Impact of Variation Orders on Time and Cost in Mega Hydropower Projects of Pakistan

The occurrence of variation orders (VOs) in the construction industry is a regular trend all over the world. Hydropower projects are no exception, and it is difficult to find a hydropower project in Pakistan that does not experience VOs. The current research investigates the causes and impacts of VOs in mega hydropower projects using case studies of three mega hydropower projects in Pakistan. The results illustrate that errors and omissions in design, changes in scope and changes in design were among the three top contributing factors to VOs in hydropower projects that resulted in time and cost overruns. Because of VOs, the time overrun is 20%, and the cost overrun is 31% with respect to the planned time and cost of the project. Based on this research, the study recommends measures to curb the causes and impacts of VOs to optimise the construction process of mega hydropower projects.


INTRODUCTION
A VO is any change or modifications to the design, quality or scope of work which is subject to an agreement with respect to volume or nature of works carried out (O'Brien 1988).Construction Industry involves complex processes which are prone to changes, these changes are inevitable and it occurs during the construction.As a result of these changes, change orders are issued to modify the original scope or design (CII 1990).
VOs ultimately lead to delay in completion of projects (Arain et al. 2004).Delay in the projects would increase the cost of construction because of the price adjustment and fluctuations in prices of various components i.e labor, fuel, cement and miscellaneous materials.Cost overrun would further lead to serious problems in future upcoming project of Pakistan due to limited funds available in Pakistan and mostly in Pakistan hydropower projects are funded by World Bank and Asian Development Bank (ADB) on loan basis.
Whenever the project is delayed, it is difficult to agree upon the additional time and its cost associated with delay.Dispute and claim arises when both the parties (employer and contractor) do not agree on the extra time and cost.The results of this study would be beneficial for employer, contractor and even the general public who can foresee the root cause of VOs in construction of hydropower projects of Pakistan as well as its effect.
To understand VOs, especially their causes and effects, the Chartered Building Institute of UK back in 1970s investigated that time delays and cost overrun increase as a result of variations to construction contracts explained by Goodacre and PE, Hunter.In 1990, the Construction Industry Institute (CII) of USA established two tasks teams on time and cost, the teams carried out a research study focused on root causes, the impact and magnitude of changes, and how these changes can be managed effectively (CII, 1990).In addition to the efforts by the above mentioned institutes, numerous research studies have been carried out on various construction projects as discussed below.

LITERATURE REVIEW
Changes and Variations are no matter the source undesirable but yet very common in all types of construction projects (O'Brien, 1998& Frisk 1997).They are undesirable because of their negative effect on either the production flow or the product resulting in decreased cost, time and quality performance (González et al. 2010& Lindhard 2014) VOs are one of the main causes to changes and variation in construction (Al-Momani et al. 2000).Therefore, VOs have a substantial effect on a projects cost and time performance (Ibbs 1998).
The many different parties involved in a construction project entail lots of possibility for VOs to arise.Thus, VOs can be caused by either the consultant, the employer, or the contractor (Hanna et al. 2002).Therefore, VOs are common and regarded as a normal part of a construction projects (Arian & Low Pheng 2005).
A degree of change should be expected as it is difficult for clients to visualize the end product they procure (Love, 2002).Variations should especially when renovating or upgrading a construction.Arian and Low (2005) found the average number of variations in upgrading projects was almost 21% more than in new projects.
Summed up, "the success of a construction project to a large extent is determined by the ability of the project team to manage the inevitable changes during the project" (Sun and Meng 2009).The project team need to make the necessary precautions to minimize both the number of VOs and their induced negative effect.
Previous research studies have been focusing on the causes of VOs.For instance, Alnuami et al., (2010) explored the causes of VOs in construction projects in Oman; they found the top three reasons of VOs to be related to: 1) additional work instructed by owner, 2) modifications by owners and 3) non-availability of manuals and specifications.N. Muhammad (2010) looked into the causes of VOs in construction projects in Malaysia and found that the top three reasons of VOs were: 1) change of plans by owner, 2) substitution of materials and 3) change in design by consultant.Additionally Ismail (2012) did, in a study in Iran, identify the top three reasons of VOs to be: 1) Change of plans, 2) Errors and omissions in design, 3) Differing site conditions.Finally Hanif et al. (2014), analyzed VOs in hydropower projects of Pakistan and found the top three reasons to be: 1) change in scope, 2) omissions in design and, 3) change in design.
Project performance depends upon a well-structured schedule of the work, if the work is carried out smoothly within the time limits and approved budget, then maximum project performance would be achieved.VOs induce project changes which have a negative effect on the project performance (A.Ismail et al. 2012).Variations adversely impact the performance of project in terms of cost, time delays, poor quality, productivity degradation, health and safety issues, and professional relations between the parties to the contract (Al-Morzoug, 2008 andEnshassi et al. 2011).Many construction projects incur increased cost because of variation; however, all variations do not increase costs.Deletion does in most cases reduce the overall cost of the project, while additions always increase costs (Thomas et al. 2002).
Following direct costs are associated with VOs (Ssegawa et al. 2002)

