Financial Impact Assessment of Time Overrun: A Case of Second Small Towns Water Supply and Sanitation Sector Project, Nepal

Government of Nepal is implementing many water supply projects through its regular and through many projects. Small Town water Supply Project is one of the major projects in water supply implemented by GoN in support of ADB. Second Small Towns Water Supply and Sanitation Sector Project (STWSSSP) project is based on cost recovery principle. The study is focused to find out factors, magnitude, cost and the way time and cost overrun decreasing the profitability financially.<br><br>All 21 sub projects are selected for study. The secondary data especially the requests by the Contractors, recommendations by Consultants and grants by Clients are used for the analysis of time and cost overrun. The financial evaluation of two projects is conducted after time and cost overrun to show the impacts of time and cost overrun in the profitability of the projects. <br><br>The average time overrun of the overall projects are found 15.83 months with average time overrun of 11.58 months in Terai(plain land) located projects and 20.94 months in Hilly located projects. The sector project is found 10.68% increment in cost after variation with 9.33% in Terai located projects and 12.48% in Hill located projects. Financial profitability of the projects was found decreased due to time and cost overrun. <br><br>The research concludes that project like SSTWSSSP which are based on the principle of cost recovery has significant impacts due to time and cost overrun. Because loan payment becomes delayed as tariff is only collected after completion of the project. It is therefore an equal role of Client, Consultants, Contractors and important stakeholders to foresee the probable factors of time and cost overrun and focus to reduce them.<br>

Second Small Towns Water Supply and Sanitation Project (STWSSSP) was based on the principle of cost recovery where the users of the particular towns have to pay capital loan to Town Development Fund (TDF) within given maturity period. As Water is considered the basic needs, timely completion of Small Towns Water Supply and Sanitation Projects would be beneficial for community due to accessibility and timely collection of water tariff;therefore, it is important to study the financial impact of time overrun of Second Small Towns Water Supply and Sanitation Projects. Time Overrun is the main cause of Cost Overrun. The Sub Projects under Second Small Towns Water Supply and Sanitation Sector Project are spread particularly in Terai and Hilly regions all over the country. The time overrun in Terai region may not be similar to that of Hilly region. Therefore, this study is important to identify the financial impact based on region. Department of Water Supply and Sewerage has not the long experiences on contract administration that of other Departments as of Road, Irrigation, Building and Hydropower. Hence, this study will be beneficial particularly to Department of Water Supply and Sewerage for the contract administration of future water supply and sanitation projects lead by Department itself. For that it is of key importance to exert the utmost effort to accomplish such study, to detect the previously mentioned factors and to treat all the weakness points and from all sides and so giving specific priorities in order to avoid time and cost overruns at water supply and sanitation construction projects.

OBJECTIVE:
The research aims to identify the region wise (Terai and Hill) impacts of time and cost overrun in the Small Towns Water Supply and Sanitation Projects for pragmatic recommendation of cost recovery project implementation.

LITERATURE REVIEW: Project Time-Cost Relationship
All out undertaking costs incorporate both direct expenses and roundabout expenses of playing out the exercises of the venture. In the event that every movement of the undertaking is planned for the span that outcomes in the base direct cost (typical length) at that point an opportunity to finish the whole venture may be too long and generous punishments related with the late task consummation may be acquired. As the immediate expense for the venture approaches the whole of the immediate expenses of its exercises, at that point the undertaking direct cost will increment by diminishing its term. Then again, the roundabout cost will diminish by diminishing the undertaking span. Following diagram shows the time cost relationship on venture cost. Figure 1 shows the direct and indirect cost relationships with the project duration. The project total timecost relationship can be determined by adding up the direct cost and indirect cost values together. The optimum project duration can be determined as the project duration that results in the least project total cost. According to Menon et al., [1] proper planning of work, committed leadership and management, and effective communication system can be very helpful in improving time performance. In order to minimize the delays Suwal et al., [2] recommended following that (i) there should be provisions in PPA and PPR to control unusual low bid by increasing performance security as per percentage of bid below estimated amount, (ii) Appropriate contractors should be selected based on experience, technical, financial capacity along with consideration of work in hand. The provision of negative marking as per work in hand should be done in Public Procurement Act (PPA) and Public Procurement Rules (PPR), so that tendency of occupying works shall be reduced, (iii) Pre-execution preparation (such as land acquisition, utility relocation, EIA and IEE) and planning of project tasks, resource need and appropriate contract strategy to avoid low bid should be done, (iv) Strict provisions or limitation on project period variations should be done in PPA and PPR, (v) Proper mechanism should be built up for stable and fixed tenure of Project manager in the project, (vi) Efficient contract management by employer (quick decision and approval on time).

