analysis of cost and schedule performance of international development projects

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International Journal of Project Management 28 (2010) 68–78

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Analysis of cost and schedule performance of internationaldevelopment projects

Kamrul Ahsan a,*, Indra Gunawan b

a Department of Management, Faculty of Business, Auckland University of Technology, Private Bag 92006, Auckland 1142, New Zealandb Department of Mechanical and Manufacturing Engineering, Auckland University of Technology, Private Bag 92006, Auckland 1142, New Zealand

Received 19 June 2008; received in revised form 20 January 2009; accepted 10 March 2009

Abstract

This study focuses on cost and schedule issues of international development (ID) projects. Through empirical analysis we examine IDproject cost and schedule performance and the main reasons for poor project outcome. We look at 100 projects that are sponsored by theAsian Development Bank and hosted by several Asian countries. The study identifies that most late projects experience cost underrun –an unusual cost and schedule variation relation in projects. Further we identify the root causes of project delay and cost underrun.Research findings will benefit ID project professionals, organizations and the ID project body of knowledge. The study can be extendedto analyse other developing country projects sponsored by different donors.� 2009 Elsevier Ltd and IPMA. All rights reserved.

Keywords: International development project; Project performance analysis; Cost and schedule; Causes of delay

1. Introduction

Public sector development projects or programs specifi-cally designed for economic and social needs of developingcountries, usually financed by a donor are known as inter-national development (ID) projects. These projects areeither implemented by recipient governments under a bilat-eral agreement with the donor country, or through an‘implementing partner’ of the donor – frequently a non-governmental organization or professional contractor [1].

ID projects differ from industrial or commercial pro-jects. The objectives of ID projects by definition, concernpoverty alleviation and improvement of living standards,environment and basic human rights protection, assistancefor victims of natural or people caused disasters, capacitybuilding and development of basic physical and socialinfrastructures [2, p. 74]. Although there are some hard ele-ments within ID projects, these projects are frequently con-

0263-7863/$36.00 � 2009 Elsevier Ltd and IPMA. All rights reserved.

doi:10.1016/j.ijproman.2009.03.005

* Corresponding author. Tel.: +64 9 921 9999x5477.E-mail addresses: [email protected] (K. Ahsan), indra.gunawa-

[email protected] (I. Gunawan).

cerned with soft issues like social or human development [1,p. 364]. The soft objectives of ID projects are usually muchless visible and measurable compared to industrial or com-mercial projects. The intangibility of ID project objectivesand deliverables raise a special challenge in managing andevaluating projects that require adaptation of the existingproject management body of knowledge [2, p. 74].

One important characteristic of most ID projects is thecomplex web of the many stakeholders involved [3]. Indus-trial and commercial projects usually have two key stake-holders, the client, who pays for the project and as aresult benefits from its deliverables, and the contractor orimplementing unit, who is paid for managing the projectto achieve the desired results. ID projects, in contrast, com-monly involve three separate key stakeholders, namely thefunding agency that pays for but does not directly use pro-ject output, the implementing unit, and the target beneficia-ries who benefit from project output but usually do not payfor the project. Most ID projects are not concerned withprofitability and do not have a business focus. The operat-ing environment and culture of the host country also makeID projects different from traditional business projects and

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K. Ahsan, I. Gunawan / International Journal of Project Management 28 (2010) 68–78 69

make traditional project management tools in the devel-oped world less appropriate [4].

Foreign loans from donor institutions, developmentbanks and host country organizations play a dominant rolein financing ID projects. Most ID projects are financed bythe five major multilateral development banks (MDBs),which are the World Bank Group, the Inter AmericanDevelopment Bank, the Asian Development Bank(ADB), the African Development Bank and the EuropeanBank for Reconstruction and Development, and the 21member countries of the Organization for Economic Co-operation and Development. According to the UNDP’sHuman Development Report 2004, the 49 Least DevelopedCountries (LDC’s) in the world received US$55.15 billionin official development assistance in 2004 [2, p. 72]. Thisamounts to 8.9% of the LDC’s total GDP, which is mostlyallocated for ID projects. The main lenders and the donorcountries have over $200 billion in outstanding commit-ments allocated for economic and social development pro-jects in over 120 countries. The largest lender among thefive MDBs is the World Bank, which had 60% in outstand-ing commitments, earmarked for 1508 projects in 1998/99,while the four other MDBs together accounted for an esti-mated 40% of the $200 billions in outstanding commit-ments [5, p. 4]. For Asia-Pacific countries, the ADBcontributed US$123.2 billion for 2002 projects during theperiod 1966–2006 [6].

