Cost overruns in public procurement

Abstract

This dissertation analyses the various implications of cost overruns in public procurement in the construction industry, specifically in the Maltese context. The main objective is to assess the financial, operational, and reputational implications of exceeding the budgeted costs and to determine the main causes and elements that contribute to this issue. The research utilises a qualitative methodology, which involves conducting in-depth interviews with key players in the sector and doing a thorough evaluation of existing literature. The study analyses various aspects associated with public procurement and cost overruns, including the systemic inefficiencies and difficulties in project management. It also examines the legal and contractual structures that regulate public procurement projects, evaluating how these structures impact cost control and the settlement of disputes. In addition, the dissertation assesses strategies and optimal methods for reducing cost overruns. The primary objective of this study is to offer an in-depth understanding of the complexity related to cost overruns in public procurement and to propose practical suggestions for enhancing procurement processes. The research provides significant insights for policymakers, practitioners, and academics engaged with construction projects, highlighting the importance of strong cost control and efficient risk reduction in public procurement. The study employs a qualitative methodology, featuring in-depth interviews with prominent industry figures and an extensive literature analysis. Findings indicate that cost overruns are caused by a lack of specialised experts, ineffective procurement procedures, inadequate resources in the design phase, and substandard quality control. Problems over subcontracting absent enforceable agreements and the exploitation of regulatory loopholes were also noted. The research underscores the necessity for enhanced quality assurance, improved stakeholder coordination, and the implementation of advanced technologies such as a further enhanced Dynamic Purchasing System (DPS). Furthermore, the implementation of more stringent regulatory frameworks and performance-based contracts is advised to alleviate increases in costs and enhance project outcomes.