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The Dulhasti Power Plant - Case Study Example

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From the given case study, it is clear that adverse geographical conditions caused the French consortium to experience project cost overruns period to complete the work. It is very difficult for construction firms to carry out accurate cost estimation when working in harsh geographical conditions…
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The Dulhasti Power Plant
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Download file to see previous pages In addition, the selected region was very poor in terms of infrastructure development. More precisely, the region did not have an adequately developed logistic network including roads and rail lines. As a result, almost all construction supplies such as raw materials and labor had to be brought to air transportation. Another issue is that the construction site was far away from larger cities and urban areas. Therefore, the construction firms had to spend more on food and accommodation for its workers. In addition, the non-proximity to larger cities significantly increased the transportation costs of the French consortium. Since the company had to wait for a relatively long period to obtain the supply of raw materials, this situation led to delay in the completion of the project. Evidently, time delay involved in the project completion would end up in cost escalations. Probably, the adverse climatic conditions in this mountainous terrain might have also contributed to the project cost escalation.
Management professionals point out that even highly experienced construction firms cannot accurately perform cost estimation when working under harsh geographical condition due to unforeseen contingencies. There are some regions that are extremely prone to natural contingencies like earthquakes, floods, drone, and wildfire. While working in such bad geographical regions, construction firms are most likely to experience cost overruns. Such threats not only impede the project development but also cause damages to construction firm’s resources including tools, pieces of equipment, and labors. Sometimes, issues like a landslide or icy roads may disrupt transportation, and hence the construction firms may be compelled to stop their work temporarily. Undoubtedly, such incidents would cause construction firms to incur unanticipated fund needs. In order to manage contingency costs, construction firms are forced to increase the level of contingency funding. ...Download file to see next pagesRead More
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