American Society of Civil Engineers


Construction Project Cost Escalation Factors


by Jennifer S. Shane, (corresponding author), (Assistant Professor, Dept. of Civil, Construction, and Environmental Engineering, Iowa State Univ., 498 Town Engineering, Ames, IA 50011 E-mail: jsshane@iastate.edu), Keith R. Molenaar, (Associate Professor, Dept. of Civil, Environmental, and Architectural Engineering, Univ. of Colorado, UCB 428, Boulder, CO 80302. E-mail: Keith.Molenaar@colorado.edu), Stuart Anderson, (Professor, Dept. of Civil Engineering, Civil Engineering Lab Building Room 115, Texas A&M Univ., College Station, TX 77843-3136. E-mail: s-anderson5@tamu.edu), and Cliff Schexnayder, (Eminent Scholar Emeritus, Del E. Webb School of Construction, Arizona State Univ., P.O. Box 6700, Chandler, AZ 85246. E-mail: cliff.s@asu.edu)

Journal of Management in Engineering, Vol. 25, No. 4, October 2009, pp. 221-229, (doi:  http://dx.doi.org/10.1061/(ASCE)0742-597X(2009)25:4(221))

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Document type: Journal Paper
Abstract: Construction projects, private and public alike, have a long history of cost escalation. Transportation projects, which typically have long lead times between planning and construction, are historically underestimated, as shown through a review of the cost growth experienced with the Holland Tunnel. Approximately 50% of the active large transportation projects in the United States have overrun their initial budgets. A large number of studies and research projects have identified individual factors that lead to increased project cost. Although the factors identified can influence privately funded projects the effects are particularly detrimental to publicly funded projects. The public funds available for a pool of projects are limited and there is a backlog of critical infrastructure needs. Therefore, if any project exceeds its budget other projects are dropped from the program or the scope is reduced to provide the funds necessary to cover the cost growth. Such actions exacerbate the deterioration of a state’s transportation infrastructure. This study is an anthology and categorization of individual cost increase factors that were identified through an in-depth literature review. This categorization of 18 primary factors which impact the cost of all types of construction projects was verified by interviews with over 20 state highway agencies. These factors represent documented causes behind cost escalation problems. Engineers who address these escalation factors when assessing future project cost and who seek to mitigate the influence of these factors can improve the accuracy of their cost estimates and program budgets.


ASCE Subject Headings:
Civil engineering landmarks
Construction costs
Estimation
Construction management
Planning