METHODOLOGY :
Study Area : Department of Water Supply and Sewerage is implementing Second phase of second largest water supply project i.e, Second Small Towns Water Supply and Sanitation Project (STWSSSP) is selected for study availability of reports and documents during completion phase. All the twenty one (21) sub projects of Second STWSSSP are spread over the country which helps region wise analysis of the projects as well. It project duration consists construction with 1 year of operation and maintenance. Consulting Services are provided through five different firms for design and supervision of these twenty one projects. Similarly, eight different contractors have been involved for the construction of the projects. Project Management Office (PMO) under the Department of Water Supply and Sewerage is the client of the project. Client, Consultant and the Contractors were interviewed mainly for key informants on cause factors of time overrun and suggestive success factors in order to lessen the cost and time overrun.

Method of Data Collection
Limited Consulting Firms and Contractors were engaged in the project, direct interview was taken aimed at obtaining preliminary data that would address the problems as identified and achieve the objectives. In order to achieve the objectives particularly on understanding the existing literature on critical success factors and identify the most recent studies regarding cost and time overrun, a systematic literature review was conducted. Books, Journals, Articles, Theses and dissertations and Internet became the source of information and considered to be an important factor when checking the validity of the information obtained. Available data from Project Management Office was used to analyze the status of delays and price escalation of the sub projects under Second Small Towns Water Supply and Sanitation Sector Project.
Similarly, the available reports, documents requesting for time extension and variations by the Contractors and Consultants helped finding out region wise different factors including the practices of granting the time extension and variation by the clients. More often, secondary data especially through the approved reports and documents were used to identify and analyze the various factors through Microsoft Excel to find frequency distributions causing delay and ranking of causes. Financial Analysis was done using Excel for two projects only.  The Table 1shows that the actual average time of the projects located in Terai(plain land) Belt is 42 months. The average time overrun of the projects is 11.58 months with the ratio of 1.39 where as cost increased percentage for Terai belt 12 projects were 9.33%. The Table 2 shows that the actual average time of the projects located in Hilly Belt is 50.94 months. The average time overrun of the projects is 20.94 months with the ratio of 1.69 where as average percentage increases of cost after Variations were 12.48%. It should be specified the different at time scheduling.

Major Factors Granted for Time and Cost Overruns by Clients
Based on the reports, the causes of time and cost overrun of each project were analyses in the following table 3.

Time Overruns
Cost Overruns Delay due to Nepal Banda, Delay due to social conflict on construction of Intake,Government decision on closure of quarries and crushers,Delay due to additional works after variation,Delay due to excessive rainfall, land erosion,Delay due to festive season, Dashain and Tihar, Delay due to Terai Unrest and blockade and Delay due to massive Earthquake Additional pipelines in missing toles/town areas, Dismantling of PCC and masonary works during laying of Pipes, Supply missing Pipe Fittings in BoQ, Supply missing Filter media in BoQ, Adjustment works of Flocculator, Additional House Connection works, Approach road to Intake and treatment plant, Construction of new 400 Cum Reservoir Tank, Additional compound wall and Additional admixtures for RCC

Damak, Jhapa Water Supply and Sanitation Project-Tarai
Delay due to additional pipe line works, GI Pipe Crossing, Brick masonry, Recreation Works (Recharge Pit) after variation, Delay due to Nepal Bandh, Delay due to unusual rainfall, Delay due to massive earthquake,Delay due to late payment, Delay due to holiday for CA election, Disturbances and delays due to closure of Quarries and Crushers, Delay in providing complete lists of households and Delay in providing the details of varied items Additional pipeline works,GI Pipe Crossing works,Recreation and Recharge Pit,Fencing works over compound wall,Additional Pipe and Fittings missing in BoQ Construction of new Dosing Unit and Electrical Control Panel

Duhabi, Sunsari Water Supply and Sanitation Project-Tarai
Delay due to sudden change in design of office building and pump house, Delay due to non performance of newly constructed DTW and additional of new DTW, Delay in providing the site for storm water drainage work and delay in decision on making variation works final, Disturbances and delays due to unexpected rainfall, Delay due to Crisis of local materials, Delay due to Festival holidays and constitutional Assembly election, Scarcity of fuels, Supply of missing Pipes and Fittings in BoQ, Repair and maintenance of existing OHT, RCC Cover Slabs for storm drains, Additional one storey office building ,Additional Boundary wall around deep tube well, Additional treatment unit, Construction of shed over Generator, Additional Pipeline Works, Additional Excavation due to occurrence of rock area, Additional quantity of sand and crushed gravelling for treatment unit, Additional cost over transportation of excavated material from 3 km

