4.64
4.18
4.18
4.36
4.45

0.5
0.6
0.7
0.6
0.9
0.7
0.8
0.8
0.5
0.5
0.8
0.5
1.1
0.7
0.9
0.7

0.5
0.3
0
0.3
0.5
0.3
0
0.3
0
0
0.5
0.5
0.5
0.5
0.5
0.5

4.24

0.62

0.43

4.21

0.72

0.34

and gave the rating of 5. The mean for Group 2 is 4.00 with a
standard deviation of 0.7 and a quartile range of 0.5. 3 of the 11
panel members gave the maximum value of 5, and 3 gave the
value of 3. Members in Group 2 are from different sectors.
Although they each hold a different view, with a mean of 4.00,

the group still thinks that factor A-4 holds certain influence
over construction costs. Figs. 7 and 8 show the comparison of
the standard deviation and quartile range between the two
groups. It is shown that the standard deviation for factor C-2
from Group 1, Material Shortage or Supply Delay, is 0.9, the

Table 2.1
Second round results environmental and circumstantial influence.
Factor

Climate factor
Natural disaster
Geology, topography
Political environment
High fluctuation in labor cost
High fluctuation in commodity price
Gross domestic products (GDP)
Interest rate on bank loans
Average

Group 1

Group 2

Mean

Standard deviation

Quartile ranges

Mean

Standard deviation

Quartile ranges

4.00
3.75
4.33
3.00
3.33
4.92
3.00
3.67
3.75

0.60
0.4
0.6
0.7
0.7
0.3
0.6
0.7
0.58

0.00
0.1
0.5
0.3
0.5
0
0
0.5
0.24

4.27
4.27
4.09
3.55
3.36
4.00
3.18
3.55
3.78

0.40
0.4
0.7
0.8
0.6
0.7
0.7
0.7
0.63

0.30
0.3
0.3
0.5
0.5
0.5
0.5
0.5
0.43

Table 2.2
Second round results scope of contract.
Factor

Clearly define the scope of project in the contract

Scale of construction
The types of clients
Contract types
Modifications to the scope of construction
Modifications of project schedule (ahead of schedule
or stop in mid-construction)
Contract dispute (unclear drawings or guidelines/regulations)
The level of demand on quality
Average

Group 1

Group 2

Mean

Standard deviation

Quartile ranges

Mean

Standard deviation

Quartile ranges

4.83
3.33
3.83
3.58
4.25
4.08

0.4
0.6
0.8
0.9
0.6
0.6

0
0.5
0.1
0.5
0.5
0.1

4.64
3.64
3.64
3.55
4.45
4.36

0.5
0.8
0.6
0.7
0.7
0.6

0.5
0.5
0.5
0.5
0.5
0.5

4.83
4.42
4.15

0.4
0.6
0.61

0
0.5
0.28

4.45
4.27
4.13

0.7
0.9
0.69

0.5
0.5
0.50

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

857

Table 2.3
Second round results project risks.
Factor

Group 1

Design modifications
Protest
The client's financial capability
Stagnant project
Occupational hazards
Inadequate project listing
The vendors/contractors/subcontractors went bankrupted
Inadequate construction techniques
The gap between the construction plan and the reality is too great.
Material shortage or supply delay
Average

