J. Basic. Appl. Sci. Res., 4(6)19-27, 2014 © 2014, TextRoad Publication ISSN 2090-4304 Journal of Basic and Applied Scientific Research www.textroad.com *Corresponding Author: Aftab Hameed Memon, Faculty of Civil and Environmental Engineering, Universiti Tun Hussein Onn Malaysia, 86400 Parit Raja, Johor, Malaysia. E-mail: aftabm78@hotmail.com, Severity of Variation Order Factors in affecting Construction Project Performance Aftab Hameed Memon, Ismail Abdul Rahman, Muhamad Hafizzudin Abu Jamil Faculty of Civil and Environmental Engineering, Universiti Tun Hussein Onn Malaysia, 86400 Parit Raja, Johor, Malaysia Received: March 6, 2014 Accepted: May 13, 2014 ABSTRACT Construction industry continues to be a driving force in the growth of the nation’s socio-economic development. Hence, construction industry is growing rapidly. Unfortunately, many of the construction projects fail in achieving desired performance specifically performance of time and cost as targeted. This is resulted due to various reasons. One of the reasons for this failure is variation order. Variation Order (VO) in the construction industry has become one of the common and serious issues. Undoubtedly, frequent occurrence of variations may decelerate the growth of the economy. Thus, it is very indispensable to discover and review the factors causing variation orders. Therefore, this study is focusing on identifying various causes of the variation order and assesses their effect on time and cost. This was done through comprehensive quantitative data collection method using questionnaire survey. The questionnaires were distributed to clients, consultants and contractors involved in the construction industry. The factors were categorized in groups by analyzing gathered data with multivariate statistical method of Factor Analysis. Factor analysis was run with SPSS software for Principal Component Analysis (PCA) test. Kaiser-Meyer-Olkin (KMO), the measure of sampling adequacy was found as 0.834 at significance level of 0.000, which showed that the data was adequate for further analysis. It resulted in categorizing data into 4 components which were used to calculate Average Index (AI) in evaluating the severity of various factors in affecting time and cost performance. Results showed that severe VO factors affecting time performance are; change in schedule, change of scope, change in design, financial problem and lack of strategic planning. Severe factors in affecting cost performance were change of schedule, financial problem, inadequate working drawing detail, change in specification, and financial difficulties. It is recommended that effective financial management and careful design can be very useful in reducing variation orders and hence project performance can be improved. KEYWORDS: Variation order, factors of variations, time performance, cost performance, PCA 1. INTRODUCTION Construction projects are continuously reported as experiencing poor performance. One of the reasons for this poor performance is occurrence of variation orders. It has become a common phenomenon in construction projects globally [1, 2, 3] and occurs even in the most well planned project [4] which may necessitate due to various factors. Variation is defined as any type of deviation from agreed upon; well defined scope or schedule of works [3]. Variation in any project can occur from various factors such as mistakes in the contract document, unknown ground conditions, modification in work scope or improper coordination and communication between the parties. Consequently, variation orders take place to put the variation together as part of signed contract [5].Variation orders have a significant impact on the performance of the project. Variations may result in considerable amendment in the contract documents, project time and cost [6, 7]. In United State, Hanna and Gunduz [8] estimated that the United States construction industry spend 13-26 billion dollar in 1 year for construction variation order. Commonly, change order is issued to correct or modify the original design or scope of work [9]. Change order is an addendum to the contract conditions and is signed by all the parties involved in the contract. It becomes part of the contract and symbolizes an alterations required in the project, discover the change in time and cost of the project [10]. The occurrence of variations is a common issue in Malaysian construction industry. The variations in construction occur due to various reasons. The construction performance can be affected severely if the project team cannot analyze and overcome the problem effectively. Hence, it is very important to identify and assess the factors causing variation orders. This study focused on identifying common factors of variation orders and their effect o project performance. 19