The Relationship between Cost Overruns and Modifications for Construction Projects: Spanish Public Works and Their Legal Framework

Abstract

Cost overruns are a common problem for public works projects, often due to modifications to the original design. While the causes of these modifications have been studied, the legal framework’s impact and limitations on these modifications have received extensive treatment, with no specific case studies from different countries. This paper explores the relationship between modifications in Spanish public works projects and their compliance with legal limits, investigating the alignment between base bidding prices and eventual costs after adjustments. The study also delves into the strategic behaviour of construction companies in Spain, which frequently involves manipulating project costs to match the initially proposed bidding price. Statistical methods, such as the Spearman correlation test and graphical analysis, confirm a nearly exact relationship between base bid price and final price. Also, a modification costs comparison for two different legal periods highlights the legal framework’s influence, as a less restrictive framework leads into higher average cost overruns. It provides valuable information to avoid malpractice for tendering institutions, practitioners, and legal developers, as well as those interested in the Spanish public works sector, and opens the door for future research on solving this problem.