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Engineering, Procurement, and Construction Cost and Schedule Performance

Leading Indicators: State-of-the-Art Review

Mohammadreza Habibi, S.M.ASCE1; Sharareh Kermanshachi, M.ASCE2; and

Elnaz Safapour, S.M.ASCE3
1
Graduate Student, Dept. of Civil Engineering, Univ. of Texas at Arlington, 425
Nedderman Hall, 416 Yates St., Arlington, TX 76019. E-mail:
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mohammadreza.habibi@mavs.uta.edu
2
Assistant Professor, Dept. of Civil Engineering, Univ. of Texas at Arlington, 425
Nedderman Hall, 416 Yates St., P.O. Box 19308, Arlington, TX 76019
(corresponding author). E-mail: sharareh.kermanshachi@uta.edu
3
Ph.D. Student, Dept. of Civil Engineering, Univ. of Texas at Arlington, 425
Nedderman Hall, 416 Yates St., Arlington, TX 76019. E-mail:
elnaz.safapour@uta.edu

Abstract
Construction projects have been rarely completed at the estimated cost and
time as it is forecasted approximately more than 50% of projects face significant
delay and major cost escalation. Hence, it is of importance to investigate the main
schedule and cost performance indicators of engineering, procurement, and
construction (EPC) projects and address these challenging issue. In spite of the fact
that a vast range of studies conducted to identify the leading performance indicators
(LPIs), lack of consistency between these indicators has been a matter of debate
among construction practitioners and scholars. Furthermore, since construction phase
activities consume the largest portion of the project budget and time, most of the
previous studies concentrated solely on the performance of construction phase. As a
result, the performance of engineering and procurement phases has received the least
attention. Therefore, this study will review numerous existing research documents to
collect the identified leading time/cost performance indicators and then prioritize
them based on their frequency of occurrence in the literature. To accomplish this
objective, over 200 peer-reviewed papers from different parts of the world have been
studied and a vast range of LPIs in each EPC phase was identified. This study
concludes that the principal common cause of delay and cost overrun in both
engineering and construction phases is “design change.” Moreover, the schedule and
cost performance of procurement phase can be highly affected by “resource shortage”
and “price fluctuation” respectively. Although, it is proven that any delay in the
project causes cost overrun, the other root causes of cost escalation lie in “poor
economic condition,” “poor communication between different stakeholders” and
“severe weather condition.” The findings of this review assist construction
practitioners to provide required resources properly and help academic researchers to
conduct their future studies by presenting an extensive phase-based review of
time/cost performance.

INTRODUCTION
Construction process can be examined in three main phases namely (1)
Engineering phase (2) Procurement phase (3) Construction phase known as EPC

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phases (Mahmoud-Jouini, 2004). Generally, as the success of complex construction

projects is strongly related to their lifecycle performance (Dao et al., 2016a),
therefore, leading performance indicators were developed and utilized to measure
construction success (Kermanshachi, 2016). The performance of each EPC phase can
be attributed to the triangle of time, cost and quality. Due to difficulty in the
measurement of the quality, many researchers excluded the quality from the
performance measurement criteria list and focused on the two quantifiable aspects of
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project time and cost.

Failure in on-time completion of construction projects causes delay. As delay
consumes extra overhead, the cost of project deviates from the estimated cost at initial
stage and as a result, it causes cost overrun (Faridi and El-Sayegh, 2006). According
to Assaf and Al-Hejji (2006), completing construction projects on time rarely happens
in Saudi Arabia as the analysis demonstrates that 70% of projects in this geographic
area encounter an average of 10% to 30% time overrun. A study conducted by
Flyvbjerg et al. (2003) concerning the cost overrun in twenty countries around the
world revealed that nine out of the ten transport projects were not on the estimated
cost performance and experienced cost overrun. Similarly, Shane et al. (2009)
underlined that approximately more than 50 percent of large transportation projects in
the United States do not meet their budgeted cost at the completion stage.
Throughout the past half-century, numerous researchers made many attempts
to identify the main causes of construction performance quality. Despite the
investigation of a number of causes, still there is no consistency among the identified
causes in the existed literatures. Therefore, the objective of this study is to conduct a
comprehensive review of related performance papers to address the inconsistency
issue of time/cost overrun indicators in construction projects. Moreover, since few
studies, if any, have focused on the phase-based review of performance indicators, the
second objective of this review is to provide a detailed list of LPIs according to
related EPC phases. The findings of this review provide the context for construction
practitioners to address their uncertainty about inconsistency of LPIs and assist them
to allocate their resources in the best possible way. Moreover, this review presents a
comprehensive phase-based view of time and cost performance for construction
scholars and also prepares the ground for future studies.

