Factors Impacting Cost Growth on Heavy Industrial Projects in Alberta
Date
2020-04-28
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Abstract
Construction in the heavy industrial sector of Alberta makes up a large portion of the provincial economy. Unfortunately, this construction work is completed in an environment of some of the highest cost growth in the world. Projects constructed in this industry typically go over budget by 11% and on some projects, costs have even exceeded budgets by up to double. Given this situation, the industry and province are eager to reduce these cost overruns to bring greater profits and to encourage investment in the province. While research thus far has determined many potential causes and indicators of this cost growth, quantification of these factors is lacking. To truly reduce cost growth, it is necessary to determine the actual impact of many potential methods of controlling costs and also gain a better understanding of the predictive nature of various indicators. Large amounts of data was collected on 139 projects based in Alberta over the past 15 years. This data was statistically analyzed to find factors that contribute to cost growth and to develop phase-based predictive models to forecast which projects are at risk of running over budget. It was found that larger, longer and more complex projects are more likely to have cost growth. However, better engineering, increased modularization, and larger contingencies can help reduce this cost growth. Further, the amount of rework, growth in the amount of work completed in the winter and growth in the size of the peak work force are all early indicators that can help determine when a project may be facing unanticipated problems. These factors are investigated using bivariate and multiple regression procedures which identify the magnitude of the impact of each variable, allow for the prediction of cost growth and, when combined, allow the unique contribution of each variable to be determined. This detailed information allows companies to perform cost-benefit calculations to better prioritize investments into cost control measures. By controlling costs better, companies can increase their profits and the province can benefit from increased investment in an efficiently running industry.
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Keywords
Project Management, Construction, Cost Growth, Heavy Industrial, Oil and Gas
Citation
Haines, D. (2020). Factors Impacting Cost Growth on Heavy Industrial Projects in Alberta (Master's thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca.