| Major projects are at the forefront of economic development. In Alberta, major projects, including numerous projects with capital costs in excess of CADThe objectives of this research were to examine why underestimation occurs on most major projects, and why it appears to persist through the execution phase of projects. To achieve those objectives, the research looked at project estimation processes, the influences on those processes, and the interactions among participants involved in those processes. The research was based on a quantitative-qualitative triangulation methodology approach, consisting of three phases in conjunction with the literature review. Phase One was a questionnaire given to cost estimation, control and project management specialists. Phase Two was a Modified Delphi with experts from owner, consultant and contractor companies involved in oil sands projects. Phase Three consisted of case study research on two major oil sands programs.The results of the research highlighted that projects are being pushed to early approval, and that strategic estimation is used to secure that approval. A lack of trust between owners and contractors, and limited availability of experienced owner personnel, are contributing to low estimates. In addition, there are delays in reporting cost and schedule variances due to reluctance to give or receive bad news. Contingency is used to mask the threat of cost overruns until it is too late to address the threat.Many reasons have been put forward for these overruns, including labour resource constraints, poor productivity, rising material costs, and so forth. These reasons are comparable to those found in literature, and support the use of project management best practices to help address the situation. There is another potential reason for the overruns: the initial estimates may have been inadequate. The notion of initial underestimation leading to project overruns has not been well addressed in project literature. |
