Causes of cost overruns of Municipal Infrastructure Grant funded projects at the OR Tambo District Municipality

Abstract

The Municipal Infrastructure Grant (MIG) is the largest infrastructure grant allocated to municipalities by National Treasury. The purpose of the MIG is to provide basic infrastructure-related services to poor communities in South Africa. Unfortunately, projects funded under the MIG have been characterised by cost overruns. OR Tambo District Municipality is no exception to this enigma. With the prevalence of cost overruns on most MIG funded projects it has become difficult for municipalities to estimate, commit and adhere to infrastructure targets. This study focuses on uncovering the causes of cost overrun on MIG funded projects in the OR Tambo District Municipality. The data was gathered by using a survey questionnaire of 69 potential factors and other sources of evidence such as project documentation. A total of 65 respondents, out of a potential 115 sampled, representing service providers and sector departments involved in OR Tambo District Municipality, responded to a 5-point Likert scale questionnaire. Of the 69 potential factors, 21 factors were found to have significant impact on cost overruns. Data gathered from other sources such as project documentation and archival records confirmed the significance of the 21 factors. Main causes of cost overrun included inadequate planning, inadequate funding, and discrepancies in the procurement processes and policies. The study recommends improvements in project planning, adjustments in the project implementation process and policy as the main focus areas to reduce cost overrun.