Risk Based Estimation in Construction Projects

Abstract

Final cost of a project is always subjected to many variables and assumptions. A single value estimate only represents one of the many possible conditions that can arise in the future. Hence a cost estimate should be represented as a range of values rather than a single value. Construction projects are complex project which involve many uncertainties. Uncertainties in activities can be a threat to the project objective or an opportunity to reach the project success. Traditional method of allocating contingency sums towards the uncertain events in a project is a weak concept and doesn’t identify risks explicitly. This doesn’t consider the long term effects also. For effective risk management the risk associated with each of the construction activity should be explicitly identified and analyzed qualitatively and quantitatively. Conditions are simulated using the simulation tool to predict different outcomes in future. High cost and schedule risks are identified and response plans are made. The estimate and schedule is expressed as a probable range of values not as a single value.