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The employer always requires that their project is completed within the prescribed time, otherwise the costs associated with time are huge and the employer cannot bear the time-related costs.The contractor desires to complete the project within time or before time.If the project is completed before time, the contractor is, as a standard practice, awarded with bonus and if project is delayed due to contractor's risk event, then the contractor is, as a standard practice, penalized with a contract specific but often unbearable amount of liquidated damages.VOs are one of the key reasons to project time and cost overruns (Bower 2000).
A number of studies have also been exploring the effects of VOs in construction.Alnuami et al. (2010) found in a study in Oman that the top three effects of VOs were : 1) delays, 2) claims and disputes and 3) cost overruns.Moreover, Ijaloa and Iyagba (2012) studied VOs in Nigeria and found the top three effects of VOs to be: 1) claims and disputes, 2) delays and, 3) cost overruns.Huge effect of VOs on delay is supported by Haseeb et al. (2011 ) who in a research study, carried out in Pakistan, found VOs as the most frequent reason of elays.Lindhard and Wandahl (2014) who in a study in Denmark ,identified changes in work plans as the second most important reason of delay.

The scientific contribution
The causes of variations and their effects/impacts have been explained by numerous authors and papers have been published in all the recognized journals from 1990 to date.Research work on VOs have been carried out in many countries such as USA, UK, South Africa, Iran, Malaysia, Oman, Jordan, Nigeria and Taiwan particularly on multi story buildings, institutional buildings and highway projects.However, the earlier researchers have not emphasized the VOs particularly in the construction of hydropower projects.To the best of our knowledge, no research work has been carried out in Pakistan to identify causes of variations in hydropower projects.The present research thus fills this gap in existing body of knowledge by reviewing the existing literature on construction projects and investigates causes and impacts of VOs especially in hydropower projects in Pakistan.Further, recommendations are proffered in order to minimize the effect of VOs in such projects .

Scope of study
The study is limited to construction of hydropower projects of Pakistan (projects costing over 5000 million rupees) executed by Federal Government of Pakistan in the last 10 years.These projects are constructed by construction contractors of category C-A as classified by Pakistan Engineering Council.Grade C-A contractors have no limit vis-à-vis construction cost of projects.

Pakistani environment
It is imperative to understand the climatic conditions of the Pakistani environment before carrying out a research to identify factors causing VOs in hydropower projects.Majority of the hydropower projects of Pakistan are located in northern areas of Pakistan.Northern areas of Pakistan have long cold weather and snowfall occurs for almost three months during the winter season.The temperature in the winter season falls below -10C in certain areas, hence it is hard to work on site in these extreme conditions.As a result, most contractors prefer to work in the summer season.
These extreme climatic conditions pose various problems to the contractors such as delivery of equipment in high altitudes and unavailability of skilled manpower, etc.The extreme weather disrupts the progress of work resulting in delaying projects, cost and time overruns.To cater for the problems posed by extreme weather and limited time available for work, a number of variations orders are issued which adversely impact the progress of work.We can therefore argue that it is essential to know about the causes of variations and their impacts in order to control these variations effectively.Hanif et al. (2014) identified an overall ranking of causes to VO in Pakistan, the ranking are shown in Table 1 by the relative importance index.2014) tested the findings in a reliability test (Cronbach alpha).All scales were found to be in acceptable range, with alpha value of above 0.70 as defined by Nunnally, J., (1978).

Placement of
With outset in Hanif et al. (2014), this research is carried out to make an in-depth analysis of causes and impacts of VOs on time and cost of selected hydropower projects in Pakistan.To increase the depth of analysis a case study approach is selected.By comparing the findings to the findings of Hanif et al. (2014), a number of recommendations are reached.The research process is shown in Figure 0.

Placement of FIGURE 0
A qualitative case study approach have been applied where three hydropower projects have been followed.The qualitative case study approach was selected because it allows the object studied to be viewed in its context (Yin 2003) and thus gives a deeper understand to causes and impacts of VO.
The data collection did in all three cases consist of: -Interview with the relevant persons involved in the construction of the hydropower plants.-Reviewing archived project documents.Both with the focus on identifying and analyzing the effect of VOs.The analysis was carried out by examining and taking notes of the monthly progress reports, design reports and project completion reports of these projects, exchange of correspondence between client, consultant and contractor and various meetings recorded in the form of minutes of meeting which indicated the causes and effects/impacts of VOs on projects.

