doi:10.3850/978-981-08-7920-4_S1-CP02-cd


Contingency vs. Percent Completion in Infrastructure Projects


Ali Touran and Ye Zhang

Department of Civil Engineering, Northeastern University, Boston, MA, United States.

ABSTRACT

This paper presents a method for establishing budget contingency levels based on the percent completion of project. All the important phases of the project life cycle including conceptual design, preliminary design, final design and construction are considered. A probabilistic approach is used to establish contingency budgets in such a way to provide a specified confidence level against cost overrun. It is understood that as project progresses, more information becomes available and the level of uncertainty decreases. For various percent completion levels, a distribution for contingency is calculated that allows the project owner/manager to select the contingency budget at their comfort level. In order to show the application of the proposed method, real data from a number of U.S. transit projects is used. Actual cost overruns for various stages of project development (conceptual design, preliminary engineering, and final design) are calculated. These values are used to establish the required contingency at the conclusion of each of the mentioned project phases. Also, using these values, the required contingency at various points during the construction phase (such as 25%, 50%, 75% construction complete) is calculated and reported. The approach can be used by project owners to plan for needed funds during various phases of project completion. It also helps project managers to have better control on project budget and be prepared to take appropriate action in case the likelihood of budget shortfall is increased.

Keywords: Contingency, Simulation, Transportation, Transit projects, Cost estimate, Overrun.



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