Stakeholder perceptions of how to diminish cost overruns in large, United States government-financed construction projects under earned value management: A multiple case study

The research topic is project cost overruns in large government-financed construction projects. Thousands of these projects exist, each costing up to billions of dollars, and employing hundreds of contractors and tens of thousands of workers. They take decades to complete and have lasting impact on the economy, the environment and society. The problem is that over 70% of such projects overrun their cost by up to 70% of their budgets, especially under Earned Value Management. Earned Value Management is widely utilized globally and is currently mandated for U. S. Government contracts. The resulting cost overruns are massive and have serious consequences for all project stakeholders. Earned Value Management's incurred cost control method results in attempting to control cost long after overruns have occurred, seriously hampering corrective efforts. Therefor the purpose of this study was to provide understanding of how to mitigate the effects of attempting to control cost after having been incurred in large, U. S. government-financed construction projects, utilizing Earned Value Management incurred cost control. A qualitative study design was used that employed multiple-case study, using semi-structured interviews, and multi-unit thematic analysis. This multiple case study explored three construction project sites in the U. S. Southeast; each project site represented a distinct case, to allow for triangulation of data. Each of the three project site cases contributed four participants, for a total of 12 participants, in two equal size groups, project managers and project engineers. The data collection method employed was semi-structured telephonic and face-to-face interviews with open-ended questions, in order to collect the experiences and perceptions of participants from the two groups of stakeholders. The two groups represented two units that allowed thematic analyses of each unit and the sample as a whole. Thematic analysis was used to detect themes and subthemes. Both groups of participants responded with the same themes to all research questions, validated within each group and across groups. The results of this study confirmed Earned Value Management incurred cost control to be predominantly ineffective in dealing with project cost overruns. Because of incongruities between managerial accounting systems and project cost control needs, Earned Value Management method leads to long delays in the discovery of cost overruns and initiation of corrective action, such that remediation efforts are rendered ineffective. Generation of early warnings of specific cost overruns can mitigate the effects of these delays, and allow timely intervention and more effective remediation. Another key finding from this study is that weak management support and inadequate allocation of time and resources to early detailed planning and preventive practices for these projects are a significant source of cost overruns. Inadequate detailed planning results in poorly developed statements of work, under-estimated budgets, and much opportunity for costly change orders. Early support from upper management in providing up-front time and resources for the development of thoroughly detailed statements of work in conjunction with designers, end-users, vendors and other stakeholders provides the basis for adequate and realistic budgets, clarity of expectations, and elimination of much opportunity for cost overruns. Sporadic preventive practices are manifested in inadequate risk management, missing much opportunity for avoidance of cost overruns in the first place. Management support, oversight and the provision of adequate resources for thorough risk management throughout the implementation phase will create a vigilant culture within project teams and preempt much opportunity for cost overruns. Lack of management support also results in the lack of continuous improvement practices, such as attempting value engineering only to counter cost overruns when they occur. Management support and adequate provisioning will encourage a collaborative culture and t e practice of continuous improvement throughout the project life cycle that will generate sufficient cost reduction to significantly counter cost overruns. The above recommended measures: (a) specific early warnings of cost overruns, (b) more detailed statements of work, (c) thorough risk management, and (d) continuous value engineering are expected to help diminish cost overruns. This study may support future research in an investigation of the approximately 30% of projects that do substantially meet their budgets to identify specific techniques that contribute to good cost performance. Additionally this study may support investigations of the cost versus benefits of funding and staffing detailed early planning and thorough preventive practices, as rewarded by diminished cost overruns. Replication studies are also recommended within different industries, different regions, and different project sizes in order to deepen understanding in how to diminish cost overruns.