Time & Cost Overrun in Construction of a Steel Plant in Asia: A Case Study

The paper presents a case study to investigate the delay, causes and its implications on the management & development of a steel plant project. Delay and cost overruns are common in construction projects and are not an exception. The results of the study reveal the main causes of delay and cost overruns in the completion of the project. Effective project planning, controlling, and monitoring are must to enhance project performance to minimize or avoid time and cost overruns in projects of similar nature.

Ashok Kumar, B.Sc. Engg.(Mech) & Keshav Ashok, B.E.(Mech)

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Introduction

Managing projects encompasses situations or problems that may appear as planning issues, but may be a result of corporate culture, lack of line management support, procurement delay, land issues or may be even lack of contemporary project management tools and techniques.

The present case describes the management of the development of a $52.52 million Cold Rolling Mill (CRM) plant in Asia. The exact location of the CRM plant and names of the participants cannot be provided as the client wanted to remain anonymous.

Project Environment

In late 1990's, a company in Asia undertook feasibility studies to build a CRM plant comprising of 6 Hi-Reversing Mill units to meet the growing demand of steel in the country. With the changing project scenario, the client opted for Management Oriented Procurement (MOP) strategy with options like Design & Build, and other forms which are discussed at length below.

Project Implementation

The project has been divided into 10 work packages (see Table 1). The paper aims to investigate the level of success of the work packages with respect to project environment, contract forms used, organizational format adopted by contractors and planning & control system. The paper emphasizes on the issues that arose because of the delay caused due to the attitude of different stakeholders. The project environment led the client to choose Management Oriented Procurement System. However, the extent of design information provided by the client for the different work packages differed. These gave rise to 4 formats, viz. Develop & Construct, Item rate with single tender, Item rate with 2-stage tender, Turnkey, etc. The paper analyzes the project management of the CRM plant project. The outcome of the analysis has been submitted to the clients so as to adopt the successful practices of the project and learn from the failures to ensure that their projects have a higher chance of success.