The Effect of Cost Overruns on Performance of Donor-Funded Construction Projects in Tanzania

One of the main aims of any construction client is to procure a project within the limits of a predefined budget. However, most construction projects routinely overrun their cost estimates. Existing theories on construction cost overrun suggest a number of causes ranging from technical difficulties, optimism bias, managerial incompetence and strategic misrepresentation. However, much of the budgetary decisions- are earlier, approved in an environment of high uncertainty with little available information for accurate estimations. The purpose of the study was to assess the effects of cost overruns on performance of donor-funded construction projects in Tanzania. The study was conducted using a descriptive research design in order to portray an accurate snapshot of some aspects of prevailing situation of cost overrun. The population of the study involved all stakeholders of construction projects in World Vision Tanzania. They included construction company owners, Projects owners in this case World Visions Tanzania Projects Managers, Consultants and Contractors. The study covered a sample size of 80 out of a population of 100 respondents. Questionnaires, interviews were used to collect data. The study revealed that cost overrun is a challenge in construction projects and mainly was caused by the lack of geotechnical studies before implementation, inaccurate estimates, cost of materials, poor contract management, new designing and new systems among others. The study concludes that, cost overrun is a real life occurrence in donor-funded construction projects and recommends that, pre-implementation detailed studies are important to avoid cost over or to reduce its severity on project performance.