METHODOLOGY
To fulfill the objectives of this study, more than two-hundred peer-reviewed
journal articles, conference papers, dissertations and research reports focusing on cost
overrun and delay were identified and collected. The identified academic sources
have been published in a period of 46 years, between 1971 and 2017. As a result of
this research, 115 journal articles have been found examining the LPIs in construction
industry. Since the number of identified related journals was adequate, the authors
decided to only focus on journal articles as their publications undergo a more rigorous
review process. It was observed that most of the highly cited studies concentrated on
the identification of the construction phase LPIs and were published in one of the
following journals: “International Journal of Project Management”, “Journal of
Construction Engineering and Management”, “Construction Management &
Economics”, “Journal of Management in Engineering”, “Engineering, Construction

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and Architectural Management”, etc. According to our research, most of the studies
conducted their research methodology in two sequential steps to identify the LPIs. As
a first step, different methods of data collection were adopted to accumulate a list of
potential performance indicators including literature review, interview, case study,
and pilot survey. Often, an integration of several methods was employed to identify
these performance indicators. Almost all the papers designed a questionnaire to assess
the perception of active construction practitioners. Diverse data analysis techniques
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were used to analyze and evaluate the results of the collected questionnaire responses.
Relative Important Index (RII), Severe Index (S.I), Important Index (I.I), Mean Score
(M.S), Frequency Index (F.I) are typical examples to illustrate some of these
techniques.
As Figure 1 illustrates, the trends of the utilized data analysis techniques in
published papers from 1990 to 2017 were studied and investigated. It should be noted
that since a few number of papers in our database was published prior to year 1990,
they were not considered in the trend analysis section of this study. Since this
research has been conducted in the middle of year 2017, the last time interval group
(2015-2020) has not been completed yet and therefore, its results have been combined
with the precedent group (2010-2015). As it is shown in this Figure, although the
utilization of RII remained constant during 2000 to 2005, however, it significantly
increased afterwards. This trend proves that RII data analysis technique has found
more popularity in the last decade.

Figure 1. Trend of data analysis techniques used for performance studies

As plotted in Figure 2, we similarly found that approximately 26% of the

researchers tended to adopt Relative Important Index (RII) technique in their data
analysis process. It is followed by II, M.S and Regression having the same portion
consisting approximately 13% of all studied papers. In the meantime, since RII is a
function of S.I and F.I and takes the advantages of these two techniques, the usage of
S.I and F.I methods as the main data analyzing techniques was reduced compared to
other techniques.

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Fig
gure 2. Perccentage of papers accorrding to the utilized datta analysis ttechniques

