Determining Optimum Cost Contingency for Road Construction Project Using Monte Carlo Simulation: A Case of Access Road for Housing Projects
No Thumbnail Available
Date
2017-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Addis Ababa University
Abstract
Road construction project is subjected to many substantial risks which affect the project cost and time. Most of the contractors and owners of such projects handle such risks by having a reserve budget which will be used for the instance called contingency. The practices of most of the project owners and contractors in determining the actual amount of cost contingency is by arbitrarily assigning a percentage values, mostly 10% to the total cost of the project. However, this reserve budget failed to achieve the objective of handling any uncertainties occurring during the courses of the project execution. Thus, this research aimed to determine realistic project cost contingency percentage for each work package by taking ten different access road construction projects containing thirty work packages found to be common for all projects. The research used three different probability distribution functions to model the variation of unit costs from project to project. Then, these probability distribution functions are used to run a Monte Carlo simulation for estimating the probability of occurrence of cost overrun and percentage deviation. The results of the study revealed that arbitrary assignment of project cost contingency to the total project cost is not feasible and inappropriate. Moreover, the result indicates different work packages have different uncertainties and the respective cost contingency varies from 0 – 35%.
Description
Keywords
Construction, Risk and Uncertainty, Contingency Assessment, Simulation