Quantiative Methodology for Determination of Cost Contingency in International Projects

Abstract

This paper presents a quantitative methodology to determine financial impacts of the risk factors during the bidding stages of international construction projects. Project and country data of 26 construction projects from 21 countries were collected for evaluation of the international risk factors. The factors impacting cost contingency were identified using correlation and regression analysis techniques. The results indicated that four factors had major contributions for explaining the variations in the contingency levels. A regression model including the significant factors was developed to support bidding contingency decisions. The methodology presented provides a robust and practical statistical approach for determination of contingency by focusing on important risk factors. Details regarding model development and validation are presented along with a discussion on study limitations.