Cost Overruns Arising From Government-Led Risks in Indonesian Toll Roads

Abstract

This paper aims to elucidate the phenomenon of cost overruns resulting from government-led risks, with a specific focus on contract changes within the context of 70 Indonesian toll road projects. The dataset demonstrates a broad spectrum of cost overrun rates (COR), from −34.43% to 356.54%, with a median of 0.00% (mean = 14.83%). Empirical evidence demonstrates that contract changes exert a discernible influence on cost overruns. Among the sampled projects, 39 out of 70 encountered changes in their original contracts, and within this subset of projects, the median COR was 7.00% (mean = 26.63%). In the case of projects experiencing cost overruns and underruns, the median COR amounted to 21.00% (mean = 44.55%, n = 27) and −13.50% (mean = −13.72%, n = 12), respectively. This paper delves into the correlations between the COR and various project attributes, providing elucidations grounded in the framework of multiple theories in the literature.