Cost Overruns and Claims Management in Highway Construction: Lessons from International Project Management and Emerging Methodological Advances

Avoiding highway infrastructure construction cost overruns and reducing associated claims and disputes continues to be a challenge in many countries. Research is needed in identifying notable project planning and management deficiencies that are likely to cause cost overruns. The literature suggests numerous potential causes of cost overrun but the clustering of cause variables and relative importance of clusters has not been researched. The research reported here addresses this knowledge gap using predictive models developed with data contributed by several agencies in participating countries and suggests mitigation measures. Following a review of methods and data sources, a methodological framework is advanced that encompasses statistical methods well suited for providing a scientific basis for identifying important clusters of cost overrun variables. Fifty-three completed questionnaires contributed by knowledge experts and experienced managers from Canada, the United States, the Middle East, and Australia met the sample requirements of statistical methods. Starting from 53 variables, the principal component-supported factor analysis method identified clusters of cost overrun variables and their relative importance was inferred with developed logistic regression models. Deeper insights into the causes of cost overruns obtained from this research suggest mitigation measures (e.g., improved qualification and experience of personnel, enhanced planning and design practices, risk analysis of inputs to cost estimation process) that are within reach of managers. The results can enhance infrastructure planning and management practice including a reduction in claims and disputes.