Irma Riana ~ FIFA World Cup

FIFA World Cup

The FIFA World Cup is the largest international sports event in the world. Hosting the FIFA World Cup remains a sought after goal for any country. Due to the magnitude of spectators and scale of participation the hosting of the event requires substantial investment in infrastructure, especially the stadia where the various football games will be played. The award of the 2010 FIFA World Cup to South Africa resulted in ten stadia to be either upgraded or newly constructed for the event in South Africa. Even though all the stadia were ready for the tournament, nearly all projects experienced time delays and cost overruns. This article investigates the reasons or causes of cost overruns and time delays during the upgrading and construction of the various stadia. A three-tier research approach covers a comprehensive literature review on the causes of cost overruns and time delays on construction-related projects globally as well as an investigation into the factors that caused cost overruns and time delays on six of the stadia. Finally, the results for the global and stadia projects are compared. The results indicate that the increase in material cost is the single largest contributor to cost overruns for both global and stadia projects. With respect to time delays the most significant contributing factor for global projects was late delay in payments while for the stadia projects design-related factors caused the most delays. The results provide valuable information on the unique challenges facing those who are interested in investing or managing construction projects in South Africa. According to the South African Construction Industry Status Report, 2004 the construction industry accounts for more than 10% of the world’s economy (CIDB, 2004: online). As a prime indicator of economic activity, the construction industry is often utilised by governments not only to stimulate growth but also to assist economic recoveries from recessions. Given the large capital amounts associated with construction projects, the performance in terms of cost and time are closely monitored, especially where tax payers’ money is involved. With the third ‘traditional’ measurement criterion for project performance, namely ‘quality’, being a more subjective unit of measure, the quantitative results from measuring against original project duration estimates and approved budgets remain popular yardsticks for assessing overall project performance. Even though South Africa completed numerous large construction projects over the years, the award of the FIFA Soccer World Cup in 2010 drew the attention to South Africa’s ability to deliver large construction projects within time and budget. Burdened with the negative global view towards the “African project failure syndrome” (Rwelamila, Talukhaba & Ngowi, 1999) and “contingency venue” already identified (Dell’Apa, 2008), the South African construction industry started work under much doubt regarding its capability to complete the massive construction work on the ten stadia across South Africa (Panja, 2008; Corbett & Alderson-Smith, 2009). Once the stadia were completed, no formal or final cost figure was released by government or any other public institution. However, Minister of Finance was quoted in The Africa Report (Ballong, 2010: online): “we have been confronted with an escalation of costs”, and the budget for all the stadia is USD 267 million in deficit. Hill (2008) reported that the stadia would require an additional R 2 billion to complete. Although the stadia were completed in time for the FIFA World Cup, some were behind schedule and not ready for the Confederations Cup in 2009, the official ‘curtain raiser tournament’ and ‘testing tournament’ to assess the stadia’s readiness for the FIFA World Cup during 2010 (Dell’Apa, 2008). Given the cost overruns and time delays on the stadia projects, this research aims to (i) investigate the general factors that cause cost overruns and time delays on global construction projects; (ii) determine which factors played a significant role during the upgrading and construction of the 2010 FIFA World Cup stadia, and (iii) compare the stadia factors with those indentified on global construction projects. Project performance in the construction industry is well researched. A study completed by the International Program in the Management of Engineering and Construction (IMEC) in 2000 (Miller & Lessard, 2000: 14) revealed that 18% of 60 large engineering and construction projects, with an average capital value of $ 1 billion undertaken between 1980 and 2000, incurred extensive cost overruns. Merrow, McDonnell & Argüden (1988) studied 47 “megaprojects” in the Acta Structilia 2011: 18 (1) construction environment and found that only four were on budget with an average cost overrun of 88%. Morris & Hough (1987: 7-15) also provide a comprehensive list of cost overruns on large projects. According to Flyvbjerg, Bruzelius & Rothengatter (2003), cost overruns are especially evident in infrastructure construction projects. The relatively poor performance of construction projects prompted researchers to investigate and identify the factors that cause cost overruns and time delays. In the following paragraphs the results of related literature is summarised and concluded with the identification of the most important and dominant factors. Formulating solutions and remedies to the causes were not addressed and are considered to be beyond the scope of this paper.
Since the 1980s various studies have investigated the causes for project cost overruns on construction projects. Kaming, Olomolaiye, Holt & Harris (1997: 87), who studied 31 construction projects in Indonesia, found that from a contractor’s point of view, cost overruns were mainly caused by “inaccuracy of material take-off”, “increase in material costs” and “cost increase due to environmental restrictions”. Reviewing public sector construction projects in Nigeria, Dlakwa & Culpin (1990: 239) found that the three main reasons for cost overruns are “fluctuations in material, labour and plant costs”, “construction delays” and “inadequate pre-planning”. In another study on construction projects in Nigeria, conducted by Okpala & Aniekwu (1988: 238), it was found that architects, consultants and clients agreed that ‘shortage of materials’, ‘finance and payment of completed works’ and ‘poor contract management’ were the most important causes of cost overruns. Mansfield, Ugwu & Doran (1994: 258) studied the performance of transportation infrastructure projects in Nigeria and concluded that ‘material price fluctuations’, ‘inaccurate estimates’, ‘project delays’ and ‘additional work’ contributed most to cost overruns. In a fourth study on construction projects in Nigeria by Elinwa & Buba (1994: 698), it was found that ‘cost of materials’, ‘fraudulent practices’ and ‘fluctuations in materials prices’ had the most significant impact on project costs. In calculating the number of times specific types of causes for cost overruns under each category were observed, the following can be concluded:
• The most significant factor causing cost overruns due to client action is ‘additional work or changes to work’. This cause was listed as a major factor in five of the seven (71%) reviewed articles.
• From a contractor’s perspective the most significant contributor to cost overruns is ‘time delays’, listed in three of the seven (43%) reviewed articles.
• The most significant factor for cost overruns is evident from external factors and that is ‘material price changes’. This factor was listed in six of the seven (86%) reviewed articles. Other common factors listed among contractors, consultants and clients were ‘poor estimates and material take-off’ and ‘delay in payments’. It can be argued that the factors mentioned do not stand alone and that the ultimate cost overruns can be a result of multiple factors contributing to the final cause for cost overruns.