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CHAPTER 3

RESEARCH METHODOLOGY

In this chapter the methodology used in the study has been outlined.
The steps followed in the methodology adopted for this research are explained
sequentially in order to provide a total picture of the thesis.

3.1 INTRODUCTION

Literature review pertaining to cost escalation in construction

projects in India highlighted various issues and causes of cost escalation
problem in construction projects. The review indicated the need for greater
scientific and also a rigorous study in this area. This chapter presents an
outline of the methodology used to achieve the research objectives stated in
chapter 1. The justification for selecting the questionnaire survey approach for
data collection, is also discussed. The questionnaire was administered across
the country covering the length and breadth of the country. The questionnaire
was designed and formulated based on extensive literature survey and expert
consultations. Based on the survey results, causes for cost overrun and cost
escalation in building construction projects in India were identified and
evaluated.

The objectives set forth in the research are basically divided into
four sections. A mixed approach of interviews, questionnaire survey (among
Government representatives and Contractors) and case studies were used for
achieving the above objectives. A brief overview of the methodology used in
this research is shown in Figure 3.1.
 Identification and Evaluation of factors affecting cost overrun in
Methodology used for building construction projects
Identification and Study of major Identification and Evaluation of factors affecting cost overrun
Materials Category among major participants and External factors
Preliminary
Identification of 70% of the cost of the
Literature Survey major components
Client related Architect related Structural Engg. Contractor External Factors
related related
Expert Opinion Case study of six building
construction projects
Semi-Structured Interview Identification and Evaluation of most significant factors category contributing to cost overrun

Identification and Evaluation of most significant factors category contributing to cost overrun
Methodology used
for data analysis –
Owner Representatives Analytical Objective 1 Validating with case studies
Construction Manager in Hierarchy Process
the level of Assistant (AHP)
Engineer to Chief
Engineer of CPWD, MES Identification and Evaluation of factors affecting cost escalation in building
& TNPWD construction projects
Questionnaire
Survey Identification and Evaluation of most significant factors cost escalation among
Methodology used
for data analysis – materials factor category
Relative
Importance Index
Contractor (RII) Cement Steel Brick Sand Stone Timber
Representatives Aggregate
Registered contractors
working with CPWD,
MES & TNPWD Identification and Evaluation of most significant factors
category contributing to cost escalation Validating with case study

Identification and Evaluation of most significant factors to cost escalation

Study on trend in prices of building materials in India
Objective 2
Cement Steel Brick Sand Stone
Aggregate
Study of cost escalation issue currently addressed in the building
Study on trend in month-wise increase in the price & monthly construction contracts
percentage change in the prices Objective 3
Study on presently used escalation clause in Govt building construction contracts

Study the adequacy of compensation paid to the contractor based on presently

CONCLUSIONS FOR ADDRESSING COST ESCALATION
used escalation clause in Govt contracts
ISSUE IN BUILDING CONSTRUCTION PROJECTS

Objective 4 Validating with case studies Study on whole sale price index

Figure 3.1 Methodology framework of study of cost escalation in Indian building construction industry

41
 42

The research work aimed at studying problems related to cost

escalation in Indian building construction projects. Construction Managers
and contractors from the area of building construction projects were
approached for obtaining data and information based on their past experience
in cost escalation. They included representatives from Government client
organizations and contractor organisations representatives who have executed
projects for these organizations. A detailed stepwise explanation of
methodology adopted is stated in the following sub-sections.

Literature survey: A wide range of areas were surveyed to identify

and understand the various factors affecting cost overrun and cost escalation
in Indian building construction projects.

Expert consultation: Professional and experts with more than 25

years of experience in construction projects such as Chief Engineers,
Directors (Contracts) and Superintending Engineers and contractor
representatives in the Government construction projects were considered for
data collection and gaining information from their past experience. The
identified factors for cost escalation from literature survey were scrutinised
with the experts to the present work situation and their opinion and
suggestions were formulated.

Semi-Structured Interview: The list of factors under cost overrun

and cost escalation were obtained through literature survey and subsequently
amended through expert opinion. With the compiled list, semi-structured
interviews were conducted among engineers from construction organisations
such as Central Public Works Department, Military Engineer Services,
Tamilnadu Public Works Departments, Engineering Unit of Indian Institute of
Technology Madras and Larsen and Toubro (L&T) Ltd. From the outcome of
 43

the semi-structured interview, the significant factor category and factors

affecting cost overrun and cost escalation were identified.

