CHAPTER – I

INTRODUCTION

A. Significance of the Study

Construction is a perilous business. And while today‘s construction projects may

be safer than they were in the past, the financial risks persist to be great. Today‘s
construction projects are bid under stern competition with little margin and require the
synchronization of many trades under demanding conditions and challenging time
frames. Often, the whole lot does not go according to plan, and the parties to the
construction Contract find themselves at odds.

Many of the risks that Owners and Contractors face can impinge on construction
time. And the cost of a lost day on a construction Project may be confounding.
Unfortunately, the effects on construction time can be difficult to isolate, identify, and
enumerate. This is true despite the fact that the construction process has employed
―modern‖ scheduling techniques for almost half a century. More surprisingly, even
though the power and capabilities of scheduling software have increased significantly in
recent years, identifying and accurately quantifying construction delays continues to
confront even the best Project Managers.

While the parties‘ management teams are able to analyze and assess most factors
associated to a change, the effect on construction time remains difficult to comprehend
and accurately measure. And so, even though the parties can often reach compromises
related to most aspects of a change, it is the delay factor that often prevents settlement.
As a result, most construction claims incorporate a component related to delays. Because
the expertise required to reliably and convincingly evaluate delays and delay damages
often goes beyond that of the participants, experts are hired to analyze delays for
mediation and trial.

The financial implication of delays demands that the Project Owner, General
Contractor, Construction Manager, Designer, and Subcontractors educate themselves

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regarding delays and the associated added costs. This study is intended as a practical,
hands-on guide to an area of construction that is not well understood.

All construction industry professionals should make out the basic types of delays
and understand the situations that give rise to entitlement to additional compensation.
Most important, they should recognize how a Project schedule and Project documentation
can be used to determine whether a delay occurred, quantify the delay, and assess the
cause of the delay. Furthermore, construction professionals must be able to assess the
delay‘s effects on the Project and quantify any costs or damages.

Many techniques are used to evaluate delays. Some of these methods have inbuilt
weaknesses and should be avoided. This study points out the shortcomings of these faulty
methods and explains how a delay analysis should be performed.

It then describes—explicitly—how the analysis is done with CPM schedules. The

study will cover the subtleties of the process, such as shifts in the critical path and
noncritical delays.

The subject matter of damages is covered in detail, including the major categories
of extended field overhead and unabsorbed home office overhead costs.

Likewise, the damages undergone by the Owner, either actual or liquidated, are
also explained.

Today, India is one of the foremost outsourcing hubs in the world. However, the
world judges us not just by the skills that have to offer, but also on the basis of our
infrastructure capabilities. India has set an determined target of investing USD 1 trillion
in infrastructure during the Twelfth Five Year Plan period. Given this factor,
infrastructure progress has been a key focus area in every Indian state more so in the
recent past. At the center as well, big budgets have been allocated for infrastructure
development in all Five Year plans. However, the country has over and over again fallen
short of meeting such targets over the last few years. These projects have been
customarily riddled with issues of time reasons for such schedule and cost overruns,
Ministry of Statistics and Programme implementation (MoSPI) recommended PMI to

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conduct a Study, in consultation with KPMG to highlight the key reasons for the time and
cost overruns across major sectors in infrastructure projects.

Infrastructure plays a vital role in the economic growth of a country.

Infrastructure investments in India have been mounting on a constant basis. In each five
year plan, the government sets an grand target which is higher than the previous one. The
12th five year plan also promises significant investment in infrastructure sector to bridge
the huge infrastructure shortfall. The plan is twice over the spending to USD 1 trillion
through 2016-17 with 50 percent of the funding to be met by private sector. Although, the
sector is considered to be a key driver of economic growth, time and cost overruns
threaten to limit the sector‘s latent to help achieve the desired growth and ensure efficient
capital expenditure.

To build Infrastructure, construction plays a paramount role in the economic

growth of a country. Infrastructure investments in India have been growing on a steady
basis. Although, the sector is considered to be a key driver of economic

Growth, time and cost overruns warn to limit the sector‘s potential to help achieve
the desired growth and ensure efficient capital expenditure.

Dearth of skilled project managers has the utmost influence on project delivery.

Lack of skilled project managers emerges as the root cause for time and cost
overruns in a project lifecycle. It has been pragmatic that the inflow of talent in the
infrastructure sector has been declining – as resources are going for alternative, more
lucrative options. This concern is felt across diverse stages of project lifecycle.

