Abstract:
Large numbers of risks are associated with construction industry because of its highly diversified and multifarious nature. To cater for these risks, contingency reserves are designed and added to the project`s budget and schedule. Different techniques are being used worldwide to calculate contingency reserves but unfortunately, Pakistan’s construction industry continues to use the “traditional percentage methodology”. In this technique a pre-set fixed amount, usually 5% - 10% of the project`s cost, is added to the base cost estimate without identifying and analyzing the risks. In case of time contingency, the situation is even more alarming. Time contingency is overlooked in majority of the projects and if considered, is usually based on subjective opinion of experts. This predetermined amount for uncertainty itself denotes the arbitrariness and becomes a reason of cost and time overrun in majority of these projects. Current study developed an enhanced framework that has circumvented this uncertainty of the system by using probabilistic quantitative risk techniques. This study thus proposes a probabilistic model for predicting total cost and duration of the project by translating the effect of risks in probabilistic scheduling and cost estimate. Rational contingency reserves for cost and time are also predicted by determining risk contingency factors. The framework developed in this research can be used by construction agency for reliable estimation of project`s cost, duration and contingency reserves, in planning phase of the project.