Questionnaire Survey Approach: Due to non availability of

information about the completed projects, the questionnaire survey approach
was considered for data exploration/ collection. This approach is well
recognised and widely used in the area of construction management. The
scope of study was limited to Government building construction project in
particular to CPWD, MES and TNPWD building construction contract in
India. The reliability of the survey results is expected to be high because all
the respondents are top-level experienced management officials in their
organisations. The questionnaire survey acted as the most important data
collection tool to analysis the cost escalation in building construction projects.

3.2 QUESTIONNAIRE SURVEY

The questionnaire was designed and formulated into four distinct

parts. The questionnaire is presented in Appendix 1.

3.2.1 Professional Experiences and Validation of View Points

Questions A1 - A11 of the questionnaire form this part. It consists

of personal, project and organisation data of the respondents. Questions A12 -
A15 of questionnaire are validation questions based on a 7-point Likert rating
scale. Analysis and results pertaining to responses of questions of this part
(A12 - A15) are presented in Chapter 4.
 44

3.2.2 Factors Affecting Cost Overrun in Building Construction

Projects in India

Questions B1 - B29 of the questionnaire helped in identifying and

evaluating factors affecting cost overrun in building construction projects.
29 factors have been identified in the questionnaire, which was developed to
sample the opinion of construction managers on the extent to which each of
the factors were contributing to overall cost overrun on a typical building
project in which they are involved. The respondents were asked to assign
weights to the factors 1 to 5 where, ‘1’ is the lowest score and ‘5’ is the
highest score. The score assigned to each factor by the respondents represents
the extent to which the factor contributes to overall cost overrun on a typical
building project. Questions B30 – B31 of the questionnaire connected to
identify and evaluate factor categories affecting cost overrun. The five factor
categories (Client-related, Architect-related, Structural Engineer-related,
Contractor-related and External factor) were formulated in the questionnaire,
which was developed to sample the opinion of construction managers on the
extent to which each of the factor categories contributed to the overall cost
overrun on a typical building construction project in which they are involved.
Pair wise comparation scale for each set of major factor category for cost
overrun through Analytic Hierarchy process (AHP) questionnaires were used
and respondents were asked to indicate their responses. The responses
received from the respondent were evaluated through Analytic Hierarchy
process (AHP) software to evaluate the differences in perceptions among
client and contractor representatives. As a general rule (Saisana 2005), AHP
responses with inconsistency ratios greater than 0.15 have not been
considered in the analysis. Using the Statistical Package for Social Sciences
(SPSS), the data were subjected to statistical analysis. Analysis and results
pertaining to responses for questions of this part are presented in Chapter 4.
 45

3.2.3 Factors Affecting Cost Escalation in Building Construction

Projects in India

Questions C1 to C13 of the questionnaire helped to identify and

evaluate factors affecting cost escalation in building construction projects in
India. 13 factors relating to the major material components were identified
and formulated in the questionnaire, which was developed to sample the
opinion of construction managers on the extent to which each of the factors
contributing to overall cost escalation on a typical building construction
project in which they are involved. The respondents were asked to adopt
weights to the factors 1 to 5. The score assigned to each factor by the
respondents represents the extent to which the factor contributes to overall
cost escalation on a typical building project. Questions C2 to C3 of the
questionnaire to identify and evaluate factor categories affecting cost
escalation in building construction projects in India. Six factor category
(Cement, Steel, Brick, Sand, Stone aggregates and Timber) were identified
through case studies of six building construction projects in India. The
identified major materials components were formulated in a questionnaire
survey. Pair wise comparison scale for each set of major factor category for
cost escalation through Analytic Hierarchy process (AHP) questionnaires
were used and respondents were asked to indicate their pair-wise comparison
scale for individual cost escalation impact. The responses received were
evaluated using expert choice software. A detailed case study analysis of six
building construction projects were carried out to validate the survey findings
on most significant factor categories contributing to cost escalation. Analysis
and results pertaining to responses of questions of this part are presented in
Chapter 5.
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3.2.4 Price Escalation Clauses and Adequacy of Compensation Paid to

the Contractor Based on the Presently Used Escalation
Clause in Contract

The experts/consultants working in the building construction

contracts opined that the presently used escalation clauses in government
construction contracts are not adequately compensated to the contractors.
Questions D1 to D11 of the questionnaire identify adequacy of compensation
paid to the contractor based on presently used escalation clause in government
construction contracts in India. These questions were formulated to evaluate
perceptions of clients and contractors about the presently used price escalation
clause in government contract. Analysis and results pertaining to responses of
questions of this part are presented in Chapter 7.

