International Journal of Civil Engineering and Technology (IJCIET)

Volume 9, Issue 3, March 2018, pp. 683–697, Article ID: IJCIET_09_03_070

Available online at http://www.iaeme.com/ijciet/issues.asp?JType=IJCIET&VType=9&IType=3
ISSN Print: 0976-6308 and ISSN Online: 0976-6316

© IAEME Publication Scopus Indexed

IDENTIFICATION OF RISKS CAUSING TIME

AND COST OVERRUN IN ROADS AND
HIGHWAY PROJECTS IN INDIA
Siddesh Pai
Assistant Professor, National Institute of Construction Management and Research,
Research Scholar, UPES, Dehradun, India

Bijayanand Patnaik
Project Management Officer, Sai Consulting India private Ltd. India

Dr. Ankur Mittal

Associate Professor, University of Petroleum and Energy Studies (UPES), Dehradun, India

Dr. Neeraj Anand

Professor, University of Petroleum and Energy Studies (UPES), Dehradun, India

ABSTRACT
Roads and Highways are the most important infrastructure for the economic
development of any country since ancient times as roads and highways are necessary
for majority of freight and passenger movement but construction, operation and
maintenance of roads and highways is not as easy as it seems as development of roads
and highway projects requires huge funding and time. However, the government does
not have the funds required for the purpose. Public private partnership (PPP or 3P or
P3) is the solution of this problem but, highway projects involves higher degree of risk
for the private participant which demotivates private parties from investing in
highway projects.
This paper explores the existing literature on risks involves in roads and highway
projects and causes of time and cost overrun in roads and highway projects for the
purpose of identifications of major risks which results in time and cost overrun in PPP
based highway projects. This paper also determines the impact of identified risks
through questioner survey.
Keywords: Highway, Roads, PPP, Time and Cost Overrun, Risks, Construction
Management.
Cite this Article: Siddesh Pai, Bijayanand Patnaik, Dr. Ankur Mittal and Dr. Neeraj
Anand, Identification of Risks Causing Time and Cost Overrun in Roads and Highway
Projects in India, International Journal of Civil Engineering and Technology, 9(3),
2018, pp. 683–697.
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 Identification of Risks Causing Time and Cost Overrun in Roads and Highway Projects in India

1. INTRODUCTION
Roads and Highways are the most important infrastructure for the economic development of
any country since ancient times as roads and highways are necessary for majority of freight
and passenger movement. Compare to air and rail transport system roads and highways are
much economical for short distance and convenient for freight and passenger movement as it
is highly flexible (The route can be changed anytime) and facilitates door-to-door service. As
per the NHAI, (2016), about 65% of freight and 80% passenger traffic of India is carried by
the roads and highways.
Given the heavy reliance on roads for both freight and passenger movements, investment
in the road infrastructure in India can pave the way to growth and other economic objectives
of India. Such an investment has a multiplier effect on crucial sectors of the economy; for
example, cement, construction, steel, etc. [1] However construction, operation and
maintenance of roads and highways is not as easy as it seems as development of roads and
highway projects requires huge funding and time. But the government does not have the funds
required for the purpose. Public private partnership (PPP or 3P or P3) is the solution of this
problem. PPP involves a contract between a public sector authority and a private party, in
which the private party provides a public service or project and assumes substantial financial,
technical and operational risk in the project and the cost the service is borne exclusively by
the users of the service and not by the taxpayer.
In general PPP project offers following advantages:
 Acceleration of infrastructure provision.
 Increased efficiency.
 Fast implementation.
 Improved service quality.
 Private financing can support increased infrastructure investment without adding to
government borrowing and public debt.
 Reduce life cycle costs.
 An alternative to full privatization.
 Transfer of knowledge; know how, management skills and new technology.

