Alhashedi, E; Zhang, H and Lin, Y (2026) Adaptive estimation and management of cost contingencies in EPC projects. Journal of Construction Engineering and Management, 152(5): 04026056, ISSN 0733-9364
Abstract
General contractors of engineering, procurement, and construction (EPC) projects face diverse, interdependent risks in highly dynamic environments; therefore, reliable estimation and management of project cost contingencies are critical for ensuring success and profitability. This study presents a novel adaptive hybrid Bayesian model (AHBM) for estimating the cost contingency in an EPC project by integrating a hybrid Bayesian network with an incremental parameter learning approach, thus adapting to new information while capturing risk interdependencies, propagation, and uncertainties. Two forms of the incremental parameter learning framework, i.e., sequential Dirichlet-based maximum a posteriori and sequential particle-filter-based maximum a posteriori, are incorporated for discrete and continuous variables, respectively. Then, a dynamic contingency management framework (DCMF) is proposed to allocate the estimated cost contingencies across work packages in an adaptive manner and monitor the contingencies over the project progress, supporting informed and dynamic decision-making. The AHBM and DCMF have been applied to demonstrate their efficiency, validity, and practical utility. The study contributes to the domain knowledge of the cost contingency estimation for the EPC project management. The proposed approach enables the general contractor to execute the EPC project with controlled risks and ensured project success and predictability.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | adaptive risk management; contingency management; cost contingency; engineering, procurement, and construction (EPC) projects; hybrid Bayesian network; incremental learning |
| Index terms: | face, project management, efficiency, estimation, general contractor, risk management, propagation, validity, estimating, profitability, decision-making, project cost, project success, package, bayesian network |
| Subjects: | economics, practitioner, project management theory and practice, probabilistic model, financial and cost management, contractual arrangements, risk assessment, engineering process, decision analysis, psychology, evaluation and assessment methods, economic analysis, performance management |
| Topics: | Business Strategy, Research Practice, Quality Management, Procurement, Cost Management, Project Management, Organizational Design, Engineering Principles, Risk Management, Digital Applications, Roles and Professions |
| Descriptive scope: | 3 PCA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here