Causes and Effects of Wrong Cost Estimating on Public Building Projects in Enugu State, Nigeria

Causes and Effects of Wrong Cost Estimating on Public Building Projects in Enugu State, Nigeria

Alintah-Abel Uchechi Vanessa¹, Iheama Ndidi Blessing², Ajaelu Henry. Chidiebere³

¹Department of Quantity Surveying, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria

²Department of Building, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria.

³Department of Quantity Surveying, Enugu State University of Science and Technology, Agbani, Enugu State, Nigeria.

DOI: https://dx.doi.org/10.47772/IJRISS.2025.90500095

Received: 17 April 2025; Accepted: 26 April 2025; Published: 31 May 2025

ABSTRACT

Cost estimation is one of the most important activities that helps a success of a project, as it helps by giving a clear idea of financial requirements for proper planning and resources. The aim of this paper is to assess the causes and effect of wrong cost estimating on public building projects in Enugu State, Nigeria in order to establish mitigation measures. The study involved convenient purposive sampling of building firms leading to a questionnaire survey. Copies of questionnaires were administered on fifty (50) randomly selected construction firms in Enugu state and two for each firm and 65 was retrieved and used for analysis. The data collected were subjected to descriptive statistical analysis. From the literature review, the causes of wrong cost estimating are divided into five main categories. Calculation errors and omissions by the estimators and market instability ranked first with a mean score of 4.32 followed by low expertise level of estimators and design complexity with a mean score of 4.01 and 3.98 respectively. Unavailability of all fields of specialisation and erratic decision ranked the lowest with a mean score of 3.08 and 2.92 respectively. The result further revealed that most effects of wrong cost estimating in the order severity are: abandonment, financial delays and schedule disruptions and finally loss of reputation and credibility. Hence the study recommends adequate precaution should be taken by Cost estimators in the process of estimating project cost and they should leverage on advanced software tools, machine learning algorithms, and historical project data.

Keywords: Cost, Wrong Cost Estimating, Estimators, Public Building Project, Estimation

INTRODUCTION

Construction is frequently used as an indicator of a nation’s socio-economic development and thus is essential to the development process (Ejekwu, Ekweani and Oha, 2022). This means that its success is vital for a nation to thrive. Cost estimation is one of the most important activities that helps the success of a project, as it he­lps by giving a clear idea of financial requirements for proper planning and resources. The fundamental parameter for developing a valid contract is estimating the probable cost of executing the work. Estimating costs predicts how much money, time, and resources will be required to complete a project, activity, or investment. cost estimation is one of the primary factors in avoiding project failures

such as cost and schedule overruns in construction projects (Mohammad, Chia and Puteri, 2021). A number of cost estimating methods are used to ascertain and possibly project building costs at the pre-tender stage. The building cost estimate carries a lot of unpredictable uncertainty and is likely to be detrimental by the decision maker and owners financing a project.

Cost performance has an effect on the successful delivery of construction project in many areas which give rises to cost overrun, claims and dispute. It is important to have accurate cost estimate, unless nothing short of an act of God can prevent a loss, regardless of management competence, the financial strength of the contractor, or know-how. Poor cost estimate performance has caused project failure (Project Management Institute, 2018). Accuracy of cost estimating in construction projects is one of the most fundamental issues for each of the stakeholders involved in projects in the construction sector (Yazıcıoğlu and Kanoğlu, 2020). The­ accurate estimate also he­lps in lowering cost overrun risks, leading to smarter choice­s and steadiness in money matte­rs that ensure the proje­ct can be finished without problems. Cost underestimation appears to exist as a global norm and occurs on construction projects ranging from infrastructure to other types of projects. Estimating risk can also impact construction processes by extinguishing the buffers for field conditions, thereby denying the project budget future allowance to unknown uncertainties. This implies that additional funding will be required for the project to proceed, or the scope of project design will be reduced; this is a significant source of claim and dispute (Ejekwu, Ekweani and Oha, 2022).