However, highway projects have certain peculiar characteristics that lead to a higher
degree of risk for private participants. Some of such characteristics are as follows: -
 The demand for a road cannot be accurately predicted even for a short period of time let alone
for a long period.
 The willingness of the commuters to pay a toll for using a better quality road.
 The services provided by a road can't move with the demand, i.e., unlike power projects where
the power can be wheeled from a place of low demand to a place of high demand.
 The land acquisition for a road project takes long time and its cost is usually high.
 Unlike most of the other infrastructure projects, the main asset of the project company
implementing the road project is not worth anything without the right to collect, manage,
appropriate the toll revenue. Thus, the lenders are also exposed to the traffic risk.
 The management of a road project is very complex.

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 Siddesh Pai, Bijayanand Patnaik, Dr. Ankur Mittal and Dr. Neeraj Anand

Risks are the variables or circumstances associated with the implementation of a specific
project that has the potential to adversely affect the development of a project, risks include
circumstances, factors, events or influences which will result in an adverse impact on any
aspect of the implementation of the project. In projects management terms the most serious
effects of risk can be summarised as follows: -
 Failure to keep within the cost estimate that is cost overrun.
 Failure to achieve the required completion date that is time overrun.
 Failure to achieve the required quality and operation requirements.

1.1. Public Private Partnership in National Highways

The national highways are owned by the Government of India and the National Highways Act
1956, bestows the rights regarding construction, maintenance, operation and tolling of
highways only to the Government of India. Due to the constraints of public funding, Public
Private Partnership (PPP) has come to play a major role in the development of national
highways. The National Highways Act, 1956 was amended in 1995 with a view to enabling
private investment in development, maintenance and operation of highways. This amendment
has allowed government to provide concession to a private „person‟ to invest in NH projects,
levy, collect and retain fee from road users. Also a private person can be allowed to regulate
traffic on such highways in terms of provisions of Motor Vehicle Act 1988. Therefore, the
enabling legal framework has been in place for a decade and a half. However, the first policy
framework for PPPs was introduced in 1997 as decision of the Cabinet of the Central
Government. [2]Later on the Government of India initiated several other measures in this
direction such as declaration of road sector as industry to facilitate borrowing on easy terms
and reduction in the custom duties on construction equipment. [3] However, the initial policy
initiatives did not yield the desired results. Many researchers suggested that it was the due to
the lack of legal framework and policies for the implementation of based PPP projects. But
another reason for the failure of the PPP in India was the huge amount of risks associated with
it.
Lack of legal framework and policies as well as risks associated with PPP based roads and
highway projects are demotivators for private players to participate in PPP based road
development projects. In several cases, Engineering, Procurement and Construction (EPC)
contractors who had ventured into PPP based roads and highway projects are now trying to
sell their stake in PPP projects. Most of the existing players in this sector have now reduced
acquisition of new projects and are instead focusing on execution responsibilities for their
current order book. In response of this MORTH/NHAI is launching majority of highway
projects on EPC bases. In year 2016, NHAI awarded total 57 highway projects and out 57
only 8 were based on PPP. [4]
However, India can't stay away from PPP for very long as PPP is need as well as the
future and for successful implementation of PPP based highway projects it is necessary to
know the significant risks involved in PPP based highway projects and its management
strategy.

2. OBJECTIVES OF THE PAPER

 To identify the risks which results time and cost overruns in PPP based roads and highway
projects through literature review.
 To identify the most impact of risk factors from the identified the risks which results time and
cost overruns in PPP based highway projects.

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 Identification of Risks Causing Time and Cost Overrun in Roads and Highway Projects in India