One of the reasons for inefficient project delivery is the paucity of skilled project
managers in the construction sector. This turn down in the inflow of talent in the sector
has emerged as the embryonic cause for time and cost overruns in the project life cycle.
Resources are being seen to deflect away from the construction sector towards
alternative, more lucrative options. This growing concern which has been felt across
various stages of the project life cycle has been supported by this insufficiency further
leads to issues such as protracted finalization of design, scope creep and contractual

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disputes. An explanation of delays and delay damages have been presented in a straight
forward, accessible manner, should be beneficial to public and private Owners,
Construction Managers, General Contractors, Subcontractors, Designers, suppliers, and
attorneys whose work involves them in the construction industry.

B. Objectives of the study

i. To identify the core issues affecting completion of construction projects

ii. To examine the major reasons for the time and cost overruns in construction
projects.

iii. To chalk out initiatives requisite for short term as well as long term to reduce
time and cost overruns

iv. To analyze how professional project management practices can bring about a
positive change in the completion of construction projects on time and within
budget.

v. To offer suggestive frame work for the actions to be taken for expediting
construction projects

C. Methodology of the Study

For ascertaining the time and over runs, a total of 16 projects have been selected
from eight sectors viz., power, petroleum, Railways, steel, health and family welfare,
urban development , road transport and highways and shipping and ports. Out of sixteen
projects selected eight are mega projects and eight are major projects. Mega projects are
the projects costing Rs.1000 crores and above and Major projects are the projects
costing Rs.150 crores and above but below Rs.1000 crores. From each sector two
projects were identified causing time and cost over runs. The following are the project
details selected for the study.

1. Establishment of pooling stations at Champa and Raigarh for IPP generation

project in Chhattisgarh. (Mega Project)

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2. System Strengthening in NR For Sasan and Mundra (Umpp), PGCIL, Multi
State. (Mega Project)

3. Strategic Crude Oil Storage Project at Padur, ISPRL, Karnataka. (Mega

Project)

4. Conversion Of Rig Sagar Samrat To Mobile Offshore Production Unit

(MOPS) ,ONGC, Maharashtra. (Mega Project)

5. Mumbai Urban Transport Project Phase-II MRTP, Maharashtra. (Mega

Project)

6. Mandarhill - Dumka- Rampurhat(Nl),ER, Jharkhand. (Mega Project)

7. Expansion of Bhilai Steel Plant SAIL, Chhatisgarh. (Mega Project)

8. NMDC Integrated Steel Plant,Bastar, Chhatisgarh. (Mega Project)

9. LHMC New Delhi-Re-Development,Delhi. (Major Project)

10. Residential complex and OPD block, AIIMS, Kalyani West Bengal. (Major
Project)

11. Construction of ITBP road to Indo-China border from NYU Sobla Sela to
Tedang, Uttarakhand. (Major Project)

12. Establishment of Central Armed Police Force Institute of Medical Sciences

(CAPFIMS) at New Delhi. (Major Project)

13. Construction of a new 2-lane highway from km 38/00 to 71/00 in to support

Kaladan multi modMizoram. (Major Project)

14. Rehabilitation and up gradation of NH-233 from km 65.870 to km 122.270 in

the state of Uttar Pradesh. (Major Project)

15. Ennore Manali Express way, F/O Special Purpose Vehicle (SPV) Thiruvallur,
Tamil Nadu. (Major Project)

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 16. Capital Dredging Phase-IV to provide 18m deep draft Chenai, Tamil Nadu.
(Major Project)

D. Hypothesis of the Study

H1 Delay in regulatory approvals significantly influence on the Project time

overruns

H2 Delay in availability of funds significantly influence on the Project time

overruns

H3 Lack of adequate planning skills significantly influence on the Project time

overruns

H4 Lack of R&R Policies significantly influence on the Project time overruns

H5 Delay in Decision making significantly influence on the Project time overruns

H6 Contractual Disputes has a significant influence on the Project time overruns

H7 Lack of awareness on modern equipment and technology significantly

influence on the Project time overruns

H8 Escalation of labour costs significantly influence on the Project cost overrun

H9 Inadequate availability of skilled resources significantly influence on the

Project cost overrun

H10 Poor selection of Consultant or PMC significantly influence on the Project

cost overrun

H11 Ineffective DPR, original estimate and budgeting of project significantly

influence on the Project cost overrun

H12 Contractual Disputes due to poor framing of contract document significantly

influence on the Project cost overrun.

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E. Limitations of the Study

Out of 1676 projects covering 462 mega and 1214 major central sector
projects executed during the period 1995 to 2020 only 16 projects have been selected
based on purposive sample method due to time and financial constrains.

F. Presentation of the Study

The study has been presented in seven chapters, chapter one is Introduction and
deals with the significance, objectives, methodology and hypothesis etc. chapter two is
Review of literature, chapter three explains about measuring delays in construction
projects, chapter four deals with project cost control, chapter five analyses about the
integrating cost and value in projects, chapter six deals with change control and
configuration management and the last chapter summarizes the study and provided
solutions to control time and cost over runs in manufacturing projects.