Unfortunately, little attention has been given to the shortcomings that emanate from inaccurate cost estimation, including the centring factors and effects. Accurate estimation of the construction cost of a project is extremely important. One of the most unpleasant bits of news you may ever have to deliver to a client is that the cost of a project will be more than you had estimated.  The effects of inaccurate cost estimation are unnecessary risk, financial loss, loss of reputation and credibility of estimator, and a rise in claims and dispute (Mahamid and Dmaidi, 2013). Inaccurate cost estimates could further result in unnecessary financial loss to project stakeholders and the loss of reputation and trustworthiness of construction professionals (Gerald, Ruth and John, 2024)

Ogbu and Ebiminor (2020) revealed that errors in BOQs causes construction disputes. Error is defined as unintended deviations from correct and acceptable practice that are avoidable (Abdurrahman, et al., 2018). Numerous researches were carried out on errors in Bill of Quantities (BOQs) in the global context and in Nigeria, e.g. (Dosumu and Iyagba, 2013; Dosumu, Oluwaseun and Adenuga, 2013; Juszczyk et.al., 2014 and Ogbu, Patrick and Ebiminor, 2020). Therefore, this study aims to evaluate the causes and effect of inaccurate Cost estimating on public building projects in Enugu State, Nigeria and the awareness drawn from the study can be used as a template for identifying and mitigating mechanism of inaccurate cost estimation.

LITERATURE REVIEW

Cost Estimating

Cost estimating is the process of determining the likely cost of performing a defined scope of work at a time in the future. It can also a process by which project’s cost and financial resources are predicted and forecasted to accomplish the project objective. Project Cost estimating is the process of calculating the costs of the identified resources needed to complete the project work. According to Abdul, Ridho and Najid (2023), cost estimation aims to determine the potential cost of any future undertaking. The person or group doing the estimating must consider the possible fluctuations, conditions, and other causes of variances that could affect the total cost of the estimate. According to Butcher and Demmers ( as cited by Ejekwu, Ekweani and Oha, 2022), a well formulated prediction of the probable construction cost of a specific building project is referred to as cost estimating. Planners use cost estimates during the design process to provide detailed information about the facility and the project’s budget. The first goal of a cost estimate is to inform you of the likely cost of construction work. Costs are estimated by calculating and forecasting future prices of resources and methods over a specified time. Budgeting, cost or value analysis, decision making, project planning, or project cost and schedule control processes all make use of cost estimates..

Construction cost estimation involves predicting the financial outlay needed to complete the project. Abdul, et., al (2023), states that the purpose of estimating is to indicate probable construction costs. This is an important factor that clients consider when deciding to build; it determines the feasibility of a project, or even provides the basis for budget control during tendering and construction. In estimating it assists the future expenditure as cost prediction like the expenditure will depend upon the cost of the respective activities. It assists the total benefits anticipated in an exact activity based on the relationship between projected revenue and projected costs. Cost estimation is helpful in business cost control, planning and decision making performance evaluation (Temesgen, 2017). Estimates have to be as accurate as possible because these make up the basis for tender comparison, assessment, evaluation or negotiations. Award decisions may be extremely difficult, if these estimates are grossly inadequate.

Factors that Cause Wrong Cost Estimating

The main focus of Liu and Zhu( as cited by Temesgen, 2017) in their research was on the control factors that affect the accuracy of cost estimation. They further categorized these factors as input control factors like project information, team experience and cost information and as behavioral control factors like estimating process, team alignment and estimation design or method. Odusami and Onukwube (as cited by Temesgen, 2017), assess the factors affecting accuracy of pre-tender costs estimate and mentioned the following six main factors influencing accuracy of consultant expertise of consultants; Quality of information and flow requirements; Project team’s experience of the construction type; Tender period and market condition; Extent of completion of pre-contract design; and Complexity of design and construction.  Biniyam (2015), in his case study proved that the estimators’ experience and expertise is one of the primary requirements for a successful project cost estimation, Liu and Zhu ( as cited by Temesgen, 2017) ranked the team experience and cost information as the third most influential factor on the accuracy of cost estimation and it is described that the factor emphasizes the importance of the experience level not only of the estimating team but also of the engineering staff.