The above four parts consisted of four basic types of questions in

the questionnaire listed below:

1. Value system assessment questions/ validation questions based

on a 7-point Likert rating scale.

2. Questions to assign weights to the factors 1 to 5: these are

questions which were developed to sample the opinion of
construction managers on the extent to which each of the
factors were contributing to overall cost overrun and cost
escalation on a typical building project in which they are
involved. The respondents were asked to adopt weights to the
factors 1 to 5. where, ‘1’ is the lowest score and ‘5’ is the
highest score.
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3. Pair-wise comparison based questions on factor categories:

Pair wise comparison scale for each set of major factor
category for cost escalation through Analytic Hierarchy
process (AHP) questionnaires were used and respondents were
asked to indicate their pair-wise comparison scale for
individual cost escalation impact. The software named Expert
choice was used for analyzing the AHP responses (Forman
et al 1983).

4. Open ended questions: They encourage respondents to share

and discuss their views on cost escalation.

3.2.5 The Analytic Hierarchy Process (AHP) Methodology

The AHP is a popular method for determining relative priorities of

final choice alternatives in multi-criteria decision problems. It represents these
decision problems as well-structured hierarchies and requires the decision
makers (experts) to provide pair wise comparison of elements in each level to
obtain their relative weights or importance scores on a ratio scale (Saaty
1980). Table 3.1 presents the pair-wise comparisons scale and the respective
explanations. It thus provides a well-structured basis for decision making by
experts. The AHP can handle both qualitative (intangible) and quantitative
(tangible) criteria and is suited for individual and group decision making. A
large number of elements in any level of the hierarchy could prove to be
cumbersome in terms of obtaining the pair wise comparisons. Applications of
the AHP can be qualitatively evaluated and validated using specific
consistency measures. The AHP allows for the application of data,
experiences, insight and institution in a logical and thorough way (Forman
1990).
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Table 3.1 The pair wise comparison scale of the AHP

Numeric
Verbal Scale Explanation
value
1 Equal important to both Two elements contribute
elements equally
3 One is moderately more Experience and judgement favor
important
5 One is strongly more important Strong favor
7 Very strong importance over the Very strong dominance
other
9 Extreme importance over the Indisputable dominance
other
2, 4, 6, 8 Intermediate values Compromise between two
levels

AHP Methodology in the Study Context: The AHP is used in this

study to obtain and analyse the weights of various factors contributing to cost
overruns and cost escalation in building construction projects. Also, AHP is
used to determine the effects of escalation factor categories that cause cost
overrun and cost escalation. However, the entire exercise retained its basic
character of determining the weight-age or importance scores on a 0 to 1 scale
to enable robust comparations across the different issues. As a general rule
(Saisana 2005), AHP responses with in-consistency ratios greater than 0.15
have not been considered in the analysis.
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3.2.6 Relative Importance Index (RII)

Chan et al (1996) and Aibinu et al (2006) used the ‘relative

importance index’ method to determine the relative importance of the factors
causing delays in construction projects. The same method was adopted for
analysis of the data collected from the questionnaire, within various groups as
classified according to the role of the participants involved in the Indian
building construction industry. The five point scale was transferred to relative
importance index for each factor. The factors were ranked in order of
importance based on the relative importance indices values. These ranking
made it possible to cross-compare the relative importance of factors as
perceived by the two group of respondents i.e. owner and contractor. All the
numerical scores of each of the identified factors were transformed to relative
importance indices to determine the relative ranking of the factors. The
relative importance index (RII) was evaluated using the following expression:

Relative Importance Index =  

 W
 (0 ≤ index ≥ 1) (3.1)
 AN 

where, W = weightage given to each factor by the respondents and ranges

from 1 to 5, W = total score assigned to the factor by the respondents;

A = highest weight (i.e. 5 in this case); and N = total number of respondents.

The factors were ranked in the order of importance based on the relative
importance index values.

