Global Journal of Economic and Finance Research

Controlling and preventing cost overruns in defense construction projects remain a core, ongoing challenge for project managers. Due to the strategic significance of these endeavors and the numerous factors that drive cost increases in construction, extensive research has been conducted on this subject. Literature review indicates that the identification of cost overrun factors often relies solely on literature review and expert interviews. This research utilizes the Failure Mode and Effects Analysis (FMEA) technique, treating the identified causes of cost overrun as potential failure events. The identified factors are subsequently ranked using the Risk Priority Number (RPN) index. Finally, these factors are categorized, and corresponding risk response scenarios are proposed for their prevention or control. The resulting ranking clearly indicates that external macroeconomic shocks, specifically General Inflation (RPN=810) and Currency Exchange Volatility (RPN=729), represent the most significant threats due to their high inherent severity and difficulty of detection. This research thus provides a prioritized framework, demonstrating that effective cost management in this sector requires a strategic shift toward contractual and financial engineering to buffer against systemic instability, rather than focusing solely on internal project execution efficiencies.

Cost Overrun, Construction Project, FMEA, Military projects.

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