There are variations in project management knowledgeand practices between industries, countries and applicationareas [7]. Within project management literature the mostfrequently addressed industry is construction [8–10].Recently, ID projects are gaining more importance amongproject professionals due to their nature and contributionto developing countries. The Project Management Institu-tion (www.PMI.org) identifies that most ID projects facetime and cost overrun and require major costly re-engineer-ing. Within the PMI there is no body of knowledge, spe-cialized global standards or certification, nor is there anytraining available for ID projects. Robert Youker, in hispresentation to the first Global Project ManagementForum in 1995 in New Orleans, discussed seven areas ofID project management and concluded that in almost everyarea, current project management standards and certifica-tions need to be extended to cover ID project management[5]. The International Development Special Interest Groupof PMI shares this vision which has already been includedwithin their 5-year strategy.

Many research articles have been published for con-struction and manufacturing sector projects, but the inter-national development and aid sector is less represented inproject management literature [11]. From the perspectiveof African countries, Diallo and Thuillier [12] highlightthe unique characteristics of ID projects and identify theinfluence of interpersonal relationships, trust and commu-nication on project success. Muriithi and Crawford [13]discuss approaches to project management in Africa withimplications for ID projects. It is argued that project man-

agement concepts are not universally valid because they arebased on certain assumptions about what governs humanbehaviour and these assumptions are not valid in some cul-tures. The tools and techniques of themselves will not deli-ver successful projects if they run counter to cultural andwork values. Palmer [14] points out that in developingcountries, projects run down much faster due to generalabsence of routine maintenance. Quartey [15] exploresand discusses the issues of infrastructure development pro-jects for developing countries. The main emphasis is onimplementing the build-operate scheme in these countries.Kwak [16] identifies some ID project risk factors andemphasises risk management strategies during the projectinitiation and planning stage for project success. Youker[3] identifies ID project lessons learned in managing andimplementing World Bank Group sponsored projects.Youker [17] further suggests that ID projects go througha typical lifecycle with relatively distinct stages of concep-tualization, planning, implementation and closing. Kwak[18] identifies several critical success factors of ID projectsthat cover political, legal, cultural, technical, managerial,economical, environmental, social, and corruption issues.Recently, Khang and Moe [2] identify sets of ID projectsuccess criteria and factors in phases of the project lifecycle. Existing research [3,11,13,14,16,18,19] points to lackof empirical research in identifying current practices andperformance of ID projects.

Project completion within time, cost and scope, andmaintaining quality throughout are very common dimen-sions of success factors mentioned by project managementprofessional bodies and the research community. It isencouraging that research focus on project evaluation isincreasing [9] and research interest in the areas of perfor-mance/earned value management increased more than100% in 2000s [20]. Time and cost performance studieshave been conducted for several developing countries andfor different types of projects. Literature identifies develop-ment projects as well-known for over-running cost andschedule budgets [21–23]. Bromilow [24], Kaka and Price[25], Kumaraswamy and Chan [26], and Chan [27] attemptto build an empirical relationship between time and costperformance and predict construction time is a functionof cost. Raftery [28] pointed out that construction projectstend to have a poor reputation for excessive time and costoverruns. Bromilow [29] found from 309 Australian build-ing projects conducted over the years 1964–1967, only 37projects (12%) met their estimated completion times. Fortransport projects, Flyvbjerg et al. [21] found that costescalation was strongly dependent on the length of theimplementation phase. Odeck [31] identified mean costoverrun for Norwegian road construction projects at7.88% and overrun predominant among the smaller pro-jects (costing less than 15 m NOK) compared to the largerones. Kaming et al. [30] identified the root causes of timeand cost overrun for Indonesian high-rise constructionprojects and concluded the problems were relevant to otherdeveloping countries. For Nigeria, research conducted by

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70 K. Ahsan, I. Gunawan / International Journal of Project Management 28 (2010) 68–78

Mansfield et al. [32] investigated the causes of constructionproject delays and cost overrun. For Ghana, Frimponget al. [33] investigated the causes of time and cost overrunon ground water construction projects. Recently Kalibaet al. [34] identified the causes of schedule delay in roadconstruction projects of Zambia as follows: financial pro-cesses and difficulties on the part of contractors and clients,contract modification, economic problems, materials pro-curement, changes in drawings, staffing problems, equip-ment unavailability, poor supervision, constructionmistakes, poor coordination on site, changes in specifica-tions and labour disputes and strikes .

ID project performance is not well studied in projectmanagement literature. The performance evaluation ofID projects is as important as for other projects. Howeverthe evaluation criteria are slightly different from other pro-jects. Diallo and Thuilleir [35] first outlined a comprehen-sive set of evaluation criteria that includes satisfaction ofbeneficiaries, conformation of goods and services pro-duced, achievement of project objectives, completion ofthe project in time and within budget, receiving a highnational profile and receiving a good reputation amongprincipal donors. Although the study is based on Africancountries, the findings can be of use to ID projects of othercontinents. Morris and Hough [36] found 63% of 1778 dif-ferent type of projects funded by the World Bank between1974 and 1988, experienced significant cost overruns.