Khandbari, Sankhuwasabha Water Supply and Sanitation Project-Hilly
Disturbance due to rainfall, Delay due to massive earthquake, Obstruction due to strikes (including Terai unrest and shortage of construction materials and fuels), Delayed decision making in DBST road crossing work, fire hydrant, valves, support blocks, pipe protection works, fire hydrants, crossing, household connections, Delay in site possession, Shortage of sand and gravel as government prohibited the extraction from Sabha, Arun, Hewaand Piluwa Khola, Delay due to varied additional works, Delay due to closure of quarries and crushers, Delay due to construction of access road, Disturbance due to damage of laid pipelines, Redesigning the location of Transmission Lineadditional pipe line and fitting, Rectification works on certain stretches of pipeline was damaged by road works Site Development works, Thrust Block construction, Supply, Laying and jointing of additional Pipelines and Fittings due to change in alignment, Increase Household connections, Rectification works on certain stretches of pipelines, Additional Cost for construction of access road, Increase the quantity of fire hydrants, DI, GI and HDPE fittings as per site condition, Additional Truss unit over treatment Plants, Additional compound wall, fencing, manhole cover due to missing and less quantity in BoQ and Dismantle and reinstate road pitches

Narayan, Dailekh Water Supply and Sanitation Project-Hilly
Delayed decision making in changing the pipe material in transmission due to acidic nature, Delay due to varied Item of works including pipeline works due to change of pipes and fittings in Transmission main (site development, retaining structures) , Delay due to redesign of pipe line, Strikes, Unavailability of construction materials and boarder blockade, Obstruction by locals to fulfill their different demands such as school building, irrigation scheme, Repair and reconstruction of pipeline and IC damaged due to widening of Dailekh Bazzar, Decision delay of office building , Site Possession-HH connections, Existence of rocky area in transmission main , Delay due to massive earthquake (shortage of materials) and Testing and commissioning

Lamahi, Dang Water Supply and Sanitation Project-Tarai
Delay due to varied items, Delay due to strikes (Nationwide and Dang Banda), Unavailability of landfor electromechanical works, dumping site development, reservoir tank, drains, pipe line work, Monsoon, Electrical works-delay in approval by NEA, Delay in decision making by WUSC for remaining HH connections, Unavailability of site for drainage construction and Delay in approval of water meter Supply, laying and jointing of Pipes and fittings as request by WUSC and missing in BoQ, Additional Quantity of stone soling, Office Building, Additional compound wall due to availability of land, Road dismantles and reinstatement, Change generator location increases electrical work, O/M of vehicle due to extension of project period, Site development work, Missing DI/GI Fittings and PP saddles and Additional Septic tank and incineration chamber KaraiyaMakrahar, Rupendehi Water Supply and Sanitation Project Delay due to varied items (black top, public toilet, staircase in WUSC building, design change of electrification, tile work on toilet), Delay due to strikes, Unprecedented rainfall, Delay due to approval of water meter and Delay in payment.
Cost of Landscaping, Additional Cost for construction of Public toilet, Tractor on request of WUSC, Missing DI/GI fittings and PP Saddles, Shades for generator house and revenue counters, dismantling of concrete footpaths, Access road, pitch cutting and re-pitching, Replacement of submersible pumps and Additional cost of electrical works due to redesigning.

Meghauli, Chitwan Water Supply and Sanitation Project-Tarai,only Time overruns
Conflicts among Users on House connection using clamps or tee, Delay due to availability of land for pipe laying in town area, Delay due to varied items (additional pipeline works), Delay in decision making by users on House connection, Delay due to strikes, Delay due to approval of water meter and Site possession-storm drain.  [7] including with Condition of Contract of the Contract Document. In some cases, the review of Procurement Experts weretaken prior recommending/granting EOT and VO and Many requests for EoT and VO were being resubmitted due to lack of sufficient documents on recommendation by PMC with comments. The factors of Time overrun were given during interview as checklist based on modified checklist of Yadav and Mishra [8] & Ghimire and Mishra [9] for building and Hydropower respectively asked regarding the presence and absence to verify the documents authenticity and based on frequency; it is presented in figure2 for Hilly area projects. In Hill located SSTWSSSP projects, social disputes at source and disturbances during construction was one of the major causes of time extension including other causes of delay as variations, strikes, rainfall, earthquake and decision delay. The other causes factor of time extension in the hill located projects were adjudication, accident (pipe burnt) and massive earthquake. The rectification of the damaged pipe lines that were laid already due to construction of road became one of the causes of time extension. Similarly, for Tarai area project refer Figure 3.In Terai located SSTWSSSP projects, except the common cause factors such as variations, strikes, rainfall, earthquake and decision delay, the NEA's late approval of providing electricity line to the project was the main cause of time extension.

