Methods for Cost Risk Management in Public Construction Projects
PhD student: Andreas Claus Hansen
Cooperation Partners: Bygningsstyrelsen
Project duration: 2020-2023
Together with Bygningsstyrelsen and with an additional grant from Innovationsfonden, we are developing novel cost risk management methods for construction projects in this 3-year project.
The public sector is plagued by significant cost overruns in large construction projects up to 80% (Ernst & Young, 2017; Rigsrevisionen, 2014, 2009; Statsrevisorerne, 2016; Statsrevisorerne and Rigsrevisionen, 2017). This has 3 major negative consequences: 1. It increases the financial burden on the general public and binds funds that now cannot be spend on other public services. 2. Persistent and significant cost overruns erode the public’s trust in the ability and goodwill of the government. And 3. Cost overruns in construction lead to significant quality degradation in the use phase of the building (as smaller or less capable buildings are built to compensate for the overrun) as in the case of the mega hospitals (DR, 2019; Statsrevisorerne, 2016). There is general professional and public agreement that insufficient risk management is the root cause of these unchecked cost overruns. Bygningsstyrelsen has the formal mandate to implement and oversee the execution of project (cost) risk management in public construction projects, as well as influence and define the regulatory environment for this project risk management.
The project objective is to reduce these cost overruns in public construction projects by 1) co-creating a set of three tailored project cost risk management methods with the appropriate stakeholders for the three key life cycle phases of construction projects (conceptual design, contracting, and execution), 2) implementing these methods in project governance process at Bygningsstyrelsen and 3) facilitate their cascading implementation in the Danish construction industry.
You can read more about the project (in Danish) in Bygningsstyrelsens press release.