The literature mentioned regarding project performanceevaluation, focuses on time and cost performance of partic-ular local or international development projects. To ourknowledge there is no research that has evaluated ID pro-jects for several countries in terms of time and cost perfor-mance. The purpose of this study is to explicate unexploredissues in ID project time and cost performance throughempirical research. The basis of the study is publishedpost-project reports of the ADB. By analyzing the post-project reports we investigate project size in terms of bud-get and duration, project performance in terms of time andcost, and root causes of poor performance. The outline ofthe paper is as follows. In the next section we give a formaldescription of ID projects with emphasis on project pro-cess, life cycle and classifications. In Section 3, we analyseresearch methods and project performance. Finally, theconclusion provides a summary of our study and recom-mendations for future research.

2. Formal analysis of ID projects

International development is conducted or sponsored byinternational organizations for an emerging, developing orleast developed country. Usually, projects that are gener-ated for international development are known as ID pro-jects. ID projects are also known as aid projects and area sub-sector of project management like other areas suchas information technology, education, construction andengineering, telecommunications, manufacturing, and theservice industries, e.g., legal, insurance, and finance [5].

The success of an ID project which is its long-term impacton the prosperity and development of the local populationdepends on how well it is prepared, and the policies behindits design [12].

2.1. ID project process

The process of the ID project is complex because thereare many parties involved. Typically this includes the len-der or donor, the Ministry of Finance of the host country,the client, stakeholders, a project management or coordina-tion unit and a multitude of contractors who carry outphysical implementation of most components and activitiesof the project. Overall performance of the ID projectdepends largely on these parties which are from differentcultures and have different objectives within the project.The client is a sectoral ministry or institution of the hostcountry. They are the official representative of all beneficia-ries, participate in the project assessment phase, and needto closely monitor the project implementation process.Considering several stockholders and project developmentand implementation processes, and literature from Rondi-nelli [19, p. 580] we construct an ID project network modelin Fig. 1. The solid arrows represent usual communicationbetween involved parties and the dotted arrows representlikely communication between parties. The donor is oftensolely involved in the process of project identification anddevelopment, resulting in local stakeholders feeling leftout [3]. Confirmation of donor funding is vital in ID pro-jects, and after funding approval the project implementa-tion unit starts work with a project manager.

2.2. ID project life cycle

Like other projects, ID projects have a project life cycle.ID project cycle is the preferred vehicle for the delivery offoreign aid to developing or newly emerging economies[37]. Youker [17] identified two generic project life cyclesfor ID projects; one from the point of view of the hostcountry and the other from the point of view of the donors.The key difference of the life cycles is the ‘financing’ phasefrom the host countries’ point of view. The host countryneeds to attract project financing from donor agencies.According to Youker’s generic project life cycle models,both parties (donor and host country) have a project iden-tification phase which should be undertaken together. It isfrustrating for the host country that project identification isoften dominated by donor choice rather than host countrypriority [17]. Rondinelli [19, p. 580] emphasises ‘an inte-grated project cycle’ and suggests 10 steps that a wellplanned project should proceed through. These are (1)identification and definition; (2) formulation, preparationand design; (3) appraisal; (4) selection, negotiation andapproval; (5) activation and organization; (6) implementa-tion and operation; (7) supervision, coordination and con-trol; (8) termination and completion; (9) dissemination of

ID Projects

Donor

Host country Ministry of

Finance

Other beneficiaries

Project implementation unit

Contractor/ Supplier

The client

Supporting firms or individuals

Fig. 1. ID project network model.


output and transition to normal administration; and (10)post-evaluation and follow-up.

We examine project life cycle steps of five different inter-national organizations: the World Bank, United NationsDevelopment Programme, Food and Agricultural Organi-zations, ADB and Islamic Development Bank. We ascer-tain that donor organizations follow their own style ofproject phases to explain the ID project life cycle. However,it is apparent that most organizations have five commonstages in the life cycle which are project identification, prep-aration, appraisal and approval, implementation and eval-uation. Realizing the existing phases of project life cyclesthis study suggests a project life cycle (Fig. 2) that will fitboth donor and host country.

In the proposed cycle there are five basic phases. Fordonor and host country, the first three phases are quitesimilar in name; however the purpose and activity of thephases depend largely on the parties. During these threephases, in many instances it is necessary to co-ordinateactivities between donor and host. Donors have theirown specific country strategy and host country projectobjectives should match with donor strategy. With the helpof donors, host country sector ministry, planning unit orthe Ministry of Finance, project profile and initial designis prepared. In the approval phase, the host country usuallyseeks approval from donors, and donors assess the projectplan and provide feedback about possible funding or sup-

Identification

Preparation and design

Approval Identification

Appraisal and approval

Preparation

For donor or sponsor

For host country government

Co-ordination

Phase 1 Phase 2 Phase 3

Fig. 2. Proposed ID

port. These three phases are basically the ID project plan-ning stage and take about half of total project duration[17]. Many projects disappear at this phase. After approval,the project work begins in the activation phase. At thisstage, a project manager is usually appointed and workcommences through a project implementation unit. Thelast phase of the cycle is evaluation which is a never-endingprocess; however there are standard post-project evalua-tions that are generally conducted by donors. For success-ful completion of a project it is important to focus on allstages from identification through to evaluation.