3. LITERATURE REVIEW
As per NHAI, India‟s road network of over 3.3 million km is second largest in the world
consisting of expressways, national highways, state highways, major district roads and other
roads. These roads carry about 65 per cent of freight and 80 per cent of passenger traffic.
National highways constitute only 1.7 per cent of the road network, but carry about 40 per
cent of the total road traffic. Broadly, the road network in India is divided into the primary
system comprising national highways and the secondary system made up of state highways
and major district roads. In addition, the network comprises expressways as well as rural and
other roads.
Road Transport has emerged as the dominant segment in India‟s transportation sector with
a share of 4.7% in India‟s GDP in 2009-10. The number of vehicles on Indian roads has been
growing at an average pace of 10.16% per annum over the last five years. Hence,
development of road network assumes paramount importance in the context of a rapidly
growing economy.[5] At present road transport have3.19% share in India‟s GDP which is
around twice of the combine share of air, water and rail transport.
As per the data of NHAI and several other government reports the value of roads and
bridges infrastructure in India is projected to grow at a Compound Annual Growth Rate
(CAGR) of 17.4 per cent over FY12–17. The country's roads and bridges infrastructure,
which was valued at US$ 6.9 billion in 2009 is expected to touch US$ 19.2 billion by 2017.
The financial outlay for road transport and highways grew at a CAGR of 19.4 per cent in the
period FY09-14. The plan outlay for 2015-16 stepped up budgetary support for Road
Transport and Highways to Rs 42,912 crore (US$ 6.43 billion) [6].

3.1. Risk Associated with Construction of Highway or Road

Risk is an inherent part of the roads and highway projects due to the size and cost involved.
Many studies have been conducted to identify the risks in roads and highway projects, all over
the world. According to [7] highway construction projects exposed to high risks which needs
special attention. They emphasized that highway construction projects carry high risks than
the traditional construction. They identified 10 significant risks factors in highway
construction projects in China. These are in macro and micro level areas. Macro level risks
are: Financial, market risk, political and cultural risk. The financial risk includes variations
and foreign exchange rate increases. The micro risks are: Emerging technology usage
(technical know-how of consultants and contractors), design stage, contract and legal issues,
resources, quality of work and weather conditions.
[8] Identified 10 most significant risks out of 42 in the UAE. These risks are:
 Inflation and sudden changes in prices
 Clients unreasonable imposed tight schedule
 Subcontractor's poor performance and management
 Delay of material supply by suppliers
 Change of design required by clients
 Clients improper intervention during construction
 Shortage in manpower supply and availability
 Delays in approval
 Lack of departure of qualified staff
 Shortage in material supply availability

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 Siddesh Pai, Bijayanand Patnaik, Dr. Ankur Mittal and Dr. Neeraj Anand

[9] Concluded that PPP projects bears heavy risk during entire life span except initiation
and transfer phase and construction phase of PPP projects is most risky phase.
In PPP projects, both the concessionaire and the Government may be exposed to many
risks. Risk is defined as exposure to the possibility of economic or financial loss or gains,
physical injury or delay as a consequence of the uncertainty associated with passing a course
of action. The major risk factors of road projects under BOT can be classified into four
phases viz, Developmental phase, Construction phase, Operational phase, and Project life
cycle as listed below. Detailed assessment should be conducted on each of the above items
before the project is finally taken up for execution.[10].

Table 1
Risks in different phases BOT Based Highway projects
Project Phase Risk Category
Developmental Pre-investment risk, Resettlement and Rehabilitation risk, Delay in land
Phase acquisition, Permit / Approval risk, Delay in financial closure
Construction Technology risk, Design and latent defect risk, Completion risk, and Cost
Phase overrun risk.
Operation Phase Traffic revenue risk, Operation risk, Demand risk, Debt servicing risk
Project Life Cycle Legal risk, Political risk (direct and indirect), Partnering risk, Regulatory risk,
Financial risk, Environmental risk and Physical risk
Source: (Dr. G. RaviKumar, 2005)

3.2. Time and Cost Overrun in Highway Projects

To a project developer who counted on revenue from the project commencing from a
particular date in order to comply with the schedule for repayment of the project finance,
delay is not only a humiliation but also a serious risk of financial failure of the whole
enterprise. On the contractor‟s side, delay in completion entails increased overheads over
those budgeted.
As per the MOSPI (2016), 312 of 750 infrastructure projects were running behind their
original schedule at the end of September 2014. The time overrun in these projects ranges
from 1-247 months. The cost overrun in the delayed projects has resulted 18.75% increase in
original cost.