Factors for Time Overruns in SSTWSSSP Hill Located Projects
Frequency Fig 3: Causes of Time Overrun in Terai Located projects Extension of pipe line works and construction of office buildings for WUSC were among the main variation works followed by supplying of missing pipe fittings. Nepal Bandh/strikes including terai unrest and blockade had been reported as another cause factor for time extension. The consequences of the strikes creating unavailability of the construction materials and fuels was been granted by the clients as a cause factor of time extension. Delay in decision by the consultants in providing the details of varied items/ sludge drying/pressure filter/ transmission line/storm drains/drilling etc., was also the major factor of time extension. This is followed by the delay in site possession by the clients and representative of the client, the WUSC. Excessive rainfall, massive earthquake and the series of aftershock that occurred on 25 th April 2015 where been the causes for time extension of the project. The consequences of the earthquake as scarcity of manpower, materials were being reported in some of the town projects where the effect was minimal. Timely unavailable of the household lists from the respective WUSC of the town project was became one of the causes of the time extension for various project. Similarly, late approval of water meter by the consultant extends the time for many projects. NEA's late approval of providing electricity line to some of the projects had also been the cause of the time extension. Unforeseen site conditions such as drilling works and occurrence of rocky area during laying of pipes took extra time for completing those works. Design change, change of location for construction, Dashain/ Tihar and Election Holidays, Late payments, adjudication and burnt of pipes at site were also granted as a cause for time extension in some projects. The frequency of these factors is less than the factors described above. In the same way, figure 4 shows the factors of cost overrun. Additional works mainly including additional laying of pipelines, sheds, treatment plants, and structures comes as a major factor of cost overrun followed by missing items in BoQ mainly as pipe and pipe fittings as a second major factor. Many items upon request of WUSC such as construction of office building, public toilet had been incorporated as a third major factor of cost overrun in the project. Cost had been increased also upon additional activities due to change in the location than estimated mainly in electrification works and additional works upon unforeseen ground condition comes as fourth and fifth major factor. Increased cost due to client's lost in adjudication had increased cost of some projects. Similarly change in the materials than estimated and increased cost due to extension of time such as transportation, insurance also been granted for cost variations. During Key Informant Interview (KII), consultant's professionalism was the major factor of time and cost overrun in the eyes of clients and contractors because many projects were delayed due to late decisions and approval. In many projects design had been changed and there were lots of mistakes in the previous design. These were the major factors for the overruns. The provisions of performance evaluation of the consultants and the decisions there after have not been accepted. The provision of professional liability seems less in the contract document. The second major factor accepted by all three parties was strikes (Bandh) and all suggested the political stability can stop all types of strikes. Contractor's financial capacity had been viewed by client and consultants as another major factor of delay because the contractor's involvements in many projects have an effect in the regular cash flow. Due to this the contractor could not pay to the labors and market in time and delayed the particular project. The lack of coordination and lack of timely decision due to the involvement of many stakeholders and low bid of the project were also considered major factors by the clients.

COST OVERRUN FACTORS IN SMALL TOWNS WATER SUPPLY PROJECTS
Frequency Similarly, slow decisions by the clients in order to provide grant to EoT and Variations, WUSC's unusual demands during implementation of the project and Improper plan and management of the contractor were regarded as major factors of delay by the consultants. Quantity overrun due to various reasons like expansion of pipelines, WUSC's unusual demands, and changed scope of the project was taken as a major factor by Contractor. Delay in site possession by clients (WUSC) and Social Conflicts at source, HH Connections, pipelines were also considered as a major factor by Contractors.

Financial Impact of Time Overrun on Projects
Phidim and Mukundapur Town Projects have been evaluated as a represents of remaining town projects from Hilly and Tarai Area in table 4. Above table 4 clarifies that the time and cost overrun decreases the profit margin of project both financially and economically. Due to increase in time of 29.5 and 5.5 months and cost of 14.68% and 9.02% respectively of Phidim and Mukundapur Town Projects, FIRR and EIRR of the projects are highly decreases. Similar results were found in Hydropower projects by Chiluwal and Mishra [10]. AIFC (Average Incremental Financial Cost) which is used to determine financial tariffs required to achieve full cost recovery and the level necessary to achieve recovery of O&M costs and debt payments is increased. Similarly, AIEC (Average Incremental Economic Cost) which is the present value of all the economic capital investments and economic operating costs throughout the project life divided by the total water produced over the period as expressed economic cost per cubic meter of water produced also increased.All the remaining town projects have cost or time overruns or both. Thus, the profit margin of the remaining projects decreases as well.