2.3. ID project classification

Identifying project type can be valuable in deciding howbest to manage the project. Typical characteristics of pro-jects are product projects, service projects and continuousimprovement projects [38]. The feature areas of projectclassification are based on size, application area, priority,degree of risk, cash flow, technology, business experiences,and deliverables. According to Turner and Cochrane [39]there are four types of project: type 1 projects where thegoals and methods are well defined such as in large engi-neering projects. Type 2 projects where the goals are welldefined but the methods of achieving them are not suchas in product development projects. Type 3 projects wherethe goals are not well defined but the methods are such as

Evaluation Implementation and operation

Both for donor /sponsor and host country government

Activation

Phase 4 Phase 5

project life cycle.


in software development projects. Type 4 projects whereneither the goals nor the methods of achieving them arewell defined such as in organizational development pro-jects. Since ID projects have definite objectives but themethods of achieving them are not well defined, theauthors think these projects can be classified as type 2 pro-jects. Crawford and Pollack [40] provided a framework foranalyzing project hardness and softness in response to aperceived need for more informed use of the terms hardand soft in relation to project management. Seven dimen-sions have been identified as the key issues: goal/objectiveclarity, goal/objective tangibility, success measures, projectpermeability, number of solution options, degree of partic-ipation and practitioner role, and stakeholder expectations.Based on these dimensions, we consider that ID projectspossess hard and soft aspects of projects.

ID projects have a goal of reducing poverty and covermany sectors in both soft and hard areas. Hard projectsinclude agricultural, infrastructure development, watersupply and sanitation and examples of soft projects areresettlement, basic health care, education, social welfareand capacity building [2,3,5,16]. Even for projects involv-ing development of physical infrastructure and facilities,the ultimate soft goals of serving sustainable social andeconomic development always have a priority in the projectevaluation by key stakeholders [2, p. 74]. According toYouker [3], ID projects are medium to large size projectsor programs. In terms of size, this means the dimensionof the project in dollar value, duration, number of peopleon the project, or a combination. Sometimes ID projectsare classified based on priority. Priorities are in terms ofhumanitarian need, emergency situation, or socio-eco-nomic need. ID project deliverables are goods and services.Most ID projects are initiated for infrastructure and socialdevelopment, and are design-develop-build-deliver projectswhere monetary benefit is not the prime objective [15].

3. Research procedure and data analysis

Our research is based on secondary data from ADBpost-project appraisal reports which have been archivedby the ADB as a knowledge base of ID projects.

Research based on secondary data offers great opportu-nities for new studies in operations and supply chain man-agement [41–44]. Within the project management arearesearch based on archival or secondary data is promising.Sun and Meng [45], identify that for construction projectsout of 101 reviewed journal articles, research method usingdocumentation and records of completed projects is 49.There are several advantages to using this kind of data inproject management and for ID projects. Firstly, becauseof the temporary nature of projects it is difficult to obtainnecessary past project data from primary sources. Sec-ondly, this data is widely available from a source and lessexpensive to analyse [41]. Thirdly, data sourced fromarchives is even more objective than primary survey datasince it is free from contamination by respondent percep-

tions and/or memories of the phenomenon of interest[46]. On the other hand, of the major limitations data fromcomputers or reports are not always accurate, and resultsdepend on quality and comprehensiveness of projectreports. Many data (e.g., financial reports) are quite noisy,making statistical significance of hypothesized relation-ships hard to establish [41, p. 342]. Considering the abovebenefits and limitations we consider ADB project comple-tion archival data as a good source for credible research.

A project is a temporary endeavour and usually aftercompletion project team members and key personnel leavethe project. Furthermore, many projects do not conductpost-project appraisal and for those projects it is very hardto find historical project data. However, if projects system-atically write and store a project appraisal report, it will bebeneficial to learn about project process and managementthroughout the life cycle and for use in future projects.

The ADB plays an important role of donor for develop-ment projects. Usually, the ADB carefully and systemati-cally prepares implementation manuals and detailed post-project evaluation reports for public and private sectorprojects and programs. The post-project appraisal reportis prepared at the end of the project to record projectrelated practices, learned lessons, and performance inregards to ‘triple constraints’ – scope, time and cost prac-tices. Individuals or organizations use these project recordsfor future project planning and research. The results of theproject appraisal are published every year and are availableto the public. The report is prepared under the direction ofthe project manager, incorporating information providedby the consultant and contractor as appropriate. Gener-ally, upon completing the project, the executing agencysubmits its own completion report to the ADB and within12–24 months ADB operations staff visit project site andprepare the project completion report [47].

