Investigating the Impact of Risk Factors on Cost Estimate Inaccuracy Caused by Project Cost Overrun in the Kurdistan Region’s Public Sector Construction Projects

A construction project will be successful when it is delivered on time, is executed within the estimated budget, is according to required specifications, and satisfies the client or project owner. No matter how detailed the pre-planning phase of any construction project is, there should be stumbling in one way or another during the construction phase, for example, cost overruns, delivery and handover timing amendments, difficulties in providing resources, and qualitative deficiencies. Failure in construction projects is of high risk due to the large amount of finances invested and the involvement of different partners. The risk is mainly due to delays in delivery and cost overruns, which are considered the most common and damaging factors. In this research, seven risk factors are chosen to investigate their effects on project cost overrun. They are related to (1) the project, (2) the client or owner, (3) the design, (4) the contractor, (5) the materials and equipment, (6) the manpower, and (7) external factors. This chapter studies the identified risk factors that affect the accuracy of cost estimation. It also discusses best practices in calculating cost estimates. A mixed methodology is conducted; the empirical part in the form of a survey questionnaire examines the identified factors among those who are experts in different fields of specialties. An ordered logit probability model is estimated based on the seven main risk factors. To support the empirical findings, a qualitative study is performed in the form of interviews with five experts in the construction industry. The findings report that the highest risk causing cost overruns is contractor-related factors, followed by design-related factors. On the other hand, project-related factors, materials-related factors, and external factors tend to have the lowest risk of cost overrun.