Stephen, M and Picken, D (2000) Using risk analysis to determine construction project contingencies. Journal of Construction Engineering and Management, 126(2), pp. 130-136. ISSN 0733-9364
Abstract
A contingency allowance is an amount of money used to provide for uncertainties associated with a construction project. Traditionally, it is a percentage addition on top of the base estimate. Estimating using risk analysis (ERA) is a methodology that can be used to substantiate the contingency by identifying uncertainties and estimating their financial implications. A study of the effect of ERA was carried out to compare the variability and consistency of the contingency estimates between non-ERA and ERA projects. This paper presents results difference in variation and consistency between these groups. It indicates successful use of the ERA method for public works projects to reduce unnecessary and exaggerated allowance for risk. However, the contingency allowance for ERA projects was still considered high. Improvement and refinement of the ERA method as well as recommendations on capital budgeting policy are suggested.
| Item Type: | Article |
|---|---|
| Index terms: | capital budgeting, public work, estimate, variability, variation, methodology, construction project, risk analysis, estimating |
| Subjects: | financial and cost management, environmental hazards, budgeting, statistical analysis, production management, contractual condition, infrastructure engineering, research methods |
| Topics: | Sustainability, Cost Management, Engineering Principles, Research Practice, Project Management, Contract Administration |
| Descriptive scope: | 3 PCT |
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