A Study On Factors Causing Cost Escalation And Schedule Overruns In Hydropower Projects In NEPAL

The primary objectives of any construction project are to complete the project within the given time frame, keep the project cost within the estimated budget and meet the quality based on the standard and specifications. However, most of the projects are found to have overrun in terms of time or in terms of cost. Due to these conditions, there has been trade-off between cost and quality of work. In order to reduce such time and cost overruns, identifying and understanding the factors that are causing the variation in time and cost is of utmost importance. Hence this research focuses on the analysis of factors causing cost and schedule overruns in hydropower projects.The study is conducted in country Nepal considering five hydropower projects situated in Nepal.All the projects considered are Run-off-River hydropower projects and currently in construction phase. All five of the projects are experiencing cost and schedule overruns. The basic purpose of the study is to achieve following research objectives:1. Determine cost and schedule variance of the projects in consideration2. Identify and analyze various factors responsible for causing cost escalation in hydropower projects in Nepal3. Identify and analyze various factors responsible for schedule overruns in hydropower projects in Nepal4. Determine relative importance of the identified factors of variance for Cost Escalation and Schedule Overrun by using Analytic Hierarchy Process(AHP) Model5. Identify and recommend measures for improving the construction performance of the hydropower projects in Nepal, in terms of time and costPossible factors of variance resulting in cost escalation and schedule overruns in hydropower projects, considered in the study are categorized into following nine major categories:i. Owner/ Client Relatedii. Consultant Relatediii. Contractor Relatediv. Scheduling, Control & Coordinationv. Human Resourcevi. Design Relatedvii. Materials Relatedviii. Equipment Relatedix. EnvironmentalBased on the knowledge gained from the review of literature related to cost and schedule overruns and study of general background of hydro-power projects in Nepal, the research is designed which included collecting data from primary and secondary sources. Data was collected through structured questionnaire, personal interview and direct observation. Collected data was analyzed using statistical tools like average, mean, etc. to determine factor importance index and Analytic Hierarchy Process(AHP) Model to determine relative importance of factor categories.Findings generate from the research has been fairly able to answer the research questions and fulfill the research objectives.The major findings of the research are as follows:The most important factors causing Cost Escalation are “ Shortage in supply of materials,resulting in higher prices”(Materials Related), “Rise in cost due to destruction caused by any natural disasters”(Environment Related), “ Inadequate contractor expertise and experience, resulting in high cost of construction”(Contractor Related) and so on.On the basis of Combined Priority Value determined by using Analytic Hierarchy Process(AHP) model, the factor categories showing their relative importance in causing Cost Escalation in hydropower projects are ranked in following order;(1st) Environment Related,(2nd) Contractor Related,(3rd) Scheduling, Control and Coordination,(4th)Human Resource/ Manpower Related,(5th) Materials Related,(6th) Equipment Related,(7th) Client Related,(8th) Consultant Related and(9th) Design RelatedThe most important factor causing Schedule Overrun are “Delay in construction due to any natural disasters”(Environment Related), “Delay in site handover by client”(Client Related), “Delay due to Contractor’s Cash flow problems”(Contractor Related), “Time wasted due to frequent public strikes on the road, causing delay in delivery”(Materials Related) and so on.On the basis of Combined Priority Value determined by using Analytic Hierarchy Process(AHP) model, the factor categories showing their relative importance in causing Schedule Overruns in hydropower projects are ranked in following order;(1st)Environment Related,(2nd) Scheduling, Control and Coordination,(3rd) Contractor Related,,(4th) Human Resource/ Manpower Related,(5th) Materials Related,(6th)Equipment Related,(7th) Client Related,(8th) Design Related and(9th) Consultant RelatedThe study of five hydropower projects under construction in Nepal has shown that the most critical factors for cost escalation and schedule overruns are related to Environment, Contractor,Scheduling and Control of Projects and so on. The factors identified in this research clearly illustrate the reasons behind the present dismal situation of electricity production in Nepal, which is around mere 2% of the total feasible capacity. focusing and provisioning maximum resources to deal with most important factors(having high frequency and severity of impact) and lower level of provisioning for factors with lower importance index.Study has shown cost escalation and schedule overrun in projects are also caused by improper and inadequate initial planning and lack of proper project management practices. It is recommended that project managers should enhance their knowledge and implement modern project management practices like PERT to improve the efficiency and effectiveness of the project activities.