Allocation and Management of Cost Contingency in Projects

Abstract

Contingency is crucial for successfully managing projects since it provides a buffer against risk development. This research introduces a new methodology to estimate and allocate cost contingency during the planning phase, as well as managing cost contingency during the execution phase of the project. The cost contingency allocation technique is based on the activity’s contribution to the overall cost variance of the project, which includes the cost, uncertainty, and whether the activity is on the critical path or not. New measures have been introduced in the proposed cost contingency management method to control the expenditure and balance of activities’ cost contingency and estimate future need. The new cost contingency management method is applied to a real-life bridge maintenance project. The result shows that the proposed cost contingency methodology is adaptive and robust enough to accommodate typical disruptions in the project environment.