Kim, D Y; Han, S H and Kim, H (2008) Discriminant analysis for predicting ranges of cost variance in international construction projects. Journal of Construction Engineering and Management, 134(6), pp. 398-410. ISSN 0733-9364
Abstract
Unanticipated market conditions as well as project-related risks can easily lead to cost overruns in international construction projects. For a contractor to be financially successful in international projects, a careful examination of the project is a prerequisite to understanding the cost variance characteristics. Based on the reasonably accurate characterization of the cost performance, the markup or contingency amount is determined to ensure both a decent level of profit and a good chance of winning the contract. This paper presents a classification model to categorize international construction projects, particularly faced by Korean contractors, into five cost-variation classes: extreme cost overrun, moderate cost overrun, neutral, moderate cost saving, and extreme cost saving. The model is able to characterize an international project for its cost performance prediction in comparison to the contractor's initial cost estimate. A linear discriminant analysis is utilized to develop the predictive classification model with the support of the bootstrap method. Tests show that the proposed model is able to help cost estimators determine a proper level of cost contingency before bidding on an international project.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | cost control; forecasting; foreign projects; project management; risk management |
| Index terms: | profit, market condition, variation, cost control, international construction project, cost performance, bidding, international project, forecasting, discriminant analysis, cost overrun, risk management, project management, cost estimator, cost variance, cost estimate, cost saving |
| Subjects: | economics, contractual condition, project management theory and practice, statistical analysis, financial analysis, strategic management, profession, risk assessment, economic and policy analysis, bidding, financial and cost management, prediction and forecasting, economic analysis |
| Topics: | Cost Management, Business Strategy, Research Practice, Project Management, Risk Management, Roles and Professions, Procurement, International Construction, Contract Administration |
| Descriptive scope: | 3 PCA |
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