THE MAIN CAUSES OF COST OVERRUN ON PUBLIC HOUSING PROGRAMS IN THE CASE OF ADDIS ABABA CITY ADMINISTRATION

Abstract

Construction industry contributes significantly in improving socio-economic growth of a country. However, this industry usually faces chronic problems such as time overrun, cost overrun, poor quality and others. Of all these, cost overrun is a major problem that occurs globally including Ethiopia. Hence, this study focused on identifying the main factors of cost overrun for public housing construction projects in the case of Addis Ababa City Administration. Data collection was done through structured questionnaire and office document review, which was designed based on 25 factors found from the literature. A total of 79 questionnaires were distributed to clients, consultants and contractors and 60 questionnaires were collected and which 50 responses were found valid. Descriptive statistics methods were employed through frequency Index/ mean score and average Index to understand the variables of cost overruns, the frequency of occurrence and significant impacts each causative factors on the studied area. The findings from the study identified that, from 25 identified factors, only the most causative factors are 22 and the top five factors are Material cost increased by inflation, Labor cost increased due to environmental restriction, Lack of experience of project location, Change in foreign exchange rate/ for imported materials, Contractors financial difficulties. Likewise, based on the possibility of occurrence the top five were identified, these are-payment delay for contractors, contractors financial difficulties, power interruption, incorrect quantity take-off, change in foreign exchange rate. Meanwhile, based on significant impacts of factors were identified. The most frequent way of using bidding methods in housing programs was open tendering. The overall effects that occurred in housing programs revealed through survey are – low productivity, project delay, low quality housing handover to beneficiaries or tenants, disputes among stakeholders E.T.C. Meanwhile, cost discrepancy of approved budget from actual cost for each 10/90, 20/80, 40/40 housing programs is 38%, 13.5%, and 15.5% respectively.