International Journal of Civil Engineering and Built Environment Vol.1, No.1, 2014; ISSN 2289-6317 Published by YSI Publisher 30 Factors affecting construction cost performance in project management projects: Case of MARA large projects Aftab Hameed Memon 1 , Ismail Abdul Rahman 1 , Mohd Razaki Abdullah 2 ,Ade Asmi Abdu Azis 3 1 Faculty of Civil and Environmental Engineering, University Tun Hussein Onn Malaysia, Malaysia 2 Majlis Amanah Rakyat (MARA) 3 Universiti Tun Hussein Onn Malaysia, 86400 Parit Raja - Batu Pahat Corresponding Author:aftabm78@hotmail.com Abstract Aim of Study This study has focused on investigating procurement strategies adopted in MARA large construction projects. It also identified various factor affecting construction cost performance of MARA large construction projects. Need of Study Very rarely MARA projects are finished within estimated project cost. For improving cost performance, it is very important to identify the reasons affecting cost performance of MARA projects. Hence, there is a need of study in understanding the reasons and factors affecting project cost performance of construction projects. Research Approach The project was carried out through interviews and survey using the questionnaire among the personnel involved in handling MARA large projects. Gathered data was analyzed statistically using SPSS software package. Research Findings This study revealed that fluctuation in price of the material, cash flow and financial difficulties faced by contractors, shortage of site workers, lack of communication between parties, incorrect planning and scheduling by contractors are most severe factors while frequent design changes and owner interference are least affecting factors on construction cost performance in MARA large projects. Limitations This study was limited to large construction projects administrated by Majlis Amanah Rakyat (MARA) Malaysia. Importance and Contribution This study has highlighted various issues causing poor project performance in MARA large projects. Ranking of the factors will enable the MARA engineers for taking appropriate actions in improving the performance of cost in construction projects. Keywords: Construction Industry, Construction Cost, MARA Projects, Cost performance, Cost Overrun I. INTRODUCTION In recent years, Malaysian construction industry has recorded an average growth rate of 0.7% [1] compared to GDP growth of 5.46%. However, the industry is facing a lot of challenges in achieving satisfactory cost performance [2-4]. Government formed MARA (Majlis Amanah Rakyat) to strengthen the Bumiputera (Malays and other indigenous Malaysians) in the areas of business and industry. MARA currently placed under the Rural and Regional Development Ministry after briefly controlled by the Entrepreneur and Cooperation Development Ministry plays an important role in implementing the government policy. MARA has spent about RM 12 billion in its development since 1 st Malaysian plan [5]. A portion of this allocation was spent on construction. The major issue in MARA large construction project is the delay in completing its projects. An interview with Tech Art Executive Director revealed that more that 90% of large MARA construction project experienced delay since 1984. Most frequent effects of delay in MARA projects are time overrun and cost overrun. Studies revealed that time and cost overrun has a linear relationship with each other [6]. Keeping construction projects within estimated costs and schedules requires sound strategies, good practices, and careful judgment. To the dislike of owners, contractors and consultants, however, many projects experience extensive delays and thereby exceed initial time and cost estimates. This problem is more obvious in the traditional or adversarial type of contracts in which the contract is awarded to the lowest bidder, which is the strategy in the majority of public projects in developing countries [7]. In order to manage and control construction projects, there are various procurements strategies being adopted. Most popular strategies include traditional, management, integrated services and in-house teams [8]. These strategies contain various methods of managing projects as shown in Table 1. TABLE I. TYPES OF PROCUREMENT METHODS &THEIR VARIATIONS Procurement Strategy Methods/Techniques Procurement Strategy Traditional Lump Sum System/Traditional System/ Design- Bid- Build/Open Tender Contracts Negotiated Contracts Best Value Procurement Incentives Contracts Management Construction Project Management/Contract Management Construction Management at Risk/Management Contracting Integrated Design and Build Turnkey System