Table 2
Cost overrun in roads & highway project in India at the end of year 2014
Sector No. of Cost Cost Cost Cost Cost
Projects Original Latest Anticipate Overrun Overrun
d w.r.t w.r.t
Original Latest
Road
Transportati 102,692.4 104,388.4
136 102,321.44 2,067.00 1,695.99
on & 5 4
Highways
Source : (MoSIP, 2016)
[11] identified several cause of cost overruns and schedule overruns in construction projects
through literature review. The major causes of cost overruns and of schedule overruns
include:

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 Identification of Risks Causing Time and Cost Overrun in Roads and Highway Projects in India

 Cost of materials
 Incorrect planning
 Wrong method of estimation
 Contract management
 Fluctuation of prices of materials
 Design error
 Poor site condition
 Delay in payment
 Financial incapability of client
 Financial incapability of contractor
 Non-availability of subcontractor and supplier
In a study, [12] identified 10 significant causes of construction delays regarding road
infrastructure projects out of 101 causes of delay in Road Infrastructure Projects. There are:
 Delay due to land acquisition
 Environmental issues
 Delay in progress payment
 Ineffective project planning and scheduling
 Poor site management and supervision
 Rework due to errors
 Delay in approving design documents
 Poor coordination between owner and other parties
 Financial closure
 Change order by clients

4. RESEARCH METHODOLOGY
Risk which results in cost and time overrun in PPP based highway project were identified from literature review.
Total 47 risk factors and 6 types of risk were identified and with this one of the objective of this paper were
accomplished, that is "To identify the risks which results time and cost overruns in PPP based roads and highway
projects through literature review." These risks are shown below in Table 3.

Table 3
Identified 47 Risk Factors and their Category
Sr.No. Risk Factors which Results in Time and Cost Overrun Category
1. Mismanagement by the contractor (Finance, Supplier, Technical
Support, Sub-contract)
2. Cash flow during construction Financial
3. Political interference Political
4. Government policies (laws and regulations) Legal
5. Change in the scope of project/extra work Technical
6. Lack of equipment/labour efficiency Technical
7. Political situation of the country/state Political
8. Additional works Technical

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 Siddesh Pai, Bijayanand Patnaik, Dr. Ankur Mittal and Dr. Neeraj Anand

9. Force majeure (Act of God) Environmental

10. Political Force majeure (War, riot, terrorism, strike, etc) Political
11. Inflation Economical
12. Underestimation Technical / Financial
13. Fluctuation in exchange rate Economical
14. Delay in land acquisition Legal
15. Design errors & omissions Technical
16. Effect of weather Environmental
17. Non payment of completed work Financial
18. Delay in confirmation from client on cost, quality, time, Technical
etc
19. Technology transfer disputes Technical/Political
20. Inadequacy in documentation Technical/Legal
21. Increase in taxes/charges Economical
22. Shortage of material/labour Technical/Economical
23. Public interference and protest from environmental Social
activists
24. Conflicting national and state laws Legal/ Political
25. Incomplete design scope Technical
26. Conflict in drawings and specifications Technical
27. Permit/Approval related delays Legal/Environmental
28. Decision making process Technical
29. Change in site conditions Environmental
30. Lake of effective communication among the stakeholders Social
31. Contractual relationship among stakeholders Legal
32. Discrepancies in contract Legal
33. Improper planning Technical
34. Prejudiced options and decisions Social/Environmental
35. Conflicts in execution of work order by subcontractor Technical
36. Mistake and errors during construction work Technical
37. Delay in dispute resolution Technical / Legal
38. Experience of project team Technical
39. Delay in financial closure Financial
40. Bureaucracy in tendering method Legal
41. Bureaucracy in the stakeholder's organization Social
42. Quality assurance and quality control Technical
43. Relationship between management and labour Technical / Social
44. Changing of bankers policy for loans Financial / Economical
45. Non availability of finance from equity participants in time Financial
46. Number of construction projects going on at the same time Technical
47. Commencement of work without proper site investigation Technical