As the ADB deals with Asian country projects, ourfocus is on Asia. Among the countries studied two areemerging economies: China and India; one is a developingeconomy: Thailand and one is a least developed economy:Bangladesh. These countries represent almost 50% of theworld population where development is an ongoing pro-cess through ID projects. As of July 2007, for these fourcountries we found 100 project reports from the ADBwebsite. The percentage of data representation amongthe countries is China 30%, India 20%, Thailand 19%and Bangladesh 31%. The studied projects were completedbetween 1986 and 2007 and are from different areas ofdevelopment such as agriculture, infrastructure (road con-struction, electricity generation, and telecommunication),public health, financial sector, social welfare, environmentand education. We gather project duration, cost, and per-formance data from project budget, schedule and perfor-mance related tables, charts and figures. We analysenumerical data in the form of descriptive statistics andcauses of delay in the form of charts, tables and discus-sion. Other descriptive information has been collectedfrom the project reports.


3.1. ID project performance analysis

3.1.1. Project duration and cost

This study addresses performance issues of ID projectsin terms of the project elements of time and cost. Todescribe the project time parameter we consider projectplanned duration and actual duration. There are also twocommon parameters to check budget performance, whichare planned budget and actual cost. For data of each coun-try we determine the mean and standard deviation of theseparameters. In general, we find that most of the studiedprojects are lengthy in terms of duration and take moretime than expected to complete. Further details are illus-trated in Table 1.

It can be seen from time performance data in Table 1that for all countries the average estimated project durationis 55 months and standard deviation is 17.5 months. On theother hand, actual average project duration is 72 monthsand standard deviation is 28 months. Compared toplanned project duration, average project delay is17 months and project duration overrun is 31.4%.

Table 1 also shows that ID projects are large in termsof budget. For the studied projects, planned budget perproject varies from US$126–418 million, while the averagebudget per project is US$303 million and standard devia-tion is US$253 million. Conversely, the average actualcost per project varies from US$115–308 million with anaverage cost of US$255 million and standard deviationof US$222 million. It is significant to mention that actualcost of the ID projects is less than planned cost and costunderrun per project is on average 14.5% from plannedbudget. If we compare ID project performance with otherproject management areas, from the Chaos Chroniclesreport [48, cited in 49] it can be seen that software projectcost overruns were 189% of the original estimate which ingeneral is worse than the performance of ID projects. ForIndonesian construction projects Kaming et al. [30] foundthat project managers completed 54.5% of projects ontime. For groundwater construction projects of Ghana,Frimpong et al. [33, p. 322] identified that 75% of the pro-jects exceeded the original project schedule and costwhereas only 25% were completed within budget and ontime.

The above comparisons of cost and schedule perfor-mance show how ID projects are executed in terms of time

Table 1ID project cost and time performance.

Country Planned duration(months)

Actual duration(months)

Time variatio(%)

Bangladesh 59.91 80.53 34.41China 59.40 67.50 13.63India 51.03 79.45 55.69Thailand 46.03 61.09 32.71Average 54.09 72.14 33.37

* Variation is negative compared to planned duration.** Variation is positive compared to planned cost.

and cost. In the next sub-section we analyse the degree ofschedule and cost variance of ID projects.

3.1.2. Cost and schedule variation

We determine schedule variation (SV) to be the differ-ence between planned and estimated duration. A negativeSV means the project is late while a positive SV meansthe project has been completed before scheduled time. Sim-ilarly, cost variation (CV) is measured as the differencebetween planned cost and actual cost. A negative CVmeans over budget or overspent project and a positiveCV means an under budget project. We also determinethe SV and CV percentage for a group of projects; SV per-centage is the ratio between average SV and averageplanned duration of all the projects (i.e. average SV for agroup/average planned schedule). Similarly CV percentageis the ratio between average CV and average planned costof all the projects.

In Fig. 3, we compare countrywise performance of IDprojects in terms of average schedule and cost variations.We find average countrywise SV is negative and CV is posi-tive for all the countries. Comparing project SV and CVdata, it can be seen that in India average schedule overrunis the highest (55% of actual schedule) compared to otherstudied nations. In China the variation is around 8.1%which is not that significant. Conversely, the cost data givesan interesting scenario for India. Even though projects inIndia take more time than planned, in the end the amountof cost underrun is around 26% of planned cost. ForChina, cost underrun is not as significant compared toIndia. Overall, most projects experience schedule overrunand cost underrun.

