IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v12y2020i8p3370-d348316.html
   My bibliography  Save this article

Who Risks and Wins?—Simulated Cost Variance in Sustainable Construction Projects

Author

Listed:
  • Jarosław Górecki

    () (Faculty of Civil and Environmental Engineering and Architecture, UTP University of Science and Technology, al. prof. S. Kaliskiego 7, 85-348 Bydgoszcz, Poland)

  • Manuel Díaz-Madroñero

    () (Research Centre on Production Management and Engineering (CIGIP), Universitat Politècnica de València, Pl. Ferrándiz Carbonell, s/n, 03801 Alcoy, Spain)

Abstract

More and more construction projects are closed before they ever start. Among the most significant reasons for project failures is cost risk. Construction companies have many problems with reliable cost management. Rising demands of the key market players insist on making construction projects more sustainable according to the simultaneous improvement of the economic, environmental and social responsiveness dimensions. In order to investigate these problems, a four-phase research methodology has been followed consisting of: (1) literature review to identify research trends and gaps, (2) survey to construction experts to detect their subjective perspectives about risk costs and analyse the corresponding costs structure for the investment in sustainable projects, (3) simulations based on Monte Carlo simulation with an author’s methodology for calculating the cost risk with an additional statistical analysis, (4) ending questionnaire to obtain the final feedback from the experts and the validation of obtained results. A contribution to the development of knowledge about cost risk is the observation that the changing probability distributions of individual cost-generating components may include both economic as well as technological and organizational aspects. Thus, with the proposed approach, often complex, global challenges of sustainable construction projects can be tackled in an accessible way.

