I occasionally find an old piece
of school work that seems suitable for this blog. Previously, I posted a book
review I wrote for a class. This piece is a literature review related to cost
overruns in municipal construction projects. It was written in 1999, so the
references are a bit dated. I made no attempt to update the paper.
Literature Review
Problem Statement
Construction projects commonly suffer delays and cost overruns (Arditi
& Patel, 1989; Baldwin, Manthei, Rothbart & Harris, 1971; Kraiem &
Diekmann, 1987; Mahid & McCaffer, 1998; Mulholland & Christian, 1999).
In projects that often cost millions of dollars, even a relatively small
overrun can be very expensive. Likewise, construction delays may cause late
delivery of services and loss of revenues related to that service.
Municipal governments construct and maintain a significant public
infrastructure. Engineering construction accounts for 20 to 25 percent of the
market for new construction, most of which is publicly financed (Clough, 1989).
Even small cities will often be responsible for roads, wastewater collection and
treatment, drinking water distribution, parks, and public buildings.
Municipal governments often use federal and state grants and loans to
finance all or part of construction projects. For instance, the Missouri
Department of Natural Resources operates eight grant and loan programs
available to local governments for the construction of wastewater facilities,
drinking water facilities, parks, and energy efficiency improvements to public
buildings (Financial).
The reduction of cost overruns and delays could cause a reduction in
the cost of public services, especially at the local level where many services
utilize some constructed infrastructure. These savings could result in improved
economy of state and federal programs that provide financial assistance to
municipalities.
The actors involve in public construction are all levels of government,
contractors, architects and engineers, and the public. Local governments
directly experience the cost of construction projects. Federal and state
agencies are interested in the economy and efficiency of their programs and
accountability. Contractors are interested in the availability and
profitability of public projects. Architects and engineers are similarly
concerned about the amount of public work available and requirements for the
management and cost estimation of projects. The public is concerned with the
level of taxes and user fees necessary to pay for public services.
Key questions research might address include:
-How common and severe are cost overruns and delays in public works
projects?
-What characteristics of local government relate to cost overruns and
delays?
-What project characteristics relate to cost overruns and delays?
-Might some sort of intervention reduce the occurrence or severity of
cost overruns and delays?
Literature Review
Cost growth and schedule growth are common measures of construction
project success (Pocock, Hyun, Liu & Kim, 1996; Pocock, Liu & Kim,
1997; Sanvido, Grobler, Pafitt, Guvenis & Coyle, 1992; Songer &
Molenaar, 1997). The Missouri Department of Natural Resources has a great deal
of information available on cost and schedule for projects that received loans
for the Clean Water State Revolving Fund. This includes contracts that describe
the project cost and schedule and change orders that incorporate any cost and
schedule changes into the contract. This information may also allow a review to
identify owner-initiated changes that increased the cost or lengthened the time
to project completion. However, municipalities do not appear to pursue claims
as vigorously as other levels of government or private organizations.
Therefore, these records may not clearly identify changes with the owner,
contractor, engineer, or unforeseen circumstances. A pool of project-level
information like this may be useful to this research because of the difficulty
of finding measures of comparison at the municipal level (Coe, 1999; Kopczynski
& Lombardo, 1999).
Projects funded through the Clean Water State Revolving Fund include
the construction of wastewater collection and treatment systems. These are
mostly government-owned systems. These projects involve many of the same
products and processes as other construction projects. They are comparable to other
projects that a municipality may construct.
Many of these questions relate to the owner’s role in the success of a
construction project. The owner controls a number of factors that have a
significant impact on the success of a construction project. These include a
well-defined scope, and understanding of the scope shared with other
participants, the owner’s construction sophistication, adequate owner staffing,
and an established budget (Sanvido et al., 1992; Songer & Molenaar, 1997).
Because these are mostly skills and practices related to the
development and management of projects, it seems reasonable to assume that municipal
authorities could be taught these skills. It would be difficult to measure the
availability of these skills in a number of cities over a short period, but
some indicators may be available. Specifically, form of government and population
may indicate the presence of these skills and practices.
Researchers still debate the efficiency of city manager governments relative
to mayor-council governments. Stumm & Corrigan 91998) found that city
manager cities have, on average, lower property taxes and general fund
expenditures than mayor-council cities. Others have found that city manager and
mayor-council cities do not differ in expenditures and efficiency (Deno &
Mehay, 1997; Hayes & Chang, 1990; Morgan & Pelissero, 1980).
If cities do not differ on the bottom line, city manager and
mayor-council governments appear to differ in their approach to capital
budgeting and management. In their approaches to budgeting, city managers more
often use a program budget while mayor-council governments more often use a
zero-base or target-base budget (Poister & McGowan, 1984). City managers
tend to spend more on infrastructure, use more sophisticate budgets and more
often use separate capital budgets than mayor-council cities (Doss, 1987; Nunn,
1996).
Likewise, city managers often use formal approaches to managing
capital. Doss (1987) found that city managers are more likely than
mayor-council governments to use formal capital improvement plans and routine
inspection programs.
Similarly, large municipalities tend to be more sophisticated. As
populations increase, municipalities more often adopt separate capital budgets
and make formal use of budget decision models (Doss, 1987; Sekwat, 1996).