Fig. 4 shows performance of the different groups of pro-jects according to the following four categories: scheduleoverrun, schedule underrrun, cost overrun and cost under-run. Among the projects, overall the percentage of scheduleoverrun and cost underrun projects is higher compared tocost overrun and schedule underrun projects. The groupof scheduled overrun projects (first group from the bottom,Fig. 4) show most ID projects experience schedule overrunproblems and have some cost underrun. On average 86% ofprojects are late, time overrun is almost 2 years, and pro-jects take approximately 39% more time than planned aver-age. On average, a late project experiences cost underrunby US$42 million, i.e., 13% of average planned project

n* Planned cost (US$million)

Actual cost (US$million)

Cost variation**

(%)

126.55 115.86 8.44486.67 460.33 5.41418.29 308.92 26.14305.84 229.53 24.95334.34 278.66 14.55

Thailand

India

China

Bangladesh

-60.00 -50.00 -40.00 -30.00 -20.00 -10.00 0.00 10.00 20.00 30.00 40.00

Variation (%)

SV (%)CV (%)

Fig. 3. Countrywise comparison of cost and schedule variations.

86

14

14

86

21

8

28

16

39

14

51

29

42

79

73

58

13

19

22

18

0 50 100 150 200 250

Schedule overrun

Schedule underrun

Cost overrun

Cost underrun% of projects

SV (month)

SV (%)

CV($million)

CV (%)

Fig. 4. Comparisons of project performance.


cost. Although projects with schedule underrun (secondgroup from the bottom, Fig. 4) are few they have large costunderrun. A schedule underrun project on average hasUS$79 million cost underrun which is 19% of project aver-age planned cost.

On the other hand, of the cost underrun projects 86% ofprojects were completed within or under budget, these pro-jects were behind schedule by 16 months with about 29%SV (first group from the top, Fig. 4). Projects with costoverrun (second group from the top, Fig. 4) are few(14%) and the average amount of overspending is US$73million, i.e., 22% of average planned project cost.

Analyzing the time and cost performance for all ID pro-jects, it can be seen that only a few projects (13%) are com-pleted both within schedule (schedule underrun) andbudgeted cost (cost underrun). In contrast, most projects(73%) are late (schedule overrun) and operate with lessbudgeted cost (cost underrun 20%) i.e., most late projectsexperience cost underrun. We find this to be an exceptionalnature of ID projects. Comparing time and cost perfor-mance of ID projects with other projects from literature[21–23,29–31,36], we can conclude that our finding isunique and that no previous research has identified thisunusual performance relation.

3.1.3. Overall project performanceThe performance of an ADB project is measured by

overall performance rating. The rating is calculated based

on the weighted average (WA) of the criteria: relevancy(with host country and ADB strategy), effectiveness (inachieving objectives), efficiency (in achieving outcomeand output), and sustainability [47, p. 7, 9] with weights20%, 30%, 30% and 20%, respectively. The ADB ranksproject performance as highly successful (WA P 2.7),successful (WA: 1.6–2.7), partially successful (WA: 0.8–1.6), and unsuccessful (WA < 0.8). To simplify projectoutcome, our study groups performance rates as success-ful for successful and highly successful projects andunsuccessful for partially successful and unsuccessful pro-jects. The project outcome varies amongst the countries.The data indicates that most ID projects (83%) are recog-nized as successful. The failure rate for Bangladesh isquite high (nine projects) whereas for Thailand it is quitelow (one project).

Further comparison of schedule and cost variance inrelation to project success rate shows the effect of projectsuccess differs depending on whether schedule and cost var-iance is positive or negative. For cost variance, the morecost underrun, the higher the project success rate. For sche-dule variance, the later the schedule, the higher the projectsuccess rate. The difference between the marginal means ofpositive and negative schedule and cost variations repre-sents an interaction between SV and CV, i.e., these factorsare not independent. Further, a two-factor ANOVA-anal-ysis without replication shows interaction between SV andCV means are not significant.

Table 2Causes of ID project delay.

Causes of delay Identified number of cases

Bangladesh China India Thailand Total

Lengthy procedure for contract evaluation and award 21 10 11 5 47Procurement delay 13 7 12 9 41Civil works and land acquisition delay 15 13 5 3 40Consultant recruitment delay 20 3 1 1 25Natural calamities 12 2 2 5 21Government procedural delay 4 7 7 1 19Local politics and economic problem 2 2 2 10 16Loan approval and disbursement delay 1 4 2 8 15Project staff hiring delay 6 0 0 3 9New scope addition 0 4 4 0 8Frequent change of project staff (manager, director) 6 1 0 0 7


3.2. Causes of time overrun and cost underrun

From analysis, it is apparent that most of the ID pro-jects are late and require less budgeted cost. We identifyand explain the reasons for lengthy project duration andlarge amount of cost underrun.

