Life Cycle Cost Analysis as a Technique to Reduce Project’s Cost Overruns of Assets in UAE: A Case Study-Based Research

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The British University in Dubai (BUiD)
Infrastructure projects run by two government organisations, Telecom Operator and Water and Electricity Authority, in Abu Dhabi, UAE are suffering from cost overruns during their life cycle. In 13 projects investigated from both organisations, it was found that the cost overruns were approximately estimated as AED27 million. These cost overruns represent 7.7% of the total allocated budget for the 13 projects, and if all the projects were studied, the percentage might increase further. Such percentage is considered high since it contributes to overruns in millions of Dirhams. Therefore, this study aimed to introduce a technique to reduce project’s cost overruns of assets in UAE government organisations. This technique is based on the concept of the life cycle cost analysis (LCCA) which is considered an approach to estimate project’s cost and to decide among project’s alternatives. Basically, this concept proposes the necessity of including the cost of design and implementation (initial phase), operation and maintenance, and decommissioning during the planning stage of a project. Hence, a considerable amount of money could be saved and a project’s cost overruns could be minimised during the life cycle of the asset which can be seen as one of the organisations objectives. Consequently, a comprehensive literature review was conducted in order to explore the concept of the life cycle cost by studying its phases, methods, models, barriers, and examples. Furthermore, quantitative and qualitative research approaches have been conducted in this study in order to test the literature review findings, and to collect the necessary data from real projects. The quantitative approach was used to check the reliability of the obtained data from the literature review. The qualitative research investigated the current practices in estimating projects life cycle cost at both organisations, and the causes of the cost overruns in their projects life cycle. It was found that both organisations do not consider estimating project’s cost from its inception to its disposal which yields to cost overruns during its life cycle as supported by the literature. Finally, based on the literature review findings and the data analysis, several recommendations were proposed to fulfil the gaps of both organisations’ estimation process by implementing the life cycle cost analysis.
life cycle cost analysis, cost overruns, United Arab Emirates (UAE), infrastructure projects, government organisations