Accuracy of traditional contingency estimation in the construction industry

Abstract

Contingency amounts are allocated in the construction projects to deal with uncertainties arising during the projects. Contingency amounts are usually estimated traditionally by simply adding a percentage of the estimated contract amount. However, the traditional system of contingency estimation is heavily criticised as ineffective due to several reasons. Therefore, this research focuses on evaluating the level of accuracy of current contingency estimation techniques in the Sri Lankan context. This study adopted a mixed-method research approach. Empirical data were collected using expert interviews and questionnaire survey. Data collected from the expert interviews were analysed using manual content analysis. Descriptive statistics and inferential statistics were used to analyse the questionnaire survey data. Findings revealed that inexpensiveness is the highly motivating factor for the rigid usage of the traditional method to estimate contingency in the Sri Lankan context. Estimated contract amount, procurement method, payment method, and type of client were identified as highly influencing factors in contingency estimation. Finally, the hypothesis test of this study revealed that the traditional contingency estimation is ineffective. Since the traditional contingency estimation proved ineffective and highly inaccurate, experts in the industry should consider a flexible alternative approach in contingency estimation to improve the accuracy of the contingency amount.