4.1. Sampling Size

Sampling is defined as a process of selecting a section to represent a whole. In most instances
it is impractical to conduct a census as conducting a census could be very expensive and time
consuming.
The Sampling Technique
The sampling techniques adopted in this study for the selection of the respondents were
purposive and convenient. The respondents were purposively selected because specific data
and information were needed by the researcher to measure the involvement level of the
respondents. Significantly, the process of obtaining the members to be involved in the study

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 Identification of Risks Causing Time and Cost Overrun in Roads and Highway Projects in India

was very critical and central to ensuring that each unit within the sample population has an
equal chance of being selected. The core principle is that, the sample size should have features
which reflect the entire population, such that conclusions can be generalized for the entire
population. The sample size for the study was determined by using following formula:-
( z / 2 ) 2 pq
n
E2

Where
2
n = number of items in sample ( z / 2 ) = square of the confidence level in standard error
2
units p = estimated proportion of successes q = 1 – p, or estimated proportion of failures E
= square of the maximum allowance for error between the true proportion and the sample
proportion
z 2
Hence at  / 2 = 1.645 (Z score 90% confidence interval is 1.645) , E = 10% and p= 0.5
1.6452 (.5)(.5)
n  67.65
0.12

A sample size of 68 professionals is the were obtained by using the above formula.
However, due to the time constrain a sample size of 53 professionals were used in this paper.

5. DATA ANALYSIS
Data analysis can be defined “as consisting of three concurrent flows of activity: data
reduction, data display and conclusion drawing/verification” Data analysis of this thesis was
based on the three steps defined by reduction, data display and conclusion. After completing
the data collection, the data was analysed using both descriptive data and adopting the relative
importance index to find the ranking factor among all the factors articulated from the
literature review. Relative importance index formula: -

RII 
W
A N
Where
W = the weight given to each factor by the respondents and ranges from 1 to 5
A = the highest response integer = 5
N= the total number of respondents

5.1. Data Collection Instrument

Questionnaire was prepared for the primary data collection. A questionnaire is a pre
formulated written set of questions to which respondents record their answers, usually within
rather closely defined alternatives [13]. The questionnaire was designed specifically to solicit
responses from professionals involved in PPP based roads and highway projects. Questions in
a questionnaire could be open-ended, close-ended or a mixture of the two, based on the
expected outcome. Due to the research paradigm adopted the main questions in the
questionnaire were designed to be close ended. The questionnaire used in this research was
consisting of two parts that is part A and part B. Both part combine contains 6 questions.
'Question 1' sought to investigate characteristics of the professionals; their institution of work;
position held amongst other issues. 'Question 2' investigate the professional's organization
type (Contractor, Client, and Consultant). 'Question 3' investigate the personal experience of
the professional about completion of highway projects within budget time and cost. 'Question

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 Siddesh Pai, Bijayanand Patnaik, Dr. Ankur Mittal and Dr. Neeraj Anand

4' investigates which project phase of PPP based highway project is most risky and the
professional were asked to rank the phases on the bases on their experience. 'Question 5' and
'Question 6' investigates impact of the factors responsible for time and cost overrun in PPP
based roads and highway projects and the professional were asked to rank based on the likert
scale of 5 how significant the factors are.

6. FINDING AND DATA ANALYSIS

A total 800 questionnaires were distributed through online survey site, out of which only 65
were returned and only 53 were found valid for the data analysis. These valid questionnaires
used for the analysis yielded 6.625% response rate. This indicates that, the response rate was
quiet low. However, respondents were seasoned group of contractors, consultants and clients
having a average experienced of 20 years in roads and highway projects.

Table 4
Organization demographics
Organization Type Number of responses Percentage
Clients 12 22.64
Contractors 7 13.21
Consultants 34 64.15
Total Respondents 53 100
Table 4 shows that 63.46% of the respondents were consultants. Thus the findings of the study reflect
more of the views of those who are neither part of the public sector nor the private sector.

