The impact of material and labour cost variables on contactors’ budgeted cost

Abstract

An accurate budget is important for all construction stakeholders, but it is difficult to maintain the budget within the initial estimation. The contractors’ financial stability tends to complete the projects within the budgeted cost without destructing the contractors’ cash flow. The major impact for the contractors’ budgeted cost overrun in construction projects has happened with the material and labour costs. Therefore, it is necessary to find the contribution of material cost and labour cost to the contractors’ budgeted cost in construction projects to minimise contractors’ budgeted cost overruns. This research aims to analyse the impact of material and labour costs on contractors' budgeted costs in building construction projects, Sri Lanka. Hence, three-building construction projects were selected, and documentary review was the main data collection tool to find the required data. Sensitivity Index (SI) in Sensitivity Analysis was adopted for data analysis. As research outcomes, the average contribution of material cost to the cost of civil work was assessed as 60%, whereas the cost of labour was indicated as 35%. Moreover, plastering, tiling and painting works were identified as the main civil work categories that can highly influence the material and labour cost overruns in Sri Lankan building construction projects and ultimately would impact the contractors’ budgeted cost. Therefore, contractors should pay special attention to the budgeted cost of these work categories when preparing the initial budget