COST UNDERESTIMATION IN

Since cost estimates are the basis for decision making regarding project selection, underestimation lead to selection of project with significant cost risks. This paper analyzed the factors responsible for project cost underestimation, with the aim of determining the main cause of the problem and proposing appropriate remedies. Using a questionnaire survey, 64 individuals rated 18 factors responsible for cost underestimation. The relative importance index (RII) used as analytical tool reveal that unintentional factors (inadequate information, project complexity, inexperienced forecasters, or future uncertainties) are not the main factors responsible for cost underestimation; but the main factors are intentional such as project promoters intentionally understating cost to gain acceptance and funding commitments for project. A t –test analysis of cost data from 15 projects revealed that there is a significant difference in cost estimation between private and public sector projects, but no difference i