3.3 SURVEY RESPONSE

Survey was carried out among the two major participants of Indian
building construction projects - Government representatives (Clients), and
Contracting organisations (contractors). The survey was administrated during
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the period June to December 2008. The respondents were construction

managers representing owner representatives in the level of Assistant
Engineers to Chief Engineers of CPWD, MES and TNPWD and contractor
representatives who have executed projects for these organizations. 215
questionnaires were administered through personal contact to Government
client organizations in the level of Assistant Engineers to Chief Engineers of
CPWD, MES and TNPWD and contractor representatives who have executed
projects for these organizations. Of the questionnaires administered 119
responses were obtained which accounted for about 55.4%. The details of
questionnaires circulated and responses received are summarized shown in
Table 3.2.

Table 3.2 Details of questionnaire circulated and response

Respondent Questionnaire Responses Response in

Type circulated received Percentage
Clients 115 66 57.4%
Contractors 100 53 53.0%
Combined 215 119 55.4%

The reliability of the survey results is expected to be high because

all the respondents are top-level experienced management officials in their
organisations. The summary of the survey responses are given Table 3.3.

Based on the level of experience, each category of respondents

have been classified into four groups: Very High, High, Medium and Low.
About eighty three percent of the respondents have “high” to “very high”
experience in the area of Indian building construction projects. The number
of responses with respect to the category and the level of experience are
evenly distributed in the sample.
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Table 3.3 Details of participants experience in building construction

projects

No. of respondents
Experience in building construction projects
Very High High Medium
Respondent type Low
> 25 20-25 15-20 Total
< 15 Projects
projects Projects Projects
No. 36 23 4 3 66
Client
%ge 54.5% 34.9% 6.1% 4.5% 100%
No. 13 26 8 6 53
Contractor
%ge 24.5% 49.1% 15.1% 11.2% 100%
No. 49 49 12 9 119
Total
%ge 41.2% 41.2% 10.1% 7.5% 100%

3.4 OVERVIEW OF STATISTICAL ANALYSIS

The questionnaire responses received from owner and contractor

representatives were stored in a database. The SPSS 15.0 version software
was used to perform various statistical tests. The statistical analysis based on
the status of respondents (i.e. owner and contractors), based on the owner
respondent i.e. CPWD, MES and TNPWD and also based in the status of
contractor respondent (i.e. CPWD, MES and TNPWD). The statistical
analysis used in the study included one way analysis of variance (ANOVA),
T-test, Chi-square test, concordance test. t-tests were used to compare the
sample means with the corresponding hypothesized mean values, and to test
the significance of difference between the means of two independent samples.
Mean response for question A-12 regarding cost escalation has major impact
on the quality of the project was significantly different from hypothesized
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value. The perception of clients were cost escalation has more impact on
quality than contractors.

ANOVA was used to test the significance of difference between

means of more than two samples at a time. In the study, the means of
responses of CPWD, MES and TNPWD were compared to test whether they
were significantly different on various issues i.e. cost escalation has a major
impact on the quality of the project produced, cost escalation has a major
impact on the project completion time, cost escalation is a major source of
dispute. The responses to the effects of cost overrun and cost escalation, were
subjected to statistical analysis. Chi-square test was used in performing
statistical analysis to access the whether compensation as per the existing
price escalation clause reflect the actual price escalation (questions D1-D5
).This chapter has given an overview of the various steps in thesis
methodology in sequence and has also explained them sufficiently. In the end,
the chapter also covered the different statistical methods used in data and
result analysis as part of the thesis.

3.5 CASE STUDY APPROACH

A detailed case study analysis of six building construction projects

were carried out to validate the survey findings on most significant factors
contributing to cost overrun and cost escalation in building construction
projects in India. The case study research includes interviews, discussions
with construction managers, detailed study of project documents and
contracts. One of the main objectives was to check how far the most
significant factors identified through the survey research have adversely
affected the respective projects.
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The projects examined were Construction of Educational Building

at Chennai (2 projects), Construction of Hostel Building at Chennai,
Construction of Office buildings at Chennai, Construction of commercial
building at New Delhi and Construction of Airport Terminal building at
Chennai. All the case studies were carried out during the period Dec. 2008 to
Feb. 2009.

3.6 SUMMARY

Details of various research methodologies adopted in two phases in

order to carryout the research objective of the research study is explained in
detail. In the preliminary stage factor categories and factors affecting cost
overrun and cost escalation were identified. In the secondary stage, these
identified factor categories and factors were used to formulate a questionnaire.
In order to find the weight age for the factor categories, AHP analysis was
used. Relative Importance Index (RII) method was used to find the relative
factor weights. Both these weight ages reveal the relative importance of the
factor categories and factors contributing to cost overrun and cost escalation.
The Likert scale questionnaire was used to find the gratification level.