Cost overruns and postponement of megaprojects are normal news being broadcasted all over the globe where excess millions of monies are utilized and
worldwide research has indicated that the larger the project, the higher the probability of postponement and cost overruns (Siemiatycki, 2015). In a study by Cantarelli et al.
(2012b), cost overrun was found to be affected by the size of the project. Shrestha, Burns and Shields (2013) investigation of over 360 public construction projects in Clark County, Nevada discovered that the bigger the size of the project the higher the number of cost overruns. The continuing low performance showcased by many megaprojects demonstrates the way supervising expenses and schedule is not connected to time and cost performance, with Flyvbjerg (2014) confirming that 90% of mega-projects have cost overruns so the management of time and cost issues may be considered as ‘fire fighting’ to remain in operation (Maddaloni and Davis, 2017) and not necessarily to contribute towards reducing cost overruns in these projects. Musirikare and Kule (2016) studied construction projects in a section of Kigali, Rwanda and realised that even if project costs are proficiently scrutinized and other settings remain the same while construction continues, a significant rise in the costs is observed and in turn, if the estimated project cost is increased, accordingly a concurrent upsurge in the actual cost is noted implying that in many instances, the expenses in mega projects always rises. To thoroughly understand the factors leading to cost overruns, it would still be important to check the reasons provided by previous studies to see whether there has been any change in the reasons provided for cost overruns among the various mega projects.
Various reasons have been provided by diverse scholars as to the cause for cost overruns in projects as described in the subsequent sections.
17 The study by Flyvbjerg et al. (2003) recognized and summarized the key reasons for megaproject cost overruns in infrastructure as incomplete risk assessment and poor decision making due to the absence of responsibility for the decisions. Lee (2008) analysed the reasons for cost escalations in the Korean mega projects and realized the critical reasons to project extent modification, unanticipated variations to the
construction setting, illogical approximation and amendment of project expenses and no integration of the project to its value. Park and Papadopoulou (2012) found that the most significant causes for cost overruns of infrastructural projects in Asia as the bidding process where the bidder with the least costs was selected. Another reason provided in the study was the advance payment of contracts. Merrow (2011) highlighted seven reasons for cost overruns in projects as the unsatisfactory bidding process,
inadequate risk assessment, unworkable cost approximations, lessening of the projected cost which affects quality, focus on time schedule along with an anticipated increase in net present value, heavy burden on the project manager and self-centeredness. In Brunes and Lind (2014) research that checked infrastructural projects cost overruns in Sweden using a questionnaire on experienced projects managers by examining two dimensions namely, once cost overrun happened and which section of the cost element was
accountable, found that alteration in design, technical and operational issues leading to high amount of inputs indicating absence of proficiency, and optimism bias.
Adam, Josephson and Lindahl (2015) noted that surge in prices is among the known reason for cost overruns by states and academicians where approximately 20%
to 25% of cost overruns is linked to an increase in prices and the other percentage can be connected to inappropriate design and inept execution, limited capital for the project, organizational vagueness, and absence of synchronization between processes and
18 stakeholders. The view of price fluctuation is not agreed by all project managers as in a previous study by Brunes and Lind (2014) where the views of 101 project managers was checked, more than 30% were unsure whether price is a cause for cost overrun and nearly 50% had a contrasting view regarding the price increase issue.
Alhomidan (2015) undertook an assessment of contractors’ perspective to examine the most common reasons for cost overruns in Saudi Arabia’s infrastructure projects. The study adopted 41 reasons for cost overrun and the investigation showed in-house running bottlenecks, postponement of disbursements, communication
breakdown among project affiliates and lack of timely decision making. Olaniran (2015) investigation found intricate relations among the project features, individuals,
technology, organization and culture as the main problems triggering cost overruns in hydrocarbon megaprojects and chaos theory could expound on the reasons for cost overruns.
França and Haddad (2018) studied the causes of cost overruns in Brazilian construction projects from the contractors’ standpoint of view using a questionnaire that examined the regularity of occurrence, severity, and significance. The study’s sample were 11 directors, 17 project managers and 19 area managers from varied construction firms and the findings recognized features modification, incomplete design during making provisions, and increased indirect costs coupled with decreased output as the greatest notable causes for cost overruns.
Huo et al. (2018) scrutinised three independent descriptive variables namely type of project, magnitude of the project, and duration of the project execution in relation to cost overruns in Hong Kong infrastructural projects and the key conclusions were the approval year of the project is not linked to cost overrun, in regards to project
19 type, railway projects had most cost overrun then fixed links projects and then lastly road projects. The study also showed cost overruns are not linked to project size but small projects in the road category had more cost overruns than bigger projects differing from many studies. Additionally, the study found cost increasing with the increase in deliberations of the projects.
Some academicians indicated project gain has an influence on project
performance and by focussing on the wide network of stakeholders that is the public; it will assist to ensure accomplishment of the gains through decreasing preparation miscalculation and improving openness and culpability within the project’s decision- making course (Maddaloni and Davis, 2017). Further, according to Pitsis et al. (2018), extensive coordination of all stakeholders is necessary for mega projects’ success and sharing of experiences would equally limit the shortages in mega projects. To add, the scholars perceived that considering the lasting social and economic effects as an
important ingredient to the arrangement and implementation of mega projects instead of perceiving the outcome as a burden would improve the project's performance.
