Evaluating the Cost Changes of Road Construction in Low and Middle Income Countries
Nominated for The Neil Mansfield Award
Uven Chong, Arizona State University
We conducted a literature review of cost changes for road construction projects in low/middle income countries and developed a method to identify causes of cost escalation.
Road construction projects are complex and prone to cost changes. For international development institutions that have tight budgets and significant road sector investment, cost changes are detrimental to the efficient allocation of already stressed funding resources. The purpose of this study was to investigate the magnitude and causes of cost changes in road projects for low and middle income countries (LMIC) in order to synthesize policy conclusions for minimizing cost overruns.
Cost changes were evaluated in four steps. First, we conducted a literature review of the magnitude of cost changes in road construction projects in LMICs. Second, the results were compared to cost changes in other infrastructure sectors such as water and power generation. Results were also compared to road projects in high income countries (HIC). Third, major causes of cost changes were identified. Fourth, a quantitative methodology was proposed as a way to identify causes of cost changes in road projects.
The literature review produced two main findings. First, while the road construction costs in HICs are well-documented, the equivalent data is not as well-documented and analyzed for LMICs. Second, while there is a lack of quantitative cost data in LMICs, there are multiple survey studies on the causes of cost overruns in international development projects. These surveys identified five major causes: (a) weather, (b) lack of technical capacity, (c) poor project management, (d) poor transparency in the financial process, and (e) overly optimistic project cost estimates.
Finally, we developed a method to quantitatively evaluate the causes of cost changes in LMICs. The method divided up the project cycle into four main stages: funding authorization, design estimate, contract award, and final cost. By tracking the cost changes at each stage, it was possible to identify where costs escalate and the corresponding potential causes of escalation. This method was tested using data from the World Bank Road Costs Knowledge System (ROCKS) database in order to demonstrate the types of conclusions that can be developed. Ultimately, the results from this method can be used to support policy and funding decisions for development institutions invested in road construction.
Association for European Transport