REESULTS
Eng gineering Phase
Ph Cost an nd Schedulee Performan nce
Engineeering is a proocess in whiich the owneer’s requiremments includding wishes,
dessires, and neeeds are ideentified and designed too be submittted to the ccontractors.
Num merous imp portant decisions are made durinng the pre-project plaanning and
enggineering phaase to appropriately allo ocate large ammount of funnds and otheer resources
to the
t project. AsA these deccisions highlly affect the successful ccompletion oof a project,
enggineering ph hase has the advantage of o having thhe highest leevel of influeence on the
proj
oject (Liao ett al. 2011). Although a number of rresearchers devoted theiir resources
to identify
i perfformance ind dicators in construction
c phase, enginneering phase has been
deddicated the leeast attention
n in construcction industrry (Yang andd Wei, 2010)).
Marzouuk et al. (20008) conducteed a questionnnaire to ideentify the keey causes off
enggineering-rellated delayss. To serve this purposse, the percception of cconsultants,
conntractors, andd employerss was targeteed. The mainn engineerinng- related ddelay causes
werre classified d into threee following main grouups: (1) dessign develoopment; (2)
worrkshop draw wings; and (3 3) project parrties’ changees delays.
Yang and
a Wei (20 010) conclu uded that cliients, plannners, and deesigners are
respponsible forr the most important delaysd happeening in thee planning and design
phaases. “Change in client’s requirem ments” is thhe main reaason that ddeviates the
sch
hedule perfo ormance off initial ph hase of coonstruction projects foollowed by
“coomplicated administratio
a on process of client”, and “insuffficient or illl-integrated
bassic project daata”.
Table 1 displays thhe Frequency y (F) and Raanking (R) oof top frequuent LPIs in
enggineering ph hase. It shou uld be noted d that the fr
frequency off LPIs in thhis phase is
signnificantly loower than th hat of otherr phases. T This is mainnly because of lack off
atteention to thhis significan nt phase by y the researrchers especcially in terrms of cost
perrformance. Based
B on thhe results off this studyy, “design cchange” is tthe primary
enggineering ph hase perform mance indicattor which h as been conncluded 13 ttimes as the
sch
hedule perfo ormance ind dicator and 7 times ass the cost pperformancee indicator.
“Slowness in making
m deciisions by ow wner” and ““delay in appproval stagee” both are
placced in the seecond positiion of the scchedule perfformance inddicators list.. These two
LPIIs were cateegorized into o the client-- related grooup and accoording to Suun & Meng
(20
009), design changes by client are also very com mmon duringg the engineeering phase.
Hen nce, we can nnot neglect the significcant role of the client iin time perfformance off
inittial phase.

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Table 1. List of Leading Performance Indicators (LPIs) in Engineering Phase

Category Indicators F R
Schedule Performance Indicators
Change Design change 13 1
Client-related Slowness in making decisions by owner 8 2
Client-related Delay in approval stage 8 2
Management Poor communication between stakeholders 5 3
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Cost Performance Indicators

Change Design change 7 1
Project-characteristics Project size 4 2
Management Poor communication between stakeholders 4 2
“Poor communication between different stakeholders” is another common
LPIs deviating time (Kamalirad et al., 2017) and increasing the cost of engineering
phase from estimated time/cost performance. This indicator, along with “project size”
are both the second most frequent LPIs which can cause cost-overrun during the
engineering phase.

Procurement Phase Cost and Schedule Performance

Procurement phase is the subsequent phase of engineering phase (Nethery,
1989; Yeo & Ning, 2006). Although procurement phase is simple by nature, a number
of complex processes occur during this phase (Mulholland & Christian, 1999).
Sourcing, purchasing, contracting, and on-site materials management are the typical
examples of these processes, the responsibility of which is held by the contractor
(Nethery, 1989).
Among all processes happened in procurement phase, procuring the resources
has the highest importance, as many studies stated that unavailability of resources
causes serious implications to the performance of project (Sambasivan & Soon, 2007;
Kermanshachi et al, 2017). In the meantime, Sambasivan and Soon (2007) concluded
that “material shortage”, “labor supply” and “equipment availability and failure” are
among the top ten indicators causing cost overrun and delays in construction industry.
There are many causes leading a project to face shortage of material. On the
one hand, inequality of demand and supply in construction market-place, on the other
hand, lack of adjustment between material procurement and available storage on
construction site, can prevent projects from having an effective performance and as a
result, the project experiences delay (Said and El-Rayes, 2010; Sambasivan and Soon
2007).
“Price fluctuation” is another important indicator deviating project from
estimated targets especially their budget. These fluctuations mainly result from
economic conditions (inflation rate, exchange rate). Since some countries provide
their required material from another country, low value of local currency causes them
to spend more money to import material. Moreover, unstable inflation rate mainly
causes fluctuations in price of material, labor, and service. It is basically created by
material shortage, excessive demand for resources, and absence of cost adjustment
formula in construction industry (Ameh et al. 2010; Mansfield et al. 1994).