6.1. Findings and Analysis of Question 3

As mentioned above that the question 3 investigate the personal experience of the professional
about completion of highway project within budget time and cost. It was a open end question
and question was: -
"From past experience of respondent the percentage of roads and highway project
completed within budget time and cost?". From this question, it's been discovered that only
30.58% PPP based highway projects are completed within budget time and cost.

6.2. Findings and Analysis of Question 4

As mentioned above that the question 4 investigate which project phase of PPP based
highway project is most risky. In this questions respondent were asked to ranked the project
phases, that is development phase construction phase operation phase and project life cycle on
the bases of their experience, as 1=most risky, 2=very risky, 3=somewhat risky and 4=least
risky.

Table 5
Analysis of project phases of PPP based highway project w.r.t risk involved in them
Phase of roads and highway 1=most risky, 2=very risky, 3=somewhat risky and 4=least risky.
projects 1 2 3 4
Development Phase 36.54 28.85 13.46 21.15 Percentage of
Construction Phase 46.15 32.69 11.54 9.62 respondent's rank
Operation Phase 5.77 26.92 51.92 15.38
Project Life Cycle 11.54 11.54 23.08 53.85

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 Identification of Risks Causing Time and Cost Overrun in Roads and Highway Projects in India

From the interpretation of the survey data, it's been found that construction phase of the
PPP based highway project is the most risky phase as 46.15% of respondent ranked it
1(1=most risky) while project life cycle phase is least risky as 53.85% of respondent ranked it
4. (4=most risky)

6.3. Findings and Analysis of Question 5

Question 5 investigates the impact of are factors(types of risks), that is financial factors, legal
factors, environmental factors, technical factors, social factors and political factors, on PPP
based roads and highway projects in relation to time and cost overrun and the respondent were
asked to indicate the impact of each factor on PPP based highway projects on a 'Likert rating
scale of 1 to 5'with 1 = 'Negligible Impact' 2 = 'Low Impact' 3 = 'Moderate Impact' 4= 'High
Impact' and 5 = 'Very High Impact'. This 5-point scale was chosen to prevent respondents
from providing neutral answers. The factors are ranked on the bases of their RII which is
calculated as per the formula mentioned earlier.
TABLE 6

Impact of type of risk on PPP based highway project in terms of time and cost overrun

S.No. Factors RII Rank

1 Financial Factors 0.80 1

2 Environmental Factors 0.72 2
3 Political Factors 0.71 3
4 Legal Factors 0.68 4
5 Social Factors 0.63 5
6 Technical Factors 0.62 6

Table 4.3 summarizes the results of the analyses. The table shows of all 'Financial
Factors‟ are the highest ranking factor with RII of 0.80. This is may be due the success of a
PPP based project depend upon its financial viability. In addition to that it matches with the
results of analysis conducted by researchers in different country. The table 4.3 also indicates
that the respondents ranked 'Environmental Factors‟ as second highest factor with RII of
0.72and „Political Factors‟ got the third rank with RII of 0.71. 'Legal Factors' and 'Social
Factors' got fourth rank with RII of 0.68 and fifth rank with RII of 0.63 respectively by
respondents while 'Technical Factors' is least impactful factor with RII of 0.62.

6.4. Findings and Analysis of Question 6

Question6 investigates the impact of are factors(risks) which may fall under financial, legal,
environmental, technical, social or political risks, on PPP based roads and highway projects in
relation to time and cost overrun and the respondent were asked to indicate the impact of each
factor on PPP based highway projects on a 'Likert rating scale of 1 to 5' with 1 = 'Negligible
Impact ' 2 = 'Low Impact ' 3 = 'Moderate Impact' 4= 'High Impact' and 5 = 'Very High
Impact'. In compare to analysis of question 5, analysis of question 6 is much deeper as total
47 factors were considered from all 6 types of risk categories. The factors are ranked on the
bases of their RII which is calculated as per the formula mentioned earlier.