CASE STUDY FINDINGS
This section presents a summary of VOs analysis based case studies of three selected mega hydropower projects in Pakistan, with different capacities, which were executed by the Government of Pakistan.Unit/Item rate or traditional method was used as delivery system for all of the projects.In this method, the client hires a consultant for the design and then a contractor is selected by bidding.Table 2 shows salient features of the mega hydropower projects of all the case studies.

Case Study No 1: Hydropower Project, 1450 MW
The case study no 1 was related to Ghazi Barotha Hydropower Project It is located on the Indus River, 7 km downstream of Tarbela Dam, in the Khyber Pakhtoonkhowa province.The project was completed during the fiscal year 2003-2004.This is a major run of the river and environmentally sustainable project designed to meet the acute shortage of peak power demand in the country.The project is based on utilization of the hydraulic head available between the tailrace at Tarbela Dam and the confluence of the Indus and Haro Rivers for power generation.In this reach, Indus River drops by 76 m in a distance of 63 km and generates 1450 MW electricity and 6.6 billion unit annually.The start

Case Study No 2: Hydropower Project, 1000 MW
The case study No 2 was related to dam raising of Mangla hydropower project.Which is located in the vicinity of Mangla district Mirpur Azad Kashmir.The important feature of this project was raising the height of dam 30 feet from its existing height.Its storage capacity was enhanced by 2.88 MAF and would generate additional power of 120 MW (644 Gwh/Annum).The start and end date of the projects were Apr, 2004 andDec, 2009 respectively.The four VOs of this case study were selected on basis of time and cost.43 VOs of the project delayed the project by 282 days and the below mentioned 4 VOs had a time impact of 180 days, which means there was an impact of 60 % delay due to these 4 VOs.This time impact was the main reason to select this 4 important VOs from the study.The pictorial view of the project is shown in Figure 2: Placement of figure 2 The description of four out of 43 major VOs are as follows: VO No 1, Change of Scope: It was issued due to construction of additional stairs to instrument locations and instrument houses at main dam.To ensure safe access to the extended and new instruments the additional staircases had to be placed at locations other than the six staircases already shown on the tender drawings.This variation resulted in an additional cost of 0.35 Million USD and project was delayed by 40 work days.
VO No 2, Change of Scope: This VO was issued due to installation of new guard rail at crest of dam.Guard rail at raised crest was required for the security of traffic to avoid any mishap.It was provided in construction drawing at tender stage, however relevant pay item was not provided in the respective BOQ.The preparation of VO was necessitated to allow payment for the work item in and repair costs associated with an unlined tunnel.As a consequence of this variation, it resulted in an additional cost of 328 Million USD and project fell behind the schedule by 190 work days.
VO No 4, Unavailability of Equipment: This VO was assigned due to unavailability of equipment i.e tunnel boring machine.For saving the time on tunnel excavation, it was decided by government to purchase this machine.It resulted in additional cost of 480 Million USD to client and almost 365 working days were saved due to the employment of this machine.

RESULTS AND DISCUSSION
In all the aforementioned case studies, VOs had an impact on time and cost of the project.Table 3 shows the accumulated impact of time and cost overrun of all VOs of each project.

Placement of table 3
In all three case studies only a few key VOs were found to cause the majority of the total impact.In the first case study four out of 46 VOs were considered as critical, since these four VOs (change in design, discrepancies between documents, change of scope and error & omissions in design) caused the time overrun of 100 days and the cost overrun was found to be 7 Million USD which correspond to respectively 50% and 56% of the total time and cost overrun of this project.In Case Study No 2, four out of 43 VOs were identified as critical, because these four VOs (change of scope, change in design and error & omissions in design), lead to the time overrun of 180 days and the cost overrun of 1.6 Million USD.Moreover, the four VOs comprise respectively 63% and 40% of the total cost and time overrun of this project.In the third case study, four out of 38 VOs were considered as critical.These four VOs (change in design, change of scope, error & omissions in design & unavailability of equipment), caused a time overrun of 520 days and cost overrun of 1247 Million USD corresponding to 71% and 94% of the total impact on cost and time, respectively.
Evaluating the causes of the VOs considered in the case studies of the three hydropower projects and comparing their impacts, the most significant causes of VOs were identified.Table 4 presents the impact on time due to critical VOs , while their cost impact is presented in Table 5.

Placement of table 5
Both Table 4 and 5 contain most significant five causes with the largest impact on either time or cost of the project in each case study.In all the case studies following three significant causes of VOs were found common: error & omission in design, change of scope, and change in design.

