An investigative study of road construction contract variations

Purvis, Alan (2015) An investigative study of road construction contract variations. [USQ Project]

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Abstract

The state government plans to invest $18.1 billion in transport infrastructure across local, state and national networks over the next four years. The Department of Transport and Main Roads (TMR) is the state government agency responsible to deliver the investment with fit-for-purpose and value for money infrastructure. With multi-billion dollar investments, cost overruns of project budgets can result in millions of dollars of under delivery due to contract variations.

The aim of this research project is to assist TMR with the understanding of why variations to Road Construction Contracts (RCC) arise and their the root causes which result in cost overruns. Unplanned variations to contracts can cause excessive cost over-runs and place a strain on the overall project budget. Cost overruns on several of TMR’s recent transport infrastructure projects have exceeded construction cost estimate performance targets and anecdotal evidence suggests that the average figure is in excess of 20% of the original construction budget. Whilst the construction phase is only one part of the project life cycle it can be a major contributor to the project’s total cost overrun if unbudgeted contract variations occur. Therefore the gaining of a better understanding of the source, type and reasons of these variations is critical to effectively managing and controlling costs on projects to ensure best value for money.

To gain a better understanding of variations it was necessary to first undertake a literature review of relevant past studies and publications to gain a basic appreciation of what forms a road construction contract, define what contract variations are and to review the construction industry’s research into the significance of cost over-runs on budgets. Preliminary research of information was also undertaken to identify the most appropriate data both from historical contracts and from expert opinion that would assist in achieving the desired outcomes of this research project.

The research methodology entailed a three step process by which the first step involved the collection of quantitative data from TMR databases in the form of historical contracts and associated variations. The second step required a detailed analysis of the historical data to provide the basis of the project outcomes, summarise the results and identify trends across variations. The third and final step involved collecting qualitative data through an on-line expert opinion survey to validate the results of the analysis of the historical variation data and to assess the level of understanding of the root causes of variations among road project delivery practitioners.

From the 111 contracts sampled there were 529 variations in total which combined with the survey results provide the basis of the research outcomes. On average all contracts sampled had a variation ratio of 24.2% of the original contract value. Another revealing statistic is that contracts with original values less than $10 million had an average variation ratio greater than the all contracts average and those contracts with original values greater than $10 million had variation ratio less than the all contracts average.

This research project concludes with recommendations to minimise the likelihood of typical variations studied in this research project from occurring in the future. Further work is required to consider the cost implications of the variations for future improvement of estimating and delivery of an RCC.


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Item Type: USQ Project
Item Status: Live Archive
Additional Information: Bachelor of Engineering project
Faculty / Department / School: Current - Faculty of Health, Engineering and Sciences - School of Civil Engineering and Surveying
Supervisors: Thorpe, David
Date Deposited: 07 Jun 2016 01:28
Last Modified: 07 Jun 2016 01:28
Uncontrolled Keywords: road construction, contract variations, department of transport and main roads, investigative study, constructions budget
Fields of Research : 09 Engineering > 0905 Civil Engineering > 090599 Civil Engineering not elsewhere classified
URI: http://eprints.usq.edu.au/id/eprint/29273

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