Factors affecting construction costs in Thailand: A structural equation modelling approach

Abstract

Cost performance in the construction industry is important to enhance industry standard and grow a country's economy. This paper examines the key factors affecting cost performance in Thai construction projects, specifically at the pre-construction and construction phases. A questionnaire survey is used to gather data for the exploratory factor analysis (EFA) and structural equation modelling (SEM) analysis used in this study. The EFA technique extracted the key factors affecting construction cost, while the SEM revealed the interactions and causal relationships between those key factors. The EFA results confirm seven key factors: three at the pre-construction phase: lack of coordination, design management, and unclear client requirements; and four at the construction phase, including site management, resources, labour capability and contract-related. The SEM results confirm strong relationships, directly and indirectly, between the three key factors at the pre-construction phase. Good coordination between stakeholders result in less design errors and clear client requirements. The influences that the three factors at the pre-construction phase have on the four factors at the construction phase are also supported. The result highlights that unclear client requirements cause poor site management and cost overrun, which may lead to breach of contracts. Construction companies can use this study results to better plan for cost improvement by focusing on the identified pre-construction factors, as they could lead to good cost management during the construction phase.

Keywords

• construction cost
• exploratory factor analysis
• structural equation modelling