Faten et., al (2021) stated that Aibinu and Pasco carried out research to investigate the factors related to the project’s factors that have significant effect on the accuracy of estimation through comparing the cost at the concept design phase and the tender phase. Their study revealed that the factors which have greater influence on accuracy of cost estimates are the size of the project, procurement method, and location of the project. Bakr (2019) stated that Oladokun and Odesola, studied the subject through the analysis of information obtained from 81 projects in Nigeria. The study concluded that the size of the project has the most significant effect on the estimation accuracy at the pre-tender phase. Bakr (2019) further stated that factors that have significant influence of the estimation accuracy at the pre-tender stage were discussed by Odusami and Onukwube. Their research work concluded six factors as the most significant factors. These are: Information quality, Consultant’s experience, the experience of the project team at the type of work, duration of the tender and change in conditions of the market, the design complexity, and the period allocated to complete the design. Jerry et.al., (2023) carried research on factors affecting the accuracy of detailed construction cost estimation in Ghana and based on factor analysis, accuracy of design and cost information, estimator’s capacity, resource availability or pricing, project composition and site conditions were the components that affect the accuracy of a detailed cost estimate in Ghana.There are four determinants of the accuracy of an early estimate: the person who prepared the estimate; the manner in which the estimate was prepared; project information; and other factors that were considered while preparing the estimate.

Through the examination and reviewing of the past studies and research conducted in this field, the researcher classified the various factors that causes wrong estimating into five main categories, Project Characteristics, Team of estimators, Estimating procedures, Organisational Characteristics and, External factors and Market Conditions.

Effects of Wrong Cost Estimating on Construction Projects

The following are identified effects of wrong Cost estimating on construction projects

Loss of reputation and credibility: Reputation value, also known as brand value, refers to the perceived value of a brand or organization. It represents the worth associated with a brand and the trust and confidence consumers have in it. When an estimator makes wrong calculations, the persons reputation can be lost. Inefficient estimating negatively affects client satisfaction and can damage a construction company’s reputation. Clients expect projects to be delivered on time and within budget. Clients become disillusioned when construction projects experience delays, cost overruns, and poor resource management due to inadequate estimation. Negative word-of-mouth spreads quickly, potentially leading to the loss of future projects and damage to the company’s brand image. Abiodun (2018), maintained that clients have little tolerance for cost underestimation. In their study on clients’ and estimators’ tolerance towards estimating error, it was reported that clients are more tolerable to overestimation than underestimation because cost underestimation leads to severe effects. They concluded that estimators or quantity surveyors perceive estimating error as something to be eliminated rather than minimised.

Abandonment: Abandonment can be described as the project that has started at an earlier date, but which the construction work for one reason or the other has stopped. According to Mahamid and Dmaidi, (2013), cost overruns have negative effects on project stakeholders, especially clients, contractors and consultants, and lead to adversarial relationships, cash flow problems, claims, mistrust, arbitration, litigation, and a general feeling of apprehension towards each other.  It is vital that this is minimized or mitigated because the consequences are grievous.   It can lead to project abandonment.

Financial Inadequate Resource Allocation: This scenario is when the firm fails to allocate resources in the most efficient way possible. Inadequate resource allocation can lead to a variety of problems, such as low productivity, low profitability, and high employee turnover rates. Inadequate estimating often results in the improper allocation of resources, including materials, equipment, and labour. Underestimating resource needs can lead to shortages, causing work stoppages, compromised quality, or even needing to reorder materials at higher costs. On the other hand, overestimating resources wastes valuable budgetary resources that could be allocated elsewhere. Accurate estimation allows for optimised resource allocation, ensuring smooth project execution and cost-effective utilisation of available resources.

