In Ethiopia, many projects experience cost overrun and excessive cost beyond estimation upon completion. As capital projects are expanding at a high pace nationally, it has become challenging to finalize them as per the initial cost estimation or budget.
Taking the scarcity of resources into account, project delays have become one of the major hurdles of better economic performance. As to Haji Ibsa, Communication and Public Relations Director at the Ministry of Finance, project delays have caused 43 billion Birr cost overrun during the past ten to fifteen years.
Inappropriate feasibility studies, poor site management, lack of experience, clients’ inadequate financial resources and payments, poor capacity of subcontractors and shortage of input material, labor and equipment supply have been the major reasons for project delays. Generally, the factors that cause project delays vary from project to project and from one circumstance to another, he said.
The causes of cost overrun might also be inflation or an increase in the cost of construction materials as well as poor planning and coordination. A successful project is completed on time as per the schedule with budget specifications. But, project delays have become a common occurrence particularly in the construction and similar industries.
Delays have costly, risky and undesirable consequences on project success in terms of time, cost, and quality safety. To control and check this and ensure efficient budget utilization, the ministry has prepared a profile of capital projects to put in place an effective mechanism for evaluation and monitoring. This year alone, Project Profiles of more than one thousand projects have been prepared.
A new directorate has also been set up in the Ministry to evaluate and monitor the progress of projects and prepare physical and financial performance report, Haji told The Ethiopian Herald. Inefficient expenses on unnecessary hotel and conference hall rents and purchase of electronic materials are the major factors for extra expenditures.
The systems the Ministry put in place have helped to save up to 600 million Birr unnecessary or inefficient expenditure. The launching of an urgent auditing system based on tip-offs is also supporting the effort to control overspending of capital that socioeconomic development. Following the ongoing economic reform, the ministry has put in place various mechanisms to discourage cost overrun.
If all the initiatives become successful, the country would save billions of dollars that would otherwise be lost in cost overrun. This, in turn, would speed up the pace of infrastructural development to boost economic performance and bring about meaningful change in the lives of the people.
The Ethiopian Herald, March 14/2019
BY TSEGAYE TILAHUN
