Cost overrun causality model in Saudi Arabian public sector construction projects

Construction performance in Saudi public projects has been poor over the years, with 70% of projects considered as failures and costing the country over 1 trillion SAR (over £202 billion) between 2005 and 2015. The project delivery mechanism used to deliver construction projects is one of the main reasons for such poor performance, as all service providers (consultant, designer, and contractor) are chosen based on the lowest price. The contract evaluation shows that contractors hold most of a project's risks and suffer a cost overrun problem, thereby positioning them as the weakest link in the procurement chain. This study aims to develop a contractor's cost overrun causality model in the Saudi public sector. A systematic literature review was performed and revealed three schools of thought regarding the investigation and identification of cost overrun causes. However, none of the three schools has addressed the limitations of exploring the interaction between any causes identified and then linking root causes with a direct cause, nor including the effects of the context and the process that are used to develop construction projects. Exploring the interaction between causes is important, because the construction projects covered within the literature involved different stakeholders at different phases in a project's lifecycle. Moreover, it has been found that the amount and the causes of cost overrun are different based on the project's location. After the systematic literature review, this study aimed to develop a contractors' cost overrun causality model in the Saudi public sector, which would consider the effects of context, practices and processes of developing construction projects. Specifically, the research explored the commercial context of Saudi public construction project procurement under four major portfolios (economy, business, resources and regulation). Additionally, the research explored the processes and practices that are used to develop construction projects in the sector, based on the Porter model (diamond) and institutional theory. This thesis establishes the link between the commercial context and contractors' performance. Based on the systematic literature review and interviews, the causalities of cost overrun in Saudi Arabian construction projects were critically reviewed, established, classified and evaluated. The data created a causes pool, with over 200 causes - these were then filtered through various means, resulting in 49 remaining causes. The study explores the relationship between these causes in order to create causal paths and, eventually, the overall model. The model-building process and the resultant outputs were reviewed by two industry experts, resulting in further refinement and simplification of the model. The final model contains 49 causal chains that have each been thoroughly explained. The nature of the problem investigated required this research to adopt a pragmatic and abductive approach in order to achieve its objectives. The main methodologies used were systematic literature review, case study, interviews, and project documentation. The research emphasises the importance of investigating the context and project-development process. In fact, by comparing Saudi public sector practices to established best practices, the study found that causal chains were triggered and contributed to by weaknesses within the context, process, and practices, which occur in the early stage of a project's lifecycle. However, it is established that only direct causes occur during the construction phase. Moreover, the results confirm that the current environment, regulation, practices, and behaviours of the Saudi public sector increase the risks of projects failing and damaging the construction industry. Therefore, based on the findings of the research, this thesis recommends that the Saudi public agency should: 1) adopt a project delivery approach that reduces the fragmentation in delivering a construction project, and which is tailored to the project context and characteristics; 2) adopt a new method to finance construction projects that is less affected by fluctuations in the oil economy; 3) build a long-term relationship with service providers (designers, consultants, and contractors) that is built on trust, sharing of information, and lesson learning and improvement; 4) adopt a new contract that is based on fair risk appropriation, where the risk transfer is to the most suitable party to effectively manage that risk; 5) generate general regulations and laws that transform the construction industry so as to be less affected by the external environment, more controlled by all the involved parties, and in which it becomes more attractive to invest.