Financial loss: Wrong estimating can be over or under estimating. Poor estimating practices can significantly impact a construction company’s profitability. Underestimating costs and overestimating revenue can erode profit margins, making projects financially unsustainable. Overestimated and underestimated cost both has negative impact, while overestimated costs result in a higher tender price and a tender being unacceptable to a project owner and the loss of work to contractor, underestimated costs lead to situations where project contractors incur losses. The strategic misrepresentation which is attributed to cost underestimation leads to misallocation of scarce resources, thus effectively causing a loss to those financing the project, and bearing a negative effect on the end users of the project. Accurate and efficient estimating processes safeguard profitability, maintain healthy margins, and foster long-term business success.

Cost Overruns and Budgetary Constraints: Inefficient estimating often leads to cost overruns, meaning the actual expenses exceed the estimated budget. This scenario can result from underestimating material costs, labour expenses, or unforeseen challenges during construction. When projects exceed their budgets, it can strain financial resources, jeopardise the project’s viability, and damage the construction company’s reputation. Proper estimation techniques are essential to ensure accurate budgeting and minimise the risk of cost overruns (Lauren Sandstrom, (Lauren, 2023).

Financial Delays and Schedule Disruptions: Inaccurate estimations can have a significant impact on project timelines. When estimators fail to account for all necessary tasks, potential delays may occur, leading to project extensions and disruptions. These delays can have a domino effect, causing additional problems such as increased labour costs, contract disputes, and dissatisfied stakeholders. Efficient estimating practices, including thorough task analysis and experienced judgment, are crucial to establishing realistic project schedules and mitigating delays (Lauren, 2023).

RESEARCH METHODOLOGY

 The aim of the study was to assess the causes and effects of wrong estimation on public building projects in Enugu State with a view to mitigate the errors. To achieve this, the study collected data using 50 randomly selected construction firms in Enugu state. A structured questionnaire was the instrument used to collect primary data for the study. 100 questionnaires were administered to respondent, that is two for each firm while 65 of those completed questionnaires were retrieved and used for analysis. The data collected were analysed using simple percentage, mean scores and standard deviation.

RESULTS AND DISCUSSION

Respondents’ Demographic Profile

A summary of the demographic information obtained from the survey respondents is given in table

The first point of consideration is type of organization with 42 (64.6%) of the sample firms were medium size, small firms had 6 (9.235) while large firms had 17 (26.15%). 84.62% of the respondents have at least BSc. Which makes the information from them viable. Analysis of the year of establishment of firms showed that 32.31% of the firms have been in existence for more than a decade while 25.16% of the firms had existed for more than 20 years. The average year of establishment (11 years) suggested that the firms had acquired adequate experience of cost estimating practice to respond to this study. Finally, the turnover of the firms indicated that 80% of the firm had an annual tun-over of less than two hundred and fifty million (N250m) naira, while 19% had an annual turn-over of two hundred and fifty million naira (N250m), putting the firms’ average turnover as one hundred and seven million naira.

TABLE 1: DEMOGRAPHIC INFORMATION OF RESPONDENTS

 Causes of wrong Cost estimating

The study identified 20 factors from literature which were significant to causing wrong cost estimating in construction work. The factors were grouped into five main categories: Project Characteristics, Team of estimators, Estimating procedures, Organisational Characteristics and, External factors and Market Conditions.

TABLE 2: CAUSES OF WRONG COST ESTIMATING

From table 2, Calculation Errors and Omissions by the estimators and Market instability ranked first with (M= 4.32, S.D. = 0.69), followed by Low expertise level of estimators and Design Complexity with a mean score of (M= 4.01, S.D. = 0.97) and (M= 3.98, S.D. = 0.72) respectively. Unavailability of all fields of specialisation and Erratic decision ranked the lowest with a mean score and SD of with (M= 3.08, S.D. = 1.08) and (M= 2.92, S.D. =1.12) respectively.

This shows that Errors and Omissions by estimators is a very significant cause of error in estimating.

