Estimating probabilistic cost and time contingency for residential building projects

Abstract

Many risks are associated with construction industry because of its highly diversified nature. Contingency reserves are designed and added to the project's estimate to cater for these risks. Different techniques are used worldwide to calculate contingency but unfortunately, Pakistan's construction industry continues to use the 'traditional percentage methodology'. In this technique, a pre-set amount, usually 5% - 10% of the project's cost is added to the base cost estimate without identifying and analysing the risks. Time contingency is over looked in majority of the projects and if considered, it is based on subjective opinion of experts. This predetermined amount of uncertainty denotes the arbitrariness and becomes a reason for cost and time overrun in majority of projects in the country. This research aims to develop a framework that can circumvent this uncertainty by using probabilistic quantitative risk techniques. It proposes a probabilistic model for predicting total cost and duration of the project by translating the effect of risks. Rational contingency reserves for cost and time are predicted using the model by determining risk contingency factors.