Dynamic Management of Cost Contingency: Impact of KPIs and Risk Perception

Abstract

Risks are inherent in construction projects. In order to manage risks, contingency amount is set aside usually in an escrow account. Cost contingency can be a handsome amount that would get blocked during the execution of the project for further use, incurring constant opportunity cost. The stakeholders may wish to use this held amount for other endeavors during project execution. The managerial practices for dynamic contingency management are of extreme importance. Stakeholders anticipate risks and hindsight project performance by eyeing key performance indicators of a project to direct decisions. The aim of this research is to integrate project key performance indicators with future risk perception to develop a decision support system for facilitating cost contingency release requests. The model is expected to help decision making to ease the managerial burden ensuring effective use of contingency. The findings are not conclusive due to ongoing nature of research.