Effect of wrong cost estimating

TABLE 3: EFFECT OF WRONG COST ESTIMATING

Table 3 shows the effect of wrong cost estimating, Abandonment has the highest mean score with (M= 4.48, S.D. = 0.92), followed by financial delays and schedule disruptions with a mean score of with (M= 4.22, S.D. = 0.99), Loss of reputation a and credibility with mean score of with (M= 4.11, S.D. = 0.93), financial loss a mean score of with (M= 3.94, S.D. = 1.01), cost overruns and budgetary constraints a mean score of with (M= 3.89, S.D. = 1.06) and Financial inadequate resources allocation with a mean score of with (M= 3.63, S.D. = 1.11).

From the table, it is discovered that all has more than the average mean which is 3.00, showing that their effects are significant and should not be overlooked

Wrong Cost estimating preventive Strategies

TABLE 4: WRONG COST ESTIMATING PREVENTIVE STRATEGIES

According to the survey of 65 respondents, the Wrong Cost estimating preventive Strategies are shown in the table 4. It was shown that Enhancing skills and knowledge of estimator has the highest mean score of with (M= 4.39, S.D. = 0.92), followed by Improving estimation methods and techniques with a mean score of with (M= 4.38, S.D. = 0.74), Applying value engineering and lean construction techniques with mean score with (M= 4.26, S.D. = 0.77), Improving data quality of mean score of with (M= 4.00, S.D. = 0.89), Ensuring clear and detailed project scope with a mean score of with (M= 3.87, S.D. = 0.84), Collaboration and expert judgement with mean score of with (M= 3.83, S.D. = 0.98) and Using qualified and experienced estimators with a mean score of with (M= 3.77, S.D. = 0.93) which implies that they have the least application. However, all the strategies are important since they have more than the average mean of 3.00

CONCLUSIONS AND RECOMMENDATIONS

Conclusions

The study has been able to discuss the concept of wrong estimation which is one of the major challenges in construction industry. The paper investigates the causes and effects of wrong estimation on public building projects. More over the study identified and discussed the major effect of wrong estimation which has been a set back to the industry, one of which is Abandonment. These results have been supported by many former studies’ outcomes. Furthermore, the study identified preventive strategies which can be applied to reduce errors to the barest minimum.  This study therefore concludes that wrong cost estimating has not been advantageous to the building projects and its participants and proper measures should be put in place to stop or reduce its occurrence.

Recommendations

The paper recommends the following:

• Adequate precaution should be taken by Cost estimators in the process of estimating project cost, with particular attention being paid to factors that influence the accuracy of cost estimation.
• To minimize erroneous and misleading cost estimates, leveraging on advanced software tools, machine learning algorithms, and historical project data can significantly improve estimation speed and accuracy. This the estimators can achieve by improving their computer literacy through attending workshops and trainings.
• Estimating should be done with well-completed drawings and details scope of construction projects before commencing estimating work.
• There should be more and proper line of communications including coordination among project stakeholders, this will ensure timely delivery
• To reduce the risk involved in cost estimating, estimating should only be carried out by trained professional estimators who are conscientious in their duty, ensuring proper market surveys on material and labor prices before estimating.
• Value engineering and lean construction techniques. This seeks cost-effective alternatives without compromising quality or safety.