Group 2

Mean

Standard deviation

Quartile ranges

Mean

Standard deviation

Quartile ranges

4.33
3.33
4.67
4.17
4.75
4.08
3.33
3.92
4.33
4.33
4.13

0.6
0.6
0.5
0.9
0.4
0.8
0.9
0.5
0.7
0.9
0.68

0.5
0.1
0.5
0.5
0.1
0.6
0.5
0
0.5
0.5
0.38

3.91
4.45
3.82
4.18
4.00
3.82
4.00
4.55
4.64
4.64
4.20

0.9
0.5
0.6
0.6
0.7
0.7
0.9
0.8
0.6
0.6
0.69

0.5
0.5
0.3
0.3
0.5
0
0.3
0.3
0.3
0.3
0.33

quartile range is 0.5 and the mean is 4.33. Also, 7 of the 12

members gave the rating of 5, and only 1 member gave the
rating of 2. Therefore, it is determined that this factor should be
considered a main cost-influencing factor. In addition, the
figures also show that the standard deviation of factor B-4 from
Group 2, The Level of Demand on Quality, is 0.9, and the mean
is 4.27. 5 of the 11 members rated it 5 and only 1 member rated
it 2. Therefore it is also considered a main cost-influencing
factor. After summarizing the analysis from the MDM with 2
groups and 2 rounds, 16 key cost-influencing factors were
identified.

Shash (1993) recommended this method for the analysis of

ordinal data collected through the Likert scale. Elhag et al.
(2005), Chan (2012), Rahman et al. (2013), and Olawale and
Sun (2013) also used the same approach. The SI is as follow:
!
5
X
100%
SI
1
wi  f i 
n
i1
where i represents the ratings 15, fi is the frequency of
responses, n is the total number of responses, and wi is the
weight for each rating:
i
A

6.3. Ranking result

wi

To rank the 16 key factors, the second round of the

questionnaires was sent to the 23 panel members in both
groups. Then Severity Index (SI), also known as Relative
Importance Index (RII) was adopted to rank the cost factors.

where A is the highest score (i.e. 5 in this case). The rankings of

the means of SI for the 4 categories are shown in Table 3. It is
evident that the Scope of Contract and Project Risks are the two
categories that pose higher influences over project costs. In

Table 2.4
Second round results management and technique.
Factor

Cost control
Project control meeting
Labor attendance
Carry out supervision/monitoring
Project valuation does not match the collected payment.
Whether the high-level management decentralizes the power.
Staff/personnel training
Regular budget update
Job site safety and sanitation/health management
Budget exceptions
Material management
Practical experience
Procurement contract
Time management
The project manager's capability
Project team (coordination capability
and the understanding of operational procedure)
Average

Group 1

Group 2

Mean

Standard deviation

Quartile ranges

Mean

Standard deviation

Quartile ranges

4.83
3.92
3.25
3.83
4.08
4.08
3.50
3.50
4.00
3.58
4.17
4.50
4.42
4.50
4.42
4.42

0.4
0.3
0.4
0.6
0.6
0.8
0.6
1
0.7
1
0.6
0.6
0.6
0.6
0.6
0.6

0
0
0.1
0.1
0.1
0.6
0.5
0.5
0.3
0.6
0.1
0.5
0.5
0.5
0.5
0.5

4.64
4.00
3.55
3.82
4.55
4.09
3.73
4.00
3.82
3.55
3.91
4.27
4.09
4.36
4.00
4.27

0.5
0.7
0.7
0.7
0.5
0.8
0.7
0.6
0.9
0.5
0.3
0.4
0.5
0.5
1
0.6

0.5
0.5
0.5
0
0.5
0.3
0.3
0
0.8
0.5
0
0.3
0
0.5
0.8
0.5

4.08

0.62

0.35

4.05

0.62

0.38

858

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

A-1

Table 3
Mean SI for the categories with key cost influencing factors.
Category

D-6

Factor

terms of the rankings for the individual factors (as shown in

Table 4), Clearly Defined Scope of Project in the Contract and
Cost Control are the most important cost impact factors with
94.78. The second highest is Contract Dispute with 93.04, which
clearly makes it a significant factor. If the contract does not
clearly delineate the scope of project, or if the construction
drawings are unclear with ambiguous specifications, expectations from both parties may differ and cause unnecessary
disputes after the construction commences. In addition, price
fluctuation is another main factor for cost overruns. For projects
of a larger scale or with longer construction periods, it is vital to
understand the fluctuations in prices in recent years and the
acceptable level of fluctuation. The construction companies
should examine whether the contract contains stipulations on
adjustments for price index. Price fluctuation should also be
monitored regularly and reflected to the clients. Finally, although

5.00

D-4

0.40

D-3

B-1

D-2
D-1

B-3
C-2

B-4
C-1

Fig. 7. Radar chart for standard deviation comparison between the two groups.