3.2.1. Causes of time overrunProject time overrun indicates an extension of project

completion time from the planned duration. Ex post eval-uation and completion reports demonstrate the variousreasons for delay. Summarizing the reasons of scheduledelay, we prepare a comparative list of causes and their fre-quency in Table 2. Our analysis shows the major causes ofdelay are related to lengthy contract and procurement, civilworks and land acquisition, consultant recruitment, natu-ral calamities, and host country government procedures.

Procurement is one of the biggest challenges of ID pro-jects. Delays in procurement are often caused by long bidevaluation time, operational delays of implementing orga-nizations, and inexperience of local authorities in interna-tional procurement. ID projects can often take longerdue to protracted land acquisition problems which occuras a result of local politics, land law and religious issues.The influence of local government is another factor con-tributing to project delay.

Consultant recruitment also leads to delay in many IDprojects. Usually, consultants are recruited to help in awide range of activities such as policy advice, management,engineering services, construction supervision, financialservices, procurement services, social and environmentalstudies, and identification, preparation and implementa-tion of projects [50, p. 2]. Sometimes causes of delay arebeyond control such as natural calamities. The conse-quence of floods, landslides, and rivers changing course,tsunami or inaccessibility of work location often leads toproject delay.

In the countries studied, governmental bureaucraticproblems include a slow decision making process and insti-tutional or other border issues, and cause frequent policychanges leading to project schedule delay. Delays in financ-ing approval from donor and host country sources and

occasional unavailability of funds also result in late pro-jects. The tendency to frequently widen or change projectscope by the sponsor or host country can create a changeof tasks and resource scheduling which may lead to amissed delivery date.

A summary of the causes of delay and a countrywisebreakdown of the data are presented in Table 2. It canbe seen that most projects (47 of 73) identify ‘contract eval-uation and award’ as the main cause of delay. The contractprocess is managed by the host country with the help ofdonors. The process is lengthy and there is often dispute,bias and inconsistency in the contract. ‘Lengthy procure-ment process’ is found to be the second most importantcause of delay for 41 projects. Combining the two maincauses, we can see that 26 projects experience both contractand procurement related delay.

If we look at causes of delay for late and cost underrunprojects according to country, we can see that for Bangla-desh out of 24 projects, 21 experience delay due to lengthy‘contract evaluation and award’ and 20 experience delaybecause of lengthy ‘consultant recruitment’. For China,out of 17 projects, 13 projects are late due to lengthy ‘civilworks and land acquisition’; the next major cause of delayfound in 10 projects is due to ‘contract evaluation andaward’. Out of 20 projects in India, 12 projects experiencedelay due to prolonged ‘procurement of goods and ser-vices’; and 11 projects experience ‘contract evaluation’delay. In the case of Thailand, due to the Asian financialcrisis of 1997, the scenario alters. Projects implementedduring the period experienced governmental procurementand financial restriction on borrowing and spending. Outof 12 projects, 10 faced finance related restrictions thatcaused delay in loan disbursement and procurement ofgoods and services.

Other important causes of delay are related to projectstaff hiring, finance approval and disbursement, frequenttransfer of key project staff, project scope addition, andinfluence of local politics. From Table 2 we can see thatsome causes of delay are locally dominant. In the case ofboth Bangladesh and Thailand, floods, and hiring and fre-quent change of key project staff are a recurring setback.According to the ADB: ‘Change of project directors is a

Table 3Causes of ID project cost underrun.

Causes of cost underrun Identified number of cases

Bangladesh China India Thailand Total

Depreciation/devaluation of local currency 16 6 10 8 40Lower than estimated price for procurement of goods, services, and contracts 9 8 9 6 32Competitive international bidding 6 9 6 4 25Less use of contingency funds 6 6 1 1 14Project scope cut 10 1 1 1 13Project design change 8 1 2 2 13Local taxes and interest policy change 5 2 3 2 12


persistent problem in Bangladesh’ [6: PCR BAN: 19192].In Thailand, delays in loan approval and disbursementare prominent.

In conclusion we can say most causes of ID projectdelay are related to the host country and the project pro-curement and contracting process.

3.2.2. Causes of cost underrun

Usually, projects taking more time cost more money.However, for ID projects the picture is different. Costunderrun implies the project is completed under budgetedcost, in other words allocated money is unused andaccounted for as a loan surplus. At closing of the loanaccount, with agreement of both parties, the unused loanis usually cancelled. We find that most schedule overrunID projects experience cost underrun. Because of this unu-sual nature of cost and schedule variation relations it is ofimmense interest for this study to identify some centralcauses of schedule delay and cost underrun.

We identify major causes behind cost underrun for over-time projects and summarize the results in Table 3. We findthe most frequently identified causes of cost underrun to bedepreciation or devaluation of local currency, lower thanestimated bid price, international competitive bidding,and less use of contingency funds. Other important causesof cost underrun are project scope cut, design change, localtaxes, and interest policy changes.

