Using principal component analysis to identify latent factors affecting cost and time overrun in public construction projects

Purpose: Cost and time are two of the primary benchmarks in which construction projects are measured. A variety of factors, however, affect cost and time on construction projects, as identified in previous research. This has led to a need for better understanding how factors affecting cost and time overruns on public construction projects can be managed more efficiently. The purpose of this paper is to address these issues. Design/methodology/approach: In this study 26 factors affecting cost and time overruns on construction projects were identified, through qualitative interviews with project managers from Danish governmental agencies and through a literature review. Through principal component analyses the 26 factors were subsequently narrowed down to four primary latent factors. Findings: The identified four latent factors affecting cost and time overruns on public construction projects were lack of quality management, lack of project pre-planning, lack of user management and lack of project management. Originality/value: Previous research has focussed on increasing knowledge by identifying and ranking factors affecting time and cost performance. This has led to the identification of an overwhelming number of factors to use for managing construction projects. The present research reduced the number of factors by clustering them into key latent factors responsible for most of the deviation in performance, narrowing the scope of construction cost and time management into a few tangible key focus areas. This supports and improves fast decision-making that is necessary in a changeable environment such as construction.