Cost Deviation Model of Construction Projects in Saudi Arabia Using PLS-SEM

Abstract

Miscalculations during cost estimation can have adverse effects on construction projects, including delaying or canceling planned projects, reducing project scope, and creating considerable financial risks for both owners and contractors. The objective of this research was to identify the major factors that cause cost deviation and study the effect of the interaction between these factors on cost deviation prior to the tender phase of construction projects in the Kingdom of Saudi Arabia. This was accomplished by carrying out a comprehensive literature review of the factors affecting cost deviation; implementing a survey questionnaire for project participants, including contractors, consultants, and clients, who are aware of the construction industry in Saudi Arabia; and developing a model for cost deviation based on the questionnaire data using the partial least square structural equation model (PLS-SEM). The cost deviation model was developed, and the PLS-SEM provided the critical factors affecting cost deviation and gave theoretical support for the study’s conceptual framework. The results revealed that the problem is shared by the owners and contractors, as the factors with the highest rankings were project characteristics, contractual procedures, and estimator performance. The study also showed that the issue of cost deviation is more important to owners than contractors, as the predictive relevance of project characteristics, contractual procedures, and estimator performance were 0.229, 0.335, and 0.197, respectively, for the client–consultant model, and 0.117, 0.118, and 0.292, respectively, for the contractor model. The results indicate the need to control the highest-ranked factors to enhance the efficiency of the cost estimation process. This study contributes to the body of knowledge by generating the PLS-SEM model that takes into account the indirect relationships among affecting cost deviation factors and considers these relationships while preparing the bid to reduce the deviation cost.