Cost overruns in public projects David Arditi, Guzin Tarim Akan* and San Gurdamar* zyxwvutsrqponmlkji The effects of cost overruns are not confined to the construction industry but are reflected in the state of the overall economy of a country. This is particularly so in Turkey , where construction investments account for almost half of all investments. A large number of Turkish public agencies and contractors were surveyed to identify the causes of such cost overruns in public projects undertaken in the decade 1970-l 980. The results indicate that inflationary pressures, increases in material prices and workmen’s wages, difficulties in obtaining materials at current official prices, construction delay s and errors in first estimates were the most important sources for cost overruns. Keywords: construction, public projects, inflation, Turkey Numerous public projects that were started in the 197G1980 decade in Turkey have not been completed within budget. For example, the increase in cost (excluding the effect of inflation) in school and hospital construction in the years 196881975 averaged 30% i. There have been extreme examples, such as the construction of a hospital for pulmonary diseases in Mus (Project No. 68100027), expected to have a cost of TL6M, that was completed at a cost of TL29.18M, with an overrun of 386%; and the construction of a regional school at Semdinli (Project No. 72H000850) that was completed at a cost that overran the original estimate by 258%‘. Similarly, whereas 15% (in terms of dollar value) of the projects were being completed on schedule in the first five-year national plan periods Department of Civil Engineering, Illinois Institute of Technology. Chicago, IL 60616, USA * Formerly at Department of Civil Engineering, Middle East Technical University, Ankara, Turkey (19641974), this gradually fell to 8-10% in the 1974 1979 five-year plan period2. The tendency to incur lengthy delays in public construction increased towards the end of the 1970s. In some extreme cases, construc- tion took so long to complete that the structures were worn out during construction, and many of their parts had to be replaced before construction had come to an end’. It is a well established fact that one of the most important problems relating to public investments in Turkey during the planned period 1963-1980 consisted of delays and cost overruns. This is of particular interest to Turkey’s economy, because construction investments in Turkey constitute 50% of all invest- ments”, whereas they amount to 20% in most other countries”. It is the reason why delays and cost overruns in Turkish construction projects prevent the planned increase in the property and service production from taking place, and this phenomenon in turn affects, in a negative way, the rate of national growth. Several studies on the reasons why cost overruns occur in Turkish public construction projects have been carried out in the past decade. One of these investiga- tions involved a case study of a large public project”, some concentrated on construction investments in various public sectors such as health, education, transportation and state economic enterprises’%h,7, while others tried to identify the general problems related to delays and cost overruns on a macro level in the overall Turkish economy2,“s,y. In addition to the case studies, sectorial investigations and general ob- servations presented in the literature cited above, the necessity was felt for a more comprehensive study based on a more representative cross-section of the entire construction industry. For this reason, the causes for delays and cost overruns in Turkish public projects in the decade 1970-1980 were investigated by means of a national survey that covered a large number of public agencies and contractors. The results of this survey are presented in this paper. 218 0263-7863/85/040218-07 $03.00 @ 1985 Butterworth & Co (Publishers) Ltd Project Management