Siemiatycki (2015) noted the upshots of cost overruns consist of a reduction in the national financial plan and the indication to the public that the state is not capable of attaining its pledges. Siemiatycki (2015) summarized the worldwide renowned actions to reduce or eliminate cost overruns into five solutions for this issue. Firstly, the availability of wide data manipulation techniques can be used to aid in productivity checking, evaluation, and distribution of vital information. Secondly, respective states could watch over and compensate the most complaint organization and service
providers to encourage better performance and also provide a foundation for warranting expected results. Thirdly, by training employees who are supervising mega projects in
20 managerial abilities such as the implementation of tenders and resolution to
disagreements. Fourthly, by using past experience data, states could look into
identifying the best predicting model. Lastly, the states could motivate public-private partnerships so as to easily adopt cost control and time limit measures.
Some scholars have consolidated the causes of cost overruns as described below.
In Cantarelli, Flyvbjerg, Molin, and van Wee (2013) study examining the causes of cost overruns in construction projects through an exploration of previous literature led to the grouping of the causes for cost overruns to four key reasons that are technical,
economic, psychological and political. Using Flyvbjerg studies (Flyvbjerg 2006;
Flyvbjerg and Molloy 2011; Flyvbjerg et al., 2016), the causes of costs overrun are summarized as technical, psychological, intentional underrating of costs by contractors and politicians, and incomplete sponsoring of projects and ineffective management of contracts. Love et al. (2016) and Ahiaga-Dagbui and Smith (2014) describe the reasons for cost overruns in two perspectives, first, the scholars agree with the evolution theory which explains the consistent evolving nature of projects necessitated by project extent changes and secondly, the scholars attributed cost overruns to the psychological effect an organizational setting. Although in Love et al. (2012) the scholars underscored the importance of optimism bias and strategic misrepresentation, in a current study, Love et al. (2016) further proclaims that optimism bias and strategic misrepresentations on their own are not sufficient to completely clarify the reason for cost overruns and suggested a more all-inclusive method which integrates the project’s procedures and its technicality.
From the consolidated views, it is evident that cost overruns are linked to cognitive biases of the project stakeholders due to the causes stated as optimism bias, strategic misrepresentation, and political. Love et al. (2016) study noted that the trend to
21 investigate discreet grounds of cost escalations in mega projects and the neglect of scrutinizing the interrelations between the sources of cost overruns does not provide sufficient evidence and as such this study identified decision making as the main mediator between cognitive biases and cost overrun so as to cover for the project’s complexity and other technical causes since decision making is very important to the success of company activities (Sage Publications, 2019) and in mega projects, decision making is considered as the missing link vital for successful project execution (Rumeser and Emsley, 2018). Further, decision making is impacted by similar factors to the problem in this study which is cost overruns. As noted in Steen et al. (2017) study, political, organizational, and psychological elements influence decision making in mega projects and the technical aspect of organizational issues is represented by the socio- technical elements which are magnified by the projects size and participation of numerous stakeholders and expertise.
Complexity, wide scope, extended duration, huge funds, and longitudinal surrounding settings prompt increased risks to mega projects than other projects which heighten the rate of cost overruns (Andrić et al., 2019). Decision making on complex situations is a critical topic in managing projects (Rumeser and Emsley, 2018) and according to Flyvbjerg (2014), decision making is the main determinant of success in complicated projects. Attri and Grover (2014) indicated that the current decisions made on projects are connected to the complexity and bias of the decision makers. More, all practices revolving around managing projects necessitate decision making such as in choosing projects, hiring project managers, assessing bidding documents and choosing suppliers or contractors among other similar activities (Rumeser and Emsley, 2018).
22 Naturally, megaprojects are strategic and thus decision making is also strategic.
According to Calabretta et al. (2016), strategic decision making is optimized through a combination of analytical and intuitive decision making. Musirikare and Kule (2016) proposed strictly checking costs as a way to lessen the project cost overruns hence analytical decision making can be applied to manage the cost overruns and associated risks while intuitive decision making can be used to handle the complexity surrounding deviating and contradictory intentions arising from the huge number of stakeholders, that is, the community, government, and private investors which initiate conflicts (Wu, Zhao and Zuo, 2018). Oliveira (2007) exclaimed that the primary elements of decision making are decision and behaviour as decision making entails the way people think and respond to the environment including reflecting on the past occurrences and predicting the upcoming happenings. Decision making also includes the mental effect of decision maker on the decision made (Oliveira, 2007). Research has affirmed that decision makers depend on some choice guidelines called heuristics to simplify complicated settings, even though these rules are essential and valuable, they can prompt cognitive biases that initiate extended and organized miscalculations in decision making (Cunha et al., 2014) leading to the final research question, what is the connection between cognitive biases, decision making and cost overruns.