Key drivers of discrepancies between initial and final costs of construction projects in New Zealand 1

Construction projects and the environment within which they are implemented are complex, dynamic and over-regulated. As a result significant discrepancies are introduced between initial contract prices and final accounts for most projects. These discrepancies introduce enormous risks and uncertainties with consequences such as disputes, high cost of project finance and low profit margins. Previous studies have looked at the myriads of discrepant factors, but little attempt has been made to quantify and segregate them along lines of responsibilities and accountability in the building development process. This research aimed to fill this knowledge gap by examining the nature and contributions of the key cost escalators from the actions/ inactions of the key stakeholders as well as wider factors. Feedback from a two-stage survey of consultants and contractors in the New Zealand construction industry was analysed using content analysis and multi-attribute methods. Results revealed 6 sources of discrepant factors. These comprised issues related to the owner or owner’s principal agent, designers, contractors and subcontractors, project & environment, quantity surveyors/ estimators, and external parties such as local councils and utility companies. Change orders and quality of design information were perceived as the most significant sources of cost escalations which were attributed to the owner and designers, respectively. The report presents the priority factors under each broad category. It is recommended that project teams should proactively address the priority factors identified in the study with a view to effectively mitigating project cost overruns and ensuring more reliable outcomes in the project delivery process.