Geology, Topography, Climate Factors, and Natural Disasters

are the lowest ranking factors, they are still selected among the
46 initial factors and have a certain degree of influence over
project costs.
6.4. Case study
Construction projects are large scale in nature. They involve
long project period, and each is distinctive and complex in its
own way. In addition, the clients and contractors' abilities are
also at play, which may affect the project positively or
negatively. The factors may also be in any form. For example,
the regional requisition for Taiwan High Speed Rail station
covers a geographic area of 141.48 ha. The public construction
project involves grading, road improvement, drainage, public
lighting, transportation infrastructure, sewage, irrigation and
plant relocation. The project also involves common duct
projects and utility contracting projects. The contract stipulated
that the total cost for the project was NT$1,126,867,413 and the
project period was 1060 calendar days, the final project cost
was NT$ 1,116,204,121, a decrease of NT$10,663,292 (LCEB,

A-2

0.50

A-2

0.40

D-5

A-3

A-3

0.30
D-4

A-4

0.20

A-4

0.10

1.00

Group 1

0.00

B-1

D-2
D-1

Group 1

0.00

D-3

B-1

Group 2

B-2
B-3
C-2

Group 2

B-2

D-6

2.00

D-3

Group 1

0.00

3.00
D-4

A-4

0.20

A-1

4.00

D-5

A-3

0.60

A-1
D-6

A-2

0.80

D-5

Environmental and circumstantial 1. Climate factor

influence (A)
2. Natural disaster
(SI = 84.13)
3. Geology, Topography
4. High fluctuation in commodity
Scope of contract (B)
1. Clearly define the scope of project in
(SI = 90.44)
the contract
2. Modifications to the scope of construction
3. Contract dispute (unclear drawings
or guidelines/regulations)
4. The level of demand on quality
Project risks (C)
1. The gap between the construction plan
(SI = 89.57)
and the reality is too great
2. Material shortage or supply delay
Management and technique (D) 1. Cost control
(SI = 88.26)
2. Project valuation does not match
the collected payment
3. Practical experience
4. Procurement contract
5. Time management
6. Project team (coordination capability and
the understanding of operational procedure)

1.00

B-4
C-1

Fig. 6. Radar chart for mean comparison between the two groups.

D-2

Group 2

B-2
B-3

D-1
C-2

B-4
C-1

Fig. 8. Radar chart for quartile range comparison between the two groups.

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

Table 4
Ranking of the key cost influencing factors.
N0

Factor

7. Conclusion
SI
Rank
(Severity Index)

B-1 Clearly define the scope of project in

the contract
D-1 Cost control
B-3 Contract dispute (unclear drawings or
guidelines/regulations)
A-4 High fluctuation in commodity
C-1 The gap between the construction plan and
the reality is too great
C-2 Material shortage or supply delay
D-5 Time management
D-3 Practical experience
B-2 Modifications to the scope of construction
B-4 The level of demand on quality
D-6 Project team (coordination capability
and the understanding of operational procedure)
D-2 Project valuation does not match the
collected payment
D-4 Procurement contract
A-3 Geology, topography
A-1 Climate factor
A-2 Natural disaster

859

94.78

94.78
93.04

1
2

89.57
89.57

3
3

89.57
88.70
87.83
86.96
86.96
86.96

3
4
5
6
6
6

86.09

85.22
84.35
82.61
80.00

8
9
10
11

2004). This is a successful case of cost control. Overall, the

contract for this project clearly defines the scope and the project
costs are well controlled. However, this project involves huge
amount of capital and a vast number of factors are at play.
Therefore, only public construction projects and common duct
projects with greater variations in costs are used for this case
study. Table 5 shows the effects of major cost-influencing
factors for each aspect and the costs involved. It also indicates
that the factors identified in this study agree with those from
actual practice. It confirms that the final costs are closely
associated with how well the factors are controlled. In
additional note, though project costs were affected by the
typhoon and inflation, they are within the scope of anticipated
burden of risks (LCEB, 2005).

