Examining causes for cost overruns in projects at Transnet Port Terminals.

Abstract

Cost overruns in projects is a problem worldwide. Many State Owned Enterprises fail to complete projects within the allocated time and budget. Cost overruns have severe consequences for organisations, tax payers and the economy. Transnet Port Terminals is no exception to this problem. It incurs millions of rand annually on project cost overruns. The aim of this study is to quantify the project cost overruns for TPT, incurred during the 2015/16 to 2018/19 financial years (FY) and to examine the causes of the cost overruns. Secondary data from the TPT Projects Repository and project reports like business cases, minutes, and resolutions are analysed using thematic analysis and descriptive statistics. Fifteen interviews conducted with Project Managers, Business Case Writers, Planners, Engineers and Financial Managers provide practitioner insights on the causes of cost overruns. The results reveal that in the period under review, TPT had 22 projects with cost overruns, amounting to: R732 million (2015/16 FY); R32 million (2016/17 FY); R1,2 billion (2017/18 FY) and R83 million (2018/19 FY). The 22 projects exceeded their original budgets by a range between 10% and 200%. The study reveals that the prominent causes of project cost overruns at TPT are: (1) a lack of project management skills, especially cost engineers and quantity surveyors; (2) inadequate engineering studies; (3) project approval and procurement delays; (4) poor maintenance regime; (5) poor scope definition; and (6) overregulation of the supply chain process. The main recommendations of the study are: (1) TPT should capacitate the projects department with relevant essential skills which include amongst others, cost engineers and quantity surveyors to assist with bills of quantities and budget estimation. (2) Complex projects should be supported by adequate engineering studies to ensure that the scope of work is complete and robust. (3) TPT should develop a strong relationship with National Treasury in order to find ways to deal with overregulation and inflexibility in the supply chain process. (4) TPT’s maintenance department should adopt the Asset Management Life Cycle in order to ensure that assets are professionally and adequately mantained throughout their useful lives.