Practices, barriers and benefits of risk management process in building services cost estimation

Abstract

The preparation of cost estimates for construction projects is not an easy job, because construction projects are subject to risks and uncertainties, particularly at the inception stage, when very limited information about the project is available. However, the cost estimates prepared at this stage are usually the most important to the client. Nowadays, the costs for building services installations contribute a significant share of the total construction cost of building projects. Thus the accuracy of the building services cost estimates plays an important role in the total building construction project cost estimates. Traditionally, building services cost estimates are prepared by a deterministic single-figure (most likely) approach. This approach is often cost-ineffective and reactionary in nature. The risk management process (RMP) provides a logical consistent framework in identifying the risk factors affecting costs and in making allowances for risks in cost estimation. A survey was conducted to find out the current building services cost estimation practices and to obtain an insight into the understanding, use and application of RMP in preparing building services cost estimates within the building services industry. The results of the survey have suggested that the traditional deterministic cost estimation method is still being adopted by the majority of building services engineers in preparing cost estimates. Also, RMP has not been widely adopted by the building services industry in Hong Kong. From the analysis of building services firms and engineers with regard to the critical success factors for implementation of risk management, the survey reflects that the potential of implementing RMP for building services cost estimation is high.