Many literatures and actual projects indicate that construction

cost overrun is a common problem in the construction field.
Identifying the cost-influencing factors is the first step toward
addressing such problem. If construction companies can
effectively control these key factors and formulate prevention
strategies, it is possible not only to avoid cost overrun, but also to
increase the overall profits for the project. In order to factually
provide the key cost-influencing factors to the construction
companies, the cost-influencing factors are analyzed and
discussed from the perspectives of the construction companies.
The KJ method and MDM with 2 groups and 2 rounds are
utilized to improve the traditional Delphi method, and Severity
Index (SI) computation was adopted to rank the factors.
According to the result of the SI, the highest to the lowest
categories are Scope of Contract, Project Risks, Management and
Technique, and Environmental and Circumstantial Influence.
There are 16 key cost-influencing factors in these 4 categories.
Factors with the strongest influence include Clearly Define
the Scope of Project in the Contract, Cost Control and Contract
Dispute. In practice, construction companies must clearly understand the client's needs through communication during the initial stage of the project. They must have clear understanding
of the scope of the contract and ask the clients for necessary
clarifications regarding the drawings and specifications prior
to signing the contract to avoid pricing disputes. Additionally,
during project implementation, the contractors should fully
implement cost-control measures. Construction companies can
also use the remaining factors to conduct a thorough investigation
that is tailored to the characteristics of the project and the client
prior to the project commences in order to minimize uncertainties
and reduce the chance of cost overruns.
Abbreviations
CEM Construction Engineering and Management
KJ
Kawakita Jiro method, affinity diagram
MDM Modified Delphi Method

Table 5
Effect of cost-influencing factors on public construction and common duct projects.
Category

Contract stipulated
costs (NT$)

Increase/
Details (factors)
decrease (NT$)

Public
construction
project

740,870,943

8,520,717

Common duct
project

186,310,553

3,376,191

1. For items whose actual quantities cannot be confirmed during the planning and design stage, the
contract stipulated that the payment schedule is based on actual completion. Examples include grit
chambers, road pavement and compressed concrete paving units, which were significantly reduced from
the original estimate. (B-1)
2. Fully implement cost control and regularly review the required quantity and construction costs. (D-1)
1. Contract omissions. (B-3)
2. Design changes due to site conditions. (B-2, C-1)
3. Unfamiliarity with local culture, which affected the design of the manhole cover. The client intervened
later on for the redesign. (C-1)
4. The drilling indicated inconsistency with current conditions. Additional backfill required. (C-1)
5. Poor control over the transfer schedule and unclearly defined responsibility resulted in theft finished
installations. (D-5, D-6)
6. Project redo due to poor construction quality. (B-4)

860

RII
SI

Y.-M. Cheng / International Journal of Project Management 32 (2014) 850860

Relative Importance Index

Severity Index

Acknowledgments
The author would like to thank all participating experts,
especially Kuang-Hu Cheng, former worksite director of Land
Consolidation Engineering Bureau and Yu-Ming Liu, senior
engineer with CECI Engineering Consultants, without their
valuable contributions this research would not have been
possible. Moreover, the authors would like to acknowledge the
reviewers for contributing helpful suggestions and insightful
comments, which greatly improved the quality of this paper.
References
Chan, C.T.W., 2012. The principal factors affecting construction project
overhead expenses: an exploratory factor analysis approach. Constr.
Manage. Econ. 30 (10), 903914.
Chan, A.P.C., Yung, E.H.K., Lam, P.T.I., Tam, C.M., Cheung, S.O., 2001.
Application of Delphi method in selection of procurement systems for
construction projects. Constr. Manage. Econ. 19 (7), 699718.
Chang, A.S., 2002. Reasons for cost and schedule increase for engineering
design projects. J. Manage. Eng. 18 (1), 2936.
Chen, J.H., Hsu, S.C., 2008. Quantifying impact factors of corporate financing:
engineering consulting firms. J. Manage. Eng. 24 (2), 96104.
Cheng, Y.M., Leu, S.S., 2011. Integrating data mining with KJ method to
classify bridge construction defects. Expert Syst. Appl. 38 (6), 71437150.
Dissanayaka, S.M., Kumaraswamy, M.M., 1999. Evaluation of factors affecting
time and cost performance in Hong Kong building project. Eng. Constr.
Archit. Manage. 6 (3), 287298.
Doloi, H.K., 2011. Understanding stakeholders' perspective of cost estimation
in project management. Int. J. Proj. Manage. 29, 622636.
Doloi, H., 2013. Cost overruns and failure in project management: understanding
the roles of key stakeholders in construction projects. J. Constr. Eng. Manage.
139 (3), 267279.
Elhag, T.M.S., Boussabaine, A.H., Ballal, T.M.A., 2005. Critical determinants
of construction tendering costs: quantity surveyors standpoint. Int. J. Proj.
Manage. 23, 538545.

