2019 CSCE Annual Conference - Laval (Greater Montreal)

2019 CSCE Annual Conference - Laval (Greater Montreal) Conference

Cost Growth of Heavy Industrial Construction Projects in Alberta

Mr. Danny Haines, University of Calgary (Presenter)
Dr. Farnaz Sadeghpour, University of Calgary
Dr. George Jergeas , University of Calgary

Capital investment on heavy industrial construction projects in Alberta is expected to exceed $380 billion in the period of 2017 – 2027. However, companies make these investments in an environment that is subject to some of the largest cost overruns when compared to similar projects in other parts of the world. This cost growth significantly reduces incentives for further investment in the industry and therefore negatively impacts the economy of Alberta. Thus, considering the large size of cost growth in Alberta, and the significant contribution of this sector to the economy of Canada, it is important to identify the factors contributing to this cost growth so that mitigating actions can be taken. A number of factors contributing to cost growth on projects have been examined in the literature, however these studies are not conducted to identify those specifically applicable to the heavy industrial construction sector in Alberta. The objective of this study is to determine which factors disproportionately influence cost growth on heavy industrial construction projects in Alberta. This will allow companies to focus their attention on specific areas and factors to best reduce their risk of cost growth. The study is conducted in partnership with the Construction Industry Institute (CII) and the Construction Owners Association of Alberta (COAA) and uses information on 1,270 projects from Alberta and around the world. This study investigates and quantifies the impact of these factors identified in the literature on cost growth of projects using statistical analysis. Statistically significant differences in project behaviours between Alberta and the rest of the world are determined using inferential statistics such as ANOVA, T-Tests and Pearson correlation coefficients. The results of this analysis demonstrated clearly that projects in Alberta do behave differently than those around the world. This provides guidance for ways in which heavy industrial construction projects in Alberta can be more effectively managed to help reduce cost growth. Lower cost growth that could be achieved by implementing the recommendations suggested by this study could lead to greater cost competitiveness of heavy industrial projects in Alberta. In turn, this could lead to increased investment in the Alberta economy.