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Table 2 displays the distribution of top ranking LPIs in procurement phase.

We found that, lack of resources (material, equipment, labor) is the main cause
affecting schedule of procurement phase adversely and increasing the cost as well.
Among these resources, “material shortage” has the biggest effect on the procurement
performance and has been cited 16 and 9 times as the procurement phase LPI in time
and cost performance papers respectively. “Price fluctuation” and “poor economic
conditions” are other indicators highly increasing the cost of procurement phase and
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causing cost overrun. These two LPIs are classified in “external group” meaning that
none of construction stakeholders (client, consultant, and contractor) have any control
or impact in this regard.

Table 2. List of Leading Performance Indicators (LPIs) in Procurement Phase

Category Indicators F R
Schedule Performance Indicators
Material Shortage of Construction Material 16 1
Equipment Equipment Shortage (Machinery and its parts) 14 2
Labor Shortage of site labor 13 3
Cost Performance Indicators
External Price fluctuations 14 1
Poor economic conditions (exchange rate, inflation rate,
External 9 2
interest rate, etc.)
Material Shortage of Construction Material 9 2
Labor Shortage of site labor 8 3

Construction Phase Cost and Schedule Performance

In some developing countries, construction industry has the highest impact on
the economy of that country, as the effect of construction on the Gross Domestic
Product (GDP) in United Arab Emirates (UAE) has been estimated about 14% (Faridi
and El‐Sayegh, 2006). Therefore, it is crucial to identify the main causes affecting the
schedule and budget performance of construction projects. Le-Hoai et al. (2008)
underlined that most of the issues causing time overrun and cost overrun happen in
construction phase. As National Economic Development Office (NEDO, 1987)
mentioned, more than half of construction phase problems result from the poor design
information. Since any delay in planning and design phase can significantly affect the
schedule performance of subsequent phases, the schedule of other phases should be
shortened to complete the project at the specified time in contract. Looking at this
issue with preventive view, a clear scope definition and organized management is
required to avoid these types of delay and their effects (Kermanshachi et. al, 2017).
According to Le-Hoai et al. (2008), the design related indicators which cause
cost overrun and delay in construction phase are listed as “mistakes in design”,
“design changes” and “additional works”. Mohamad et al. (2012) highlighted that
“design change” is almost inevitable in both engineering and construction phase and
they mainly result from clients. To avoid these design changes, Mohamad et al.

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(2012) investigated the main corrective measures and Kermanshachi et al. (2016a,
2016b) identified management strategies which reduce design changes and eliminate
unnecessary delays and cost overruns. In this regard, Safapour et al. (2017)
investigated how implementation of change management process could significantly
prevent potential design changes.
Chan and Kumaraswamy, (1997) undertook a survey to gain perception of
clients, consultants and contractors about eliciting the significant delay indicators
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during the construction phase. Based on the experience of the practitioner, “poor site
management and supervision”, “unforeseen ground conditions”, and “low speed of
decision making involving all project teams” are the most important indicators
harming the schedule of construction and causing delay in local building projects in
Hong Kong.
Since construction is too risky by nature, cost overrun is a very common
matter happened throughout history in construction industry. The main sources of
these risks can be divided into two groups; controllable and uncontrollable risks.
Often, there is no control or little control over the uncontrollable indicators by
contractors such as unforeseen conditions (Akinci & Fischer, 1998). A careful
analysis of 40 public infrastructure projects by Al-Hazim et al. (2017) indicates the
high importance of unforeseen conditions such as severe weather and terrain
condition on the construction phase cost and schedule performance.
Table 3 displays the distribution of top ranking LPIs in construction phase. It
should be noted that the frequency of LPIs in construction phase is higher compared
with that of other phases, as a vast range of authors focus on the performance of this
phase. Same as engineering phase, “design change” also seems to play a decisive role
in cost and schedule performance of construction phase. It is ranked first in both
schedule and cost performance groups with 28 and 14 citations respectively.
Regarding schedule performance, “poor site management and supervision”, “severe
weather condition”, and “financial issues by client” are other LPIs which can cause
delay in time performance of construction project. On the other hand, in addition to
“design change”, it is found that “severe weather condition”, “laws and regulations”,
and “inaccuracy and deficiencies in cost estimates” have also the most influence in
increasing the cost of construction phase.

