Analysis of Cost Overruns in Saudi Arabia Construction Projects: A University Case Study

Authors: Majed Alzara (PhD), Jacob Kashiwagi (PhD), Dean Kashiwagi (PhD, PE), Abdulrahman Al-Tassan (PhD)


Public projects in Saudi Arabia have been experiencing low construction project performance for
the past decade. Studies have identified the low-bid delivery method as an important factor in
causing such delays. In addition, low bids for contracts have not reflected the actual project cost.
A case study was conducted at a university campus in northern Saudi Arabia in which the actual
project costs for four projects were examined. The study found that all four projects’ costs were
higher than the original bid. In addition, a large survey was conducted of 804 classified
contractors and universities representatives who identified change orders as the most common
factor causing cost overruns in Saudi Arabia. Previous studies showed that some contractors aim
to submit low bids for winning the competition then change orders to reduce their losses.
Consequently, low bids also lead to cost overruns. In a comparison using the result of a case study
and the results of the Performance Information Procurement System (PIPS), Saudi Arabia’s
delivery system was identified as a potential cause of project performance issues.
Keywords: cost, overruns, low-bid, Saudi Arabia, Best Value Performance Information
Procurement System (BV PIPS).