Modeling the Construction Risk Ratings to Estimate the Contingency in Highway Projects

Abstract

Past studies have highlighted the importance of risk assessment in construction projects and have recommended different ways to respond to potential risks that may develop over the different phases of the project. One of the strategies to respond to risk is through the proper allocation of contingency amounts. The purpose of this research paper is to assess perceived ratings of cost and schedule impact, and relative importance of the identified risk drivers on cost contingency amounts. The preidentified risk drivers were evaluated using survey responses from professionals in the context of highway transportation projects. The stepwise regression modeling was used to analyze the dependency relationship between predetermined cost contingency amounts in these projects and the perceived ratings of risk drivers assessed by project professionals. The study found that inadequate constructability reviews had a significant influence on determining owner’s contingency, whereas changes by owner’s request impacted both the owner’s and the contractor’s contingency amount, and also had a significant impact on a project schedule. The models developed and the methodology used in developing these models could be used in the planning phase of similar highway construction projects to apportion risk-appropriate contingency percentage.