Investigating Major Factors Contributing to Construction Project Cost Overruns: A Structural Equation Modeling Approach

Abstract

A greater demand is placed on stakeholders to deliver projects on time and within budget. This study examines the prevalence and underlying causes of cost overruns in Saudi Arabian construction projects and models the interrelationships among those causes. Twenty-five factors were identified from the literature and refined through expert validation and a pilot study. A stratified questionnaire survey of project owners, consultants, and contractors yielded 107 valid responses, which were analyzed using exploratory factor analysis (EFA) and partial least squares structural equation modeling (PLS-SEM). The EFA resolved the twenty-five factors into five constructs (regulations, resources, management, project characteristics, and stakeholders), which together explained 64% of the total variance. The structural model identifies regulatory changes as the most influential driver of cost escalation, with a path coefficient of 0.396, followed by resource management issues (0.353), project characteristics (0.187), management practices (0.186), and stakeholder engagement (0.117). Whereas prior research has predominantly ranked isolated causes of cost overrun, this study empirically establishes the relative influence and interrelationships of cause groups within the Saudi construction sector. The resulting model provides policymakers and industry stakeholders with a validated framework for targeting the drivers that matter most, thereby enhancing overall project delivery and efficiency.