Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
1Â Â Contingency Factors to Account for Risk in Early Construction Cost Estimates for Transportation Infrastructure Projects Construction cost certainty is vital for a department of transportation (DOT) to effectively fund and manage an overall construction program. However, early estimates during the scoping stage are usually inaccurate because of the incompleteness of the projectâs definition and design details. These uncertainties and risks necessitate setting a contingency amount for a project or program to allow for possible cost increases. Without a rational method for computing an appropriate contingency, most DOTs rely on the fixed percentages at each stage of project development; these are established by policy rather than by a rigorous analysis of a specific projectâs risk profile. A reliable and consistent process, equipped with sound methods and tools for estimating construction contingency, is needed in order to increase a DOTâs confidence in its funding allocation and management decisions during project development and delivery. The objective of this project is to develop a guide for state DOT staff (those responsible for scoping projects) to use in order to improve their early construction contingency estimates for common project types with differing levels of complexity. This study focuses on early construction contingency among cost components that can impede the accuracy of project cost estimating. The guide will identify the project-related risks that are associated with significant cost impacts and that affect the accuracy of early construction contingency estimates as compared to actual construction costs. This guide (a) addresses the generally accepted definition of construction contingency and its components, which are aligned with the FHWAâs recent guidelines on probabilistic risk-based estimating; (b) provides specific descriptions of the major methods available for construction contingency estimationâfrom simple, deterministic methods to sophisti- cated, probabilistic methods; (c) presents the process of identifying and prioritizing poten- tial construction risks associated with a project using available DOT risk checklists and risk registers of historical projects from FHWA; (d) details the systematic process of risk-driven construction contingency estimating based on project-specific risks; (e) provides general guidelines on performing a construction contingency estimation using historical cost data available from DOTs to validate risk-based construction contingency estimates; and (f) provides guidelines on how to successfully track and monitor construction contingency by adopting an iterative risk analysis method during the project delivery process. S U M M A R Y
