Predictors of Cost‐Overrun Rates

An investigation was conducted concerning the influence of the following items on construction project cost-overrun rates: project size, construction type, number of bidders, and the percent difference between the government estimate and the award amount. The cost-overrun rate is defined as the total dollar amount of change orders and claims divided by the award amount. The analysis was conducted on 1,576 Navy construction projects that were in progress from 1984 to 1987. It was found that the shape of the frequency distribution for the cost-overrun rate changed with the size of the project. Cost overruns occurred more frequently for larger projects. The cost-overrun rate was also influenced by the percent difference between the government estimate and the award amount. Cost overruns were more likely when the award amount was less than the government estimate.