COMPARISON OF RESULTS:
The presented case study research was conducted with the outset in Hanif et al. (2014).A quick comparison of top three VOs between the case study and the findings of Hanif et al. 2014) is showed in Table 6.In both studies emission in desing, change of scope and change in design are found in the top three, thus the findings of the study match.

Placement of table 6
Moreover, the identified top causes to VO are similar to the findings from previous VO studies.In Table 7 is the top five causes of VOs from research studies conducted in Oman, Malaysia, Iran, and Pakistan shown.. Change of scope, omissions in design, and changes in design are found as top causes in all studies (with varying wording).Thus, the findings supports and strengthen the findings of previous research.Countries, 2016 (Early View) This PROVISIONAL PDF corresponds to the article upon acceptance.Copy edited, formatted, finalised version will be made available soon.

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Other important causes are unavailability of equipment, change of project schedule, substitution of materials, Non-availability of manuals and procedures, Nonavailability of license to maintain quality of consultancy service.and weather conditions.

Placement of table 7 CONCLUSIONS AND RECOMMENDATIONS
This paper presented a detailed case study based analysis of impacts of VOs on the time and cost of hydropower projects in Pakistan., Following important conclusions/findings can be drawn from this research: VOs occurred in all the three mega hydropower projects followed, the frequency varied between 38 and 46 with an average frequency at 42 registered occurrences.
1.The most significant factors with respect to time and cost impacts caused by VOs in construction of hydropower projects of Pakistan were found to be (1) error and omissions in design, (2) change of scope, (3), change in design, (4) unavailability of equipment; and (5) discrepancies between contract documents.2. Case studies, capturing the actual time and cost impacts, revealed that only a few VOs comprise the majority of the total impact on cost and time of the project.3.In all the the three case studies VOs impact on time varied between 12.8 and 25.7% corresponding to an average time overrun of 20% w.r.t all the VOs occurred on the project.4. In relation to the cost impact, the VOs had an impact between 4.94 and 89.13% corresponding to an average cost overrun on 31% w.r.t all the VOs occurred on the project.5.The average impact of the three critical causes were calculated: error & omissions in design, time overrun: 4.9%, and cost overrun : 7.7%; change of scope by employer, time overrun: 4.4%, and cost overrun:7.%;change in design, time overrun: 3.0%, and cost overrun: 2.0%.
Based on the findings of this research study the key recommendations to reduce the frequency and impact of VOs in future construction projects are as follows: 1.The most critical cause i.e errors and omissions in design can be reduced by engaging proper design consultants who have participated in the completion of similar construction projects.Employment of a permanent and well settled team member can definitely lead towards a successful project completion and create an environment of mutual understanding among the key project stakeholders.2. With regard to the second most critical cause of VOs, i.e., change of scope, it is recommended that proper feasibility, detailed design of the project and modeling techniques be carried out before finalization of the scope of work.The working personal should be engaged who have previously worked on similar hydropower projects and lessons learnt should be adopted in order to reduce scope creep.3. Keeping the remaining three critical causes of VOs in mind, it is recommended that the consultants should not transfer their well-settled design team members from their respective design offices in order to avoid hampering project design activities and client must ensure, at the stage of bidding, that the contractor has all the equipment available that is needed for the construction of the project.Proper review of method statement, resource loaded schedule which clearly defines the role and responsibilities of labor and mapower, equipment and anticipated progress curves of project can prevent from the highlighted causes of VOs.

Figure 0 :
Figure 0: Research Methodology Flow chart

Table 1 RESEARCH METHOD Journal
of Construction in Developing Countries, 2016 (Early View) This

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Hanif et al. (2014)14)is based on the findings ofHanif.H, et al. (2014).Hanif et al. (2014)made a literature review where the various causes to VOs are identified.In total 38 VOs were identified.By applying a questionnaire, employers, consultants, and contractors from the different Hydropower Projects in Pakistan ranked the VOs in relation to importance.To verify the resultsHanif.H., et al. ( 4© Penerbit Universiti Sains Malaysia, 2016

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Table 4 . Time Overrun (%) due to Critical VOs for all Case Studies
* The VO causing the unavailability of equipment was introduced to reduce time, thus it had a negative impact on time overrun. *

Table 5 . Cost Overrun (%) due to Critical VOs for all Case Studies
VOs related to unavailability of equipment or to discrepancies between contract documents did only appear once, thus no average values are calculated.Journal of Construction in Developing Countries, 2016 (Early View) This *

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Table 6 :
Comparison of Causes of Variation Orders Revealed by Survey based approach and Case Study approach Journal of Construction in Developing Countries, 2016 (Early View) This

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Table 7 :
Comparison of Causes of Variation Orders Revealed by Different Studies