Elinwa, A.U., Buba, S.A., 1993. Construction cost factors in Nigeria. J. Constr.
Eng. Manage. 119 (4), 698713.
Flyvbjerg, Bent, Holm, Skamris, Mette, K., Buhl, Soren L., 2002. Underestimating costs in public works projects: error or lie? J. Am. Plan. Assoc.
68 (3), 279295.
Hallowell, M.R., Gambatese, J.A., 2010. Qualitative research: application of the
Delphi method to CEM research. J. Constr. Eng. Manage. 136 (1), 99107.
Kaming, P.F., Olomolaiye, P.O., Holt, G.D., Harris, F.C., 1997. Factors
influencing construction time and cost overruns on high-rise projects in
Indonesia. Constr. Manage. Econ. 15, 8394.
Lance, D., 2006. Creating an Affinity Diagram. LL Decker Associates,
Inc.(Helping organizations change).
LCEB, 2004. Land Consolidation Engineering Bureau, Ministry of the Interior,
Expense Report, Regional Requisition for Taiwan High Speed Rail
Taoyuan Station.
LCEB, 2005. Land Consolidation Engineering Bureau, Ministry of the Interior,
Evaluation Report, Regional Requisition for Taiwan High Speed Rail
Taoyuan Station.
Love, P.E.D., Wang, X., Sing, C.P., Tiong, R.L.K., 2013. Determining the
probability of project cost overruns. J. Constr. Eng. Manage. 139 (3), 321330.
Ma, Z., Shao, C., Mac, S., Ye, Z., 2011. Constructing road safety performance
indicators using Fuzzy Delphi method and Grey Delphi method. Expert
Syst. Appl. 38, 15091514.
Murry, J.W., Hammons, J.O., 1955. Delphi: a versatile methodology for
conducting qualitative research. Rev. High. Educ. 18 (4), 423436.
Olawale, Y., Sun, M., 2013. PCIM: project control and inhibiting-factors
management model. J. Manage. Eng. 29 (1), 6070.
Plain, C., 2007. Build an affinity for KJ method. Qual. Prog. 40 (3), 88.
Rahman, I.A., Memon, A.H., Karim, A.T.A., 2013. Significant factors causing
cost overruns in large construction projects in Malaysia. J. Appl. Sci. 13 (2),
286293.
Shane, J.S.A., Molenaar, K.R., Anderson, S., Schexnayder, C., 2009. Construction project cost escalation factors. J. Manage. Eng. 25 (4), 221229.
Shash, A.A., 1993. Factors considered in tendering decisions by top UK
contractors. Constr. Manage. Econ. 11 (2), 111118.
Yeung, J.F.Y., Chan, A.P.C., Chan, D.W.M., 2009. Developing a performance
index for relationship-based construction projects in Australia: Delphi
study. J. Manage. Eng. 25 (2), 5968.
Zaphiris, P., Ghiawadwala, M., Mughal, S., 2005. Age-centered Researchbased Web Design Guidelines. Portland, Oregon, USA.