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 Siddesh Pai, Bijayanand Patnaik, Dr. Ankur Mittal and Dr. Neeraj Anand

Table 7
Impact of type of risk factors on highway project in terms of time and cost overrun
Factors RII Rank
Delay in land acquisition 0.88 1
Cash flow during construction 0.81 2
Mismanagement by the contractor (Finance, Supplier, Support, Sub- 0.77 3
contract)
Improper planning 0.76 4
Change in the scope of project/extra work 0.75 5
Underestimation 0.75 6
Commencement of work without proper site investigation 0.75 7
Permit/Approval related delays 0.74 8
Decision making process 0.73 9
Experience of project team 0.73 10
Political interference 0.72 11
Government policies (laws and regulations) 0.72 12
Lack of equipment/labour efficiency 0.72 13
Non payment of completed work 0.71 14
Non availability of finance from equity participants in time 0.70 15
Delay in dispute resolution 0.70 16
Delay in financial closure 0.69 17
Political situation of the country/state 0.68 18
Shortage of material/labour 0.68 19
Design errors & omissions 0.67 20
Public interference and protest from environmental activists 0.67 21
Discrepancies in contract 0.67 22
18.Delay in confirmation from client on cost, quality, time, etc 0.66 23
Incomplete design scope 0.66 24
Lake of effective communication among the stakeholders 0.66 25
Change in site conditions 0.65 26
Conflict in drawings and specifications 0.64 27
Contractual relationship among stakeholders 0.64 28
Additional works 0.63 29
Bureaucracy in tendering method 0.63 30
Conflicts in execution of work order by subcontractor 0.62 31
Bureaucracy in the stakeholder's organization 0.62 32
Inflation 0.61 33
Prejudiced options and decisions 0.61 34
Mistake and errors during construction work 0.61 35
Changing of bankers policy for loans 0.61 36
Force majeure (Act of God) 0.60 37
Quality assurance and quality control 0.60 38
Inadequacy in documentation 0.59 39
Political Force majeure (War, riot, terrorism, strike, etc) 0.58 40
Fluctuation in exchange rate 0.58 41
Number of construction projects going on at the same time 0.57 42
Relationship between management and labour 0.56 43
Conflicting national and state laws 0.55 44
Effect of weather 0.54 45
Technology transfer disputes 0.52 46
Increase in taxes/charges 0.51 47

Table 7 summarises that 'Delay in land acquisition', 'Cash flow during construction',
'Mismanagement by the contractor (Finance, Supplier, Support, Sub-contract)', 'Improper

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 Identification of Risks Causing Time and Cost Overrun in Roads and Highway Projects in India

planning' and 'Change in the scope of project/extra work' are the top 5 risk factors which have
the greatest impact on the PPP based highway projects while 'Increase in taxes/charges is the
risk factor which have least impact on PPP based highway project.
The table shows that 'Delay in land acquisition' is the highest ranking factor with RII =
0.88, which means it is the factor which have the greatest impact on PPP based roads and
highway projects in terms of time and cost overrun. As mentioned in the introduction part of
this thesis that the land acquisition is one of the factor that makes roads and highway projects
risky for private participants as land acquisition for road project takes very long time. In fact,
land acquisition is a major problem for any road construction project as a road project is not
like a port or an airport or a power plant which requires large continuous parcels of land, a
road would be along a specific route and only certain portions of the lands parcels would be
required. Therefore, the number of land parcels to be acquired is relatively higher in road
projects and a failure to acquire even one small segment of the required land parcels would
retard the progress in the implementation of the road project.
In India, NHAI have sufficient legal framework for land acquisition for National Highway
Projects while each state has their own legal framework for land acquisition for State
Highway Projects which may not be as efficient as NHAI's. However, delay in land
acquisition by NHAI tanks place may be due to the delay in approvals from forest department,
shifting of utilities and lack of coordination between NHAI and state authorities.
The respondents ranked 'Cash flow during construction' as second highest factor with RII
of 0.81. Maintenance of cash flow in PPP based roads and highway project is very difficult as
concessioner is spending on the construction of whole project from his own pocket and
construction of roads and highway projects takes huge amount of money and time. Therefore,
little change in economical and financial conditions such as inflation and fluctuation of
exchange rates can affect the cash flow during construction.
'Mismanagement by the contractor (Finance, Supplier, Support, Sub-contract)' got the
third rank with RII of 0.77. Any type of miss management by contractor may jeopardize both
cash flow and profits.
'Improper planning' obtained the fourth rank with RII of 0.76. As mentioned above that
roads and highway projects take huge amount of time and cost. Therefore, improper planning
at any phase of project by any participating party will result in time overrun, cost overrun or
change in scope.
'Change in the scope of project/extra work' acquired the fifth rank with RII of 0.75.
Change in the scope means alteration that requires a modification in a project's cost or
schedule, it depends upon many factors but the major reason behind change in scope are
improper feasibility study, faulty DPR, change in site conditions, environmental concerns,
discrepancy in contract documents and change in design.
From observation of analysis of results of question 5 and 6, it can be concluded that there
is very little agreement between them as the analysis of question 5 shows that 'Technical
Factors‟ are least impactful factors on the other hand analysis of question 6 shows that
'Mismanagement by the contractor (Finance, Supplier, Support, Sub-contract)', 'Improper
planning' and 'Change in the scope of project/extra work' are 'Technical Factors' and bottom 3
of top 5 most impactful factors. This may suggest that risk can't be quantified in broader
sense.