Usually ADB project appraisal costs are determined inUSD. The budget contains two elements: ‘foreign exchangecosts’ and ‘local currency costs’ [47]. ‘Foreign exchangecosts’ represent the sum of direct payments made in curren-cies other than the currency of the borrowing country forequipment and materials and consulting services; and ‘localcurrency costs’ represent the local currency value of allgoods and services that are procured for the project withinthe country. If a project spends more in local currency andreduces expenditure in foreign currency then the projectwill have a loan surplus. Inflation of local currency willresult in a surplus of appraisal cost and a considerableamount of unused loan.

The case of currency devaluation is serious for all thecountries and is identified as a cause of cost underrunin 40 projects. In Bangladesh, out of 24 projects 16 con-sidered inflation as a cause of cost underrun; and on aver-age a cost underrun project has 41% inflation. For India,

the number is quite high and out of 20 projects, 10 iden-tified inflation as an issue. On average an Indian costunderrun project has 80% inflation. In Thailand, devalua-tion of local currency by 46% during the Asian financialcrisis resulted in significant cost underrun for 8 of 12projects.

A total of 32 projects experienced lower than estimatedprice for procurement of goods, services, and turnkey con-tracts. The main reasons for this significant cost reductionare vigorous competition in the bidding process of equip-ment and materials, changes in market conditions, andsubstantial reduction in cost interest due to policy changesfor taxes and interest rates. While the latter is difficult topredict, other factors could have been given greater weightin estimating project costs at appraisal.

Competitive bidding of imported goods and services isthe third most common cause of cost underrun. Out of73 projects, 25 identified this issue. Amongst all countries,ID projects from China experienced the greatestadvantage.

Less use of contingency funds is another important rea-son for cost underrun in ID projects. Fourteen projectsrecognised the unused portion of contingency funds as animportant cause of cost underrun. To avoid a possiblefunding crisis caused by fluctuations in the price of goodsand services there is a tendency to keep a high contingencyin the ID project budget. From data we found on averagean ID project reserves 15% contingency within the bud-geted cost. Among the countries the highest contingencyfunds are kept in Bangladesh, i.e., 16% of planned costand the lowest are found in China, i.e., 12% of plannedcost.

Overall, our study finds late and cost underrun ID pro-jects experience 20% less budgeted cost and the main causesare established as local currency devaluation and competi-tive bidding of imported goods and services.

4. Conclusion

This study can be considered as a unique empiricalresearch that analyses performance of ID projects. We ana-lyse ADB funded projects of four countries in Asia. Thestudied projects are categorized as large and medium sizeprojects in terms of duration and total budget, as softand hard projects in terms of application area, and as emer-


gency and non-emergency projects in terms of executionapproach.

From the literature, we find the model for ID projects iscomplex and different to other projects. Many stakeholdersare involved to carry out physical implementation of com-ponents and activities of the project. The stakeholdersinclude lenders or donors, the Ministry of Finance of thehost country, the client, a project management unit, a mul-titude of contractors, firms and individuals, and others.Analyzing the project life cycle steps of five internationalorganizations, we establish that most ID projects have fivestages in the life cycle, which are identification, prepara-tion, appraisal and approval, implementation, and evalua-tion. We stress the importance of developing this IDproject cycle and further emphasise that both donor andhost country must work together to plan and implementthe project for success. We believe the development of astandard ID project life cycle with appropriate phases willcontribute to the ID project body of knowledge.

The study carries out an in-depth performance examina-tion of various ID projects in terms of time and cost. Acountrywise comparison of cost and schedule performanceshows that most projects experience schedule delay andcost underrun. The study identifies an unusual nature ofcost and schedule variation relation in ID projects. Gener-ally, projects taking more time cost more money. However,we find that most scheduled overrun ID projects experiencecost underrun.

The major causes of project delay are recognized as longduration of contract, procurement, civil works and landacquisition, and consultant recruitment. Further criticalcauses of project delay can be attributed to natural calam-ities and host country bureaucracy. The main reasons ofcost underrun are categorized as devaluation of local cur-rency, competitive bidding price, lower then estimatedbid, and large contingency budgets.

Overall, this study identifies unique performance of IDprojects and causes of schedule overrun and cost underrun.We consider the identified nature of ID projects will assistplanners and professionals to better plan future projects.We also believe our findings will stimulate further researchinterest in ID projects.

The scope of the study covers projects from emerging,developing and least developed countries of Asia. Researchfindings and conclusions however are relevant to ID pro-jects of other continents. In future, this study can beextended to incorporate impressions of the host countryas they are the ultimate customer of the ID project. Cul-tural issues of the host country can also be considered asthere are differences from country to country and continentto continent.

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