Time and cost overrun in infrastructure projects

Shirin Sharmin :

Infrastructure project delays and cost overrun are now a major worry since they have a direct impact on the national exchequer, taxpayers’ money, and external debt repayment.

By undertaking a number of enormous development projects, the Bangladeshi government intends to capitalize on the foundations of growth and assist the country’s transition from LDC to higher middle-income status by 2041.

The upcoming infrastructure developments will surely help our communication and development efforts.

Several challenges persist to complete the ongoing massive infrastructure projects.

A few of the challenges that require attention include preserving economic diplomacy among important stakeholders, avoiding debt traps, maintaining project transparency and construction schedules, and distributing economic development more fairly across the nation.

Due to the overall weaknesses of the infrastructure in our country, we were lagging and foreign investors are also shy away from investing here.

Here lies the significance of completing infrastructure projects on schedule and under budget.

According to the project completion report published by the Implementation Monitoring and Evaluation Division (IMED), the range of time overrun in the transportation sector projects was 33 per cent to 400 per cent and the extent of cost overrun was 2 per cent to 250 per cent respectively.

The main reason for time and cost overrun as conveyed by IMED are taking the projects without proper feasibility studies, and spending unnecessary time to initiate the project after getting approval from the regulatory bodies.

The lengthy land acquisition process, frequent changes in cost schedule of materials and land, delay in bureaucratic approval in different stages of work, and lengthy tendering procedures also contribute to time and cost overrun of the infrastructure projects.

When a development or communications project starts with flawed designs and improper feasibility study, it will not certainly give the output as anticipated.

If unfettered corruption, inefficiencies, and a lack of accountability add to the mix, time and cost overruns will be more prevalent.

And this has been the case for several projects done by various government agencies over the years though a few exceptions are there demonstrating that such overruns can be prevented with adequate planning and implementation.

Exploring over one-eighty project completion reports of the transportation sector from 2012-13 to 2016-17 published by IMED revealed that the structural design of most transportation projects incurred revision at least once.

A feasibility study is conducted before undertaking a project and its importance cannot be ignored.

But in most cases, sufficient time and adequate budget are not allocated for conducting a feasibility study.

There remains a gap in the identification of the requirements of the project, how it will be conducted, and the implementation process in reality.

Another inconsistency contributing to delay and cost escalation is the inadequate project preparation.

Delay in land acquisition, utility transfer, and material procurement need time.

Land acquisition is a heinous task and amicable settlement with the landowner in most cases is almost impossible.

Sometimes, this leads to litigation requiring more time and increasing costs.

Utility transfer also takes time while initiating any infrastructure project.

For smoothly running any project, the supply of adequate construction material is important.

Procurement of quality material and maintaining an appropriate supply channel throughout the project time are also crucial.

The practice of awarding the project to the lowest bidder is another reason for cost and time overrun.

In most infrastructure projects, at first technical evaluation is accomplished to check if the contractor is competent enough to complete the project, then an estimated official financial cost is determined.

If the tenderer cost is within 10 per cent of the officially estimated cost of the project, a Notification of Award (NOA) is issued.

Public Procurement Act 2006 and related Public Procurement Rules 2008 are two important guidelines followed in public procurement projects.

In reality, the tenderers try to discover the official estimated cost and give a bid amount close to this.

Once they secure the contract, they just claim more funding and want a time extension displaying various aspects.

In order to combat the issue of schedule and cost overrun, the first and most important task is to ensure a proper feasibility analysis and accurate detailed project design.

Well-planned scheduling before the commencement of the project, capacity building of the stakeholders, and efficient site management also needs to be ensured.

In the planning and execution of the project, good governance can be quite important.

Last but not least, the implementation of significant infrastructure projects depends greatly on a strong political commitment.

The cumulative consequences of time and cost overrun in the implementation of development projects.

It creates the lesser benefit to the intended beneficiaries as well as a vast loss of taxpayer money.

Therefore, the government needs to provide a strong framework for accountability and make sure that projects are properly planned and managed.

It must establish a system that encourages efficient project planning so that corruption and incompetence are not rewarded and people can reap the benefits of the projects as promised.

(The writer is a PhD researcher and serving as an Assistant Professor at the School of Business and Economics at Presidency University).