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 Siddesh Pai, Bijayanand Patnaik, Dr. Ankur Mittal and Dr. Neeraj Anand

7. CONCLUSIONS AND RECOMMENDATIONS

The objective of this paper were to identify the risk factors which are responsible for time and
cost overrun in road in PPP based roads and highway projects and to identify which of them
have the most impact in terms of time and cost overrun over PPP based highway project.
Total 47 major risk factors which results in time and cost overrun were identified through
literature review and a survey was carried out to identify the most impactful risk factors
among these 47 major risk factors which results in time and cost overrun.
The analysis of results of the survey revealed that delay in land acquisition, cash flow
during construction, mismanagement by the contractor (finance, supplier, support, sub-
contract), improper planning and change in the scope of project/extra work are the top 5 risk
factors which have greatest impact on PPP based roads and highway project in terms of time
and cost overrun.

8. RECOMMENDATIONS
Following recommendations should be considered by the government and private participant
for the successful implementation of PPP based roads and highway projects:-
 Government authorities should acquire the whole and or at least 80% of the required land
prior to concession.
 Since land is a state subject in India, each state government should establish a land acquisition
authority for PPP projects which should take advance possession of the notified land, collect
development rights build rehabilitation centres, settle the land disputes etc.
 Each state government should adopt NHAI's legal framework for land acquisition for highway
projects.
 Government should establish financing facilities which provides temporary liquidity to
concession or contractor to deal with specific risks such as inflation and cash flow problem.
 Developer and contractor should use cash flow management software to gain a general idea
about what income and expenses should be expected in the future.
 Contractor should use proper labour, equipment and material management techniques as it
helps in maintaining cash flow and increases the productivity.
 Developer and contractor should maintain contingency fund for emergency situations.
 Developer and contractor should improve the managerial skills of their construction teams by
conducting proper trainings and workshops.
 Developer and contractor should use proper project planning software such as PRIMAVERA
and MS Project
 The Government should establish a single widow clearance system for PPP based highway
projects to minimize the permit/approval related delays
 In order to understand the site conditions and for the preparation of estimate, the developer
and contractor should investigation the site properly before undertaking the work.
 DPR should be made based on detailed survey and investigations, design and technology
choice with minimal errors, so that no time and cost overrun takes place due to changes in
scope of work or quantities during construction phase.

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 Identification of Risks Causing Time and Cost Overrun in Roads and Highway Projects in India

9. FUTURE SCOPE OF RESEARCH

There are number of areas related to time and cost overrun in PPP based highway project
where of further research is required. The following recommendations are therefore made for
future research:
 Future research on the identification of probability of occurrence of major risks which results
time and cost overruns in PPP based highway projects.
 Future research on the impact of risk management practice on PPP based highway projects.

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