Methodology of Estimating Construction Projects Contingency

Abstract

Most construction projects suffer from many change orders during the construction period of the project and that leads to allocate more funds to cover these changes. Determining the amount of this fund by the owner is difficult due to the uncertainties in the construction project. On the other side, these allocated funds mean a restriction to valuable money that could be used for other financial activities. In this paper, a proposed methodology is suggested estimating the project contingency instead of the traditional approach of adding fixed value based on the contract value of the project. This methodology makes sure that minimum contingency is allocated through analyzing data from previous similar projects and identify the most activities causing change orders (consume contingency) then take actions in the planning stage to organize these activities and ensure their execution within the budget allocated. The amount of contingency could be determined based on the previous information. This methodology applied on a case study consists of seven construction projects in Tikrit University and the application indicates that adopt a scientific approach (such as this methodology) in estimating the amount of project contingency could increase the precision of estimation and minimize the contingency amount.