REFERENCES

1. Abdul, R., Ridho, B and Najid. (2023). Construction cost estimation model of the building projects. Journal lmodernpm.com 1 (1) 15-23
2. Abdurrahman, A.V., Nuru, G., Alhassan,D and Aliyu, A.A.(2018). Assessing the Severity of Errors in Bills of Quantities for Public Building Projects in Nigeria’s Construction Industry. Galore International Journal of Applied Sciences and Humanities 2(2) 25-35.
3. Abiodun, A.I (2018). Ruben, N and Julius, F. (Effects of inaccurate cost estimate on construction project stakeholders. Accessed from file:///C:/Users/User/Downloads/caigbavboa,+jcpmi_v8_n2_a4.pdf 1886-1904
4. Ashworth, A. (2004), Cost Studies of Buildings 4 ed. Harlow, England; New York Pearson/Prentice Hall Bakr, G.A. (2019). Identifying crucial factors affecting accuracy of cost estimates at the tendering phase of public construction projects in Jordan. International Journal of Civil Engineering and Technology (IJCIET) 10(1), pp. 1335-1348, Available online at http://iaeme.com/Home/issue/IJCIET?Volume=10&Issue=1
5. Biniyam Tafesse (2015), Assessment of factors affecting the Accuracy of cost estimation in project management
6. Dosumu, O.S and Adenuga, O. A. (2013). Causes , effects and remedies of errors in Nigerian c o n s t r u c t i o n d o c u m e n t s .Organization,Technology and Management in Construction: An International Journal, 5(1), 676686. https://doi.org/10.5592/otmcj.2013.1.4
7. Dosumu, O.S, and Iyagba, R. (2013). An appraisal of factors responsible for errors in nigerian construction Ethiopian Journal Environmental Studies and Management, 6 ( 1 ) , 4 9 5 7 . https://doi.org/http://dx.doi.org/10.4314/ejesm.v6i1.6
8. Ejekwu,B., Ekweani, C.P., Oha, E.J. (2022). Evaluation of the Effects and Risks of Cost Estimation on Project Costs and Claims: A Study in Imo State, Nigeria, Int. J. Environ. Eng. Educ., vol. 4, no. 2, pp. 36-47, 2022
9. Faten A., Doh, S., Rahimi A. Rahman (2021). Factors Affecting the Accuracy of Cost Estimate in Construction Projects: A Review. 1-8
10. Gerald, D., Ruth, S and John, K (2024). Improvement of risk management in cost estimation in the building construction industry in Uganda.
11. Journal of Construction in Developing Countries, 29(1): 111–138. https://doi.org/10.21315/jcdc-08-22-0145
12. Jerry Junior Gyimah, Ernest Kissi, Theophilus Adjei-Kumi, Richard Oduro Asamoah, Seth Bampo Addo, Kofi Offei-Nyako and Philip Bannor. (2023). International Journal of Engineering Management and Economics. 7(1) Vol. 59-78 https://doi.org/10.1504/IJEME.2022.129127
13. Juszczyk, M., Kozik, R., Lesniak, A., Plebankiewicz, E., and Zima, K. (2014). Errors in the preparation of design documentation in public procurement in Poland. Procedia Engineering, 85(202), 283292. https://doi.org/10.1016/j.proeng.2014.10.553
14. Larson, E.W. and Gray, C.F. (Ed.) (2010). Project management. The Managerial Process, Sixth Ed.
15. Lauren Sandstrom (2023). The Devastating Impact of Inadequate Estimating on Construction Projects. Retrieved from https://www.thrivetech.com.au/inadequate-estimating/
16. Mahamid, I. and Dmaidi, N.  (2013).  Risks leading to cost overrun in building construction from consultants’ perspective. Organization, Technology    &    Management in Construction: An International Journal, 5(2): 860-873
17. Mohammad, W.F., Chia K. L and Puteri F. M (2021). Cost estimation performance in the construction projects: a systematic review and future directions. International journal of industrial management 11(1). 217 – 234. https://doi.org/10.15282/ijim.11.1.2021.6131
18. Ogbu, C. patrick, & Ebiminor, V. B. (2020). Relationship between bill of quantities errors and construction disputes: A multivariate analysis. The Quantity Surveyor: Journal of the Nigerian Institute of Quantity Surveyors, 66(1), 4359
19. Project Management Institute. (2018). Success in disruptive times: expanding the value delivery landscape to address the high cost of low performance. In Pulse of the Profession. https://www.pmi.org/learning/thought-leadership/pulse/pulse-of-the-profession-2018
20. Temesgen, Z. (2017). Assessment of project cost estimation practices: the case of menschen fur menschen foundation. (mfmf) A thesis submitted to St. Mary’s University, school of graduate studies Addis Ababa, Ethiopia.
21. Yazıcıoğlu, E and Kanoğlu, A. (2020). Cost Estimating in Construction Projects: The Relationship Between Cost and Macro Economic Indicators https://www.researchgate.net/publication/348835261_Cost_Estimating_in_Construction_Projects_The_Relationship_Between_Cost_and_Macro_Economic_Indicators