Table 3. List of Leading Performance Indicators (LPIs) in Construction Phase

Category Indicators F R
Schedule Performance Indicators
Change Design change 28 1
Management Poor site management and supervision 18 2
External Severe weather condition 17 3
Client-related Financial issues by client 17 3
Cost Performance Indicators
Change Design change 14 1
External Severe weather Condition 11 2
External Laws and regulations 10 3
Consultant-related Inaccuracy and deficiencies in cost estimates 10 3

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DISCUSSION
Based on the information collected from over two-hundred papers, 121
indicators were identified and classified into thirteen groups including: change,
consultant, labor, client, contractor, material, equipment, external, project,
management, sub-contractor, planning-scheduling-estimating, and contract. We
examined each EPC phase from two main perspectives: schedule performance and
cost performance. The identified indicators are spread to the related schedule/cost
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performance groups of each EPC phase based on the paper of origin. The frequency
of each indicator was also calculated to identify the LPIs.
Figure 3 demonstrates the distribution of top 10 LPIs in different groups
according to phase-based time/cost performance. As it is seen, External group has the
largest portion of indicators among all groups with 10 indicators in all EPC phases.
Most of the LPIs in “external group” are related to economic, governmental and
unforeseen conditions. “Price fluctuation”, “law and regulation”, and “severe weather
and terrain condition” are perceived to be the main LPIs in “external group”. Based
on the Figure 3, “management” and “consultant” groups occupy the subsequent
positions (after External) with 8 and 7 indicators respectively. It is notable that each
of these three groups includes LPIs at least from two different EPC phases. Other
groups either have a small number of indicators or they are related to only one EPC
phase. For instance, sub-contractor, planning-scheduling-estimating, and contract
groups do not have any LPIs among the top ten LPIs in all EPC phases.

Figure 3. Distribution of LPIs in different design-based performance groups

CONCLUSION AND FUTURE WORK

As the success of construction project can be attributed to the effective
time/cost performance of project, in the recent years, considerable research efforts
have been made to find the causes of delay and cost overrun. Despite identifying an
array list of time/cost performance indicators, there have seldom been consistency
among those indicators. Furthermore, comparatively small number of studies, if any,
focused on the causes of time/cost overrun according to the related EPC phases.
Those, who have examined this issue according to the phase-based performance, the
output of their studies was mainly limited to the construction phase. However, in this

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research, a list of the most frequent LPIs, along with popular data collection and data
analysis methods in the literature were identified.
Based on this study, “design change” has been found to have the most
significant indicators affecting the schedule/cost performance of engineering and
construction phase. Besides, “resource shortages” and “price fluctuation” are two
most frequent indicators causing delay and cost overrun in procurement phase.
Furthermore, by dividing all performance indicators into thirteen groups, it has been
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found that “external group” has the largest portion of time/cost performance
indicators among all groups in all EPC phases, followed by the “management”, and
“consultant” groups.
The finding of this paper creates the ground for construction professionals to
recognize the LPIs endangering the schedule/cost performance, and assists them to
allocate resources properly during the lifecycle of the construction projects.
Furthermore, identifying the LPIs helps practitioners to proactively prepare
themselves with the preventive strategies and corrective best practices before and
after facing schedule and cost overrun. It also provides a comprehensive
understanding of delay/cost overrun causes for academic researchers to undertake
their future related-studies in this field and guides them to examine all phase-based
indicators in more details based on various project sizes and project types. Under such
circumstances, they would be able to make a comparison between delay and cost-
overrun sources within different industries.
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