Suggested Citation

  • Jarosław Górecki & Manuel Díaz-Madroñero, 2020. "Who Risks and Wins?—Simulated Cost Variance in Sustainable Construction Projects," Sustainability, MDPI, Open Access Journal, vol. 12(8), pages 1-31, April.
  • Handle: RePEc:gam:jsusta:v:12:y:2020:i:8:p:3370-:d:348316
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/12/8/3370/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/2071-1050/12/8/3370/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Skamris, Mette K. & Flyvbjerg, Bent, 1997. "Inaccuracy of traffic forecasts and cost estimates on large transport projects," Transport Policy, Elsevier, vol. 4(3), pages 141-146, July.
    2. Kapelko, Magdalena & Oude Lansink, Alfons & Stefanou, Spiro E., 2014. "Assessing dynamic inefficiency of the Spanish construction sector pre- and post-financial crisis," European Journal of Operational Research, Elsevier, vol. 237(1), pages 349-357.
    3. Bent Flyvbjerg & Mette K. Skamris holm & Søren L. Buhl, 2003. "How common and how large are cost overruns in transport infrastructure projects?," Transport Reviews, Taylor & Francis Journals, vol. 23(1), pages 71-88, January.
    4. Cantarelli, C.C. & van Wee, B. & Molin, E.J.E. & Flyvbjerg, B., 2012. "Different cost performance: different determinants?," Transport Policy, Elsevier, vol. 22(C), pages 88-95.
    5. Richard M. Van Slyke, 1963. "Letter to the Editor---Monte Carlo Methods and the PERT Problem," Operations Research, INFORMS, vol. 11(5), pages 839-860, October.
    6. Zaigham Ali & Fangwei Zhu & Shahid Hussain, 2018. "Risk Assessment of Ex-Post Transaction Cost in Construction Projects Using Structural Equation Modeling," Sustainability, MDPI, Open Access Journal, vol. 10(11), pages 1-20, November.
    7. Cavalieri, Marina & Cristaudo, Rossana & Guccio, Calogero, 2019. "On the magnitude of cost overruns throughout the project life-cycle: An assessment for the Italian transport infrastructure projects," Transport Policy, Elsevier, vol. 79(C), pages 21-36.
    8. Zhen Lei & Wenzhe Tang & Colin F. Duffield & Lihai Zhang & Felix Kin Peng Hui & Richun You, 2018. "Qualitative Analysis of the Occupational Health and Safety Performance of Chinese International Construction Projects," Sustainability, MDPI, Open Access Journal, vol. 10(12), pages 1-17, November.
    9. Cantarelli, C.C. & Molin, E.J.E. & van Wee, B. & Flyvbjerg, B., 2012. "Characteristics of cost overruns for Dutch transport infrastructure projects and the importance of the decision to build and project phases," Transport Policy, Elsevier, vol. 22(C), pages 49-56.
    10. Bon-Gang Hwang & Ming Shan & Helena Phua & Seokho Chi, 2017. "An Exploratory Analysis of Risks in Green Residential Building Construction Projects: The Case of Singapore," Sustainability, MDPI, Open Access Journal, vol. 9(7), pages 1-21, June.
    11. Sanghyo Lee & Kyunghwan Kim, 2015. "Collar Option Model for Managing the Cost Overrun Caused by Change Orders," Sustainability, MDPI, Open Access Journal, vol. 7(8), pages 1-15, August.
    12. Edyta Plebankiewicz, 2018. "Model of Predicting Cost Overrun in Construction Projects," Sustainability, MDPI, Open Access Journal, vol. 10(12), pages 1-14, November.
    13. Eleni Sfakianaki & Theoharis Iliadis & Emmanouil Zafeiris, 2015. "Crisis management under an economic recession in construction: the Greek case," International Journal of Management and Decision Making, Inderscience Enterprises Ltd, vol. 14(4), pages 373-389.
    14. Jozef Švajlenka & Mária Kozlovská & Terézia Pošiváková, 2018. "Analysis of Selected Building Constructions Used in Industrial Construction in Terms of Sustainability Benefits," Sustainability, MDPI, Open Access Journal, vol. 10(12), pages 1-16, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Miranda Sarmento, J.J., 2014. "Public private partnerships," Other publications TiSEM c7d4c978-234c-4f88-83ed-1, Tilburg University, School of Economics and Management.
    2. Odeck, James, 2014. "Do reforms reduce the magnitudes of cost overruns in road projects? Statistical evidence from Norway," Transportation Research Part A: Policy and Practice, Elsevier, vol. 65(C), pages 68-79.
    3. Chong, Uven & Hopkins, Omar, 2016. "An international experience on the evolution of road costs during the project life cycle," Transport Policy, Elsevier, vol. 48(C), pages 60-66.
    4. Catalão, Francisco Pinheiro & Cruz, Carlos Oliveira & Sarmento, Joaquim Miranda, 2019. "The determinants of cost deviations and overruns in transport projects, an endogenous models approach," Transport Policy, Elsevier, vol. 74(C), pages 224-238.
    5. Ihsan Issa Ahmad Hosani & Fikri T. Dweiri & Udechukwu Ojiako, 0. "A study of cost overruns in complex multi-stakeholder road projects in the United Arab Emirates," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 0, pages 1-10.
    6. Jorge Valido, 2020. "Large Infrastructure Investments: Financing Mechanisms and Incentives in Decentralised Countries," Fiscal Studies, John Wiley & Sons, vol. 41(4), pages 905-921, December.
    7. Ihsan Issa Ahmad Hosani & Fikri T. Dweiri & Udechukwu Ojiako, 2020. "A study of cost overruns in complex multi-stakeholder road projects in the United Arab Emirates," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 11(6), pages 1250-1259, December.
    8. Cavalieri, Marina & Cristaudo, Rossana & Guccio, Calogero, 2019. "On the magnitude of cost overruns throughout the project life-cycle: An assessment for the Italian transport infrastructure projects," Transport Policy, Elsevier, vol. 79(C), pages 21-36.
    9. Yi Gao & Gaosheng Yang & Qiuhao Xie, 2020. "Spatial-Temporal Evolution and Driving Factors of Green Building Development in China," Sustainability, MDPI, Open Access Journal, vol. 12(7), pages 1-21, April.
    10. Dejan Makovšek & Marian Moszoro, 2018. "Risk pricing inefficiency in public–private partnerships," Transport Reviews, Taylor & Francis Journals, vol. 38(3), pages 298-321, May.
    11. Zaigham Ali & Fangwei Zhu & Shahid Hussain, 2018. "Risk Assessment of Ex-Post Transaction Cost in Construction Projects Using Structural Equation Modeling," Sustainability, MDPI, Open Access Journal, vol. 10(11), pages 1-20, November.
    12. Love, Peter E.D. & Sing, Michael C.P. & Ika, Lavagnon A. & Newton, Sidney, 2019. "The cost performance of transportation projects: The fallacy of the Planning Fallacy account," Transportation Research Part A: Policy and Practice, Elsevier, vol. 122(C), pages 1-20.
    13. Steininger, Bertram & Groth, Martin & Weber, Birgitte, 2020. "Cost overruns and delays in infrastructure projects: the case of Stuttgart 21," Working Paper Series 20/11, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    14. Edyta Plebankiewicz, 2018. "Model of Predicting Cost Overrun in Construction Projects," Sustainability, MDPI, Open Access Journal, vol. 10(12), pages 1-14, November.
    15. Edyta Plebankiewicz & Damian Wieczorek, 2020. "Prediction of Cost Overrun Risk in Construction Projects," Sustainability, MDPI, Open Access Journal, vol. 12(22), pages 1-15, November.
    16. Verweij, Stefan & van Meerkerk, Ingmar & Korthagen, Iris A., 2015. "Reasons for contract changes in implementing Dutch transportation infrastructure projects: An empirical exploration," Transport Policy, Elsevier, vol. 37(C), pages 195-202.
    17. Love, Peter E.D. & Ahiaga-Dagbui, Dominic D., 2018. "Debunking fake news in a post-truth era: The plausible untruths of cost underestimation in transport infrastructure projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 357-368.
    18. Makovšek, Dejan, 2014. "Systematic construction risk, cost estimation mechanism and unit price movements," Transport Policy, Elsevier, vol. 35(C), pages 135-145.
    19. Chantal C. Cantarelli & Bert van Wee & Eric J. E. Molin & Bent Flyvbjerg, 2013. "Different Cost Performance: Different Determinants? The Case of Cost Overruns in Dutch Transportation Infrastructure Projects," Papers 1307.2179, arXiv.org, revised Jan 2015.
    20. Cantarelli, C.C. & Flyvbjerg, B. & Buhl, S.L., 2012. "Geographical variation in project cost performance: the Netherlands versus worldwide," Journal of Transport Geography, Elsevier, vol. 24(C), pages 324-331.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:12:y:2020:i:8:p:3370-:d:348316. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (XML Conversion Team). General contact details of provider: https://www.mdpi.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.