In light of this, city manager governments and larger cities would seem
to have natural advantages. Because of the use of capital improvement plans and
separate capital budgets, city manager governments and larger cities seem more
likely to have a well-established budget and well-defined scope for any given
construction project.
Professional management is a fundamental of city manager governments.
This would seem to give city managers an advantage in construction sophistication
and experience, staffing and the ability to work with contractors to develop a
common understanding of project scope.
Large cities have a practical need for professional staff, so they may have
many of the same advantages as city manager cities. Because of the number of
projects large cities can be involved in, they are likely to have staff with
previous experience in many types of construction projects.
Previous research links form of government and population to a number
of factors that are likely to lead to successful construction projects. Much of
this research uses surveys of municipalities, contractors and engineers. While
surveys are difficult and expensive, population and form of government
information is readily available (Missouri Municipal, 1997; Official
Manual, 1996).
Construction projects vary widely in size and complexity. Research that
tries to attribute cost and schedule growth to specific factors must account
for differences that occur as project increase in size or complexity. This is
difficult to judge. However, because estimators attempt to consider these
complexities (Clough, 1989), the contractor’s bid may be taken as a reasonable
judgment of the size and complexity of a construction project.
A review of the literature leads to the following conclusions. Form of
government and population can indicate the likely presence of skills and
practices that lead to successful projects. Successful projects are those that
have no cost or schedule growth. It is possible to account for project
complexity in a comparison across projects and municipalities.
An assumption of this review is that municipal officials can learn the
skills and practices that contribute to construction project success.
Therefore, if it is found that form of government and population are related to
cost and schedule growth, an intervention that increases these skills may decrease
cost and schedule growth.
References
Arditi, D., & Patel, B. K. (1989). Impact analysis of
owner-directed acceleration. Journal of Construction Engineering Management.
115(1), 144-157.
Baldwin, J. R., Manthei, J. M., Rothbart, H., & Harris, R. B.
(1971). Causes of delays in the construction industry. Journal of the
Construction Division. 97(CO2), 177-187.
Clough, R. H. (1986). Construction Contracting. 5th
ed. New York: John Wiley & Sons.
Coe, C. (1999). Local government benchmarking: Lessons from two major
multigovernment efforts. Public Administration Review. 59(2),
110-123.
Deno, K. T., & Mehay, S. L. (1987). Municipal management structures
and municipal services in America’s largest cities. Southern Economic
Journal. 53(3), 21-26.
Doss, C. B. (1987). The use of public budgeting procedures in U.S.
cities. Public Administration Review. 7(3), 57-59.
Financial Assistance Opportunities. Jefferson City, MO: Missouri
Department of Natural Resources.
Hayes, K., & Chang, S. (1990). The relative efficiency of city
manager and mayor-council forms of government. Southern Economic Journal.
57(1), 167-177.
Kopczynski, M., & Lombardo, M. (1999). Comparative performance
measures: Insights and lessons learned from a consortium effort. Public
Administration Review. 59(2), 124-134.
Kraiem, Z. M., & Diekmann, J. E. (1987). Concurrent delays in
construction projects. Journal of Construction Engineering and Management.
113(4), 591-602.
Mahid, M. Z. A., & McCaffer, R. (1998). Factors of non-excusable
delays that influence contractor’s performance. Journal of Management in
Engineering. 14(3), 42-49.
Missouri Municipal Officials 1997-98 Directory. (1997).
Jefferson City, MO: Missouri Municipal League.
Morgan, D. R., & Pelissero, J. P. (1980). Urban policy: Does
political structure matter? American Political Science Review. 26(1),
8-15.
Mulholland, B., & Christian, J. (1999). Risk management in
construction schedules. Journal of Construction Engineering and Management.
125(1), 8-15.
Nunn, S. (1996). Urban infrastructure and capital spending in city
manager and strong mayor cities. American Review of Public Administration.
26(1), 93-112.
Official Manual 1995-1996. (1996). Jefferson City, MO: Missouri
Secretary of State’s Office.
Pocock, J. B., Hyun, C. T., Liu, L. Y., & Kim, M. K. (1996).
Relationships between project interaction and performance indicators. Journal
of Construction Engineering and Management. 122(2), 165-176.
Pocock, J. B., Liu, L. Y., & Kim, M. K. (1997). Impact of
management approach on project interaction and performance. Journal of
Construction Engineering and Management. 123(4), 411-418.
Poister, T. H., & McGowan, R. P. (1984). The use of management
tools in municipal government: A national survey. Public Administration
Review. 123(4), 411-418.
Sanvido, V., Grobler, F., Parfitt, K., Guvenis, M., & Coyle, M. (1992).
Critical success factors for construction projects. Journal of Construction
and Engineering Management. 123(4), 411-418.
Sekwat, A. (1996). Use of capital budgeting decision models by county
governments: A survey. State and Local Government Review. 28(3),
180-192.
Songer, A. D., & Molenaar, K. R. (1997). Project characteristics
for successful public-sector design-build. Journal of Construction
Engineering and Management. 123(1), 34-40.
Stumm, T. J., & Corrigan, M. T. (1998). City managers: Do they promote
fiscal efficiency? Journal of Urban Affairs. 20(3), 343-351.
