Abstract:
Risk-contingencies can strongly influence cost certainty if properly evaluated and managed. Accuracy of early cost estimates is a major concern for construction industry practitioners in New Zealand, especially quantity surveyors. Several researchers have long expressed their concern about cost estimating inaccuracies by recognizing that the accuracy achieved in cost estimating has been less than desirable. The essence of having an accurate design stage cost estimate as a reliable budgetary tool is defeated if risk estimates are not incorporated or not properly evaluated if incorporated. Hence, project objectives regarding cost, time, and quality targets are threatened as contingency is proportional to the risk present in a construction project. Therefore, the aim of this study is to signify the design stage cost estimating as a function of risk-contingency reserve. This study is a literature-based theoretical exploration and part of an ongoing doctoral research on the budgetary reliability of a design stage elemental cost plan. As a first step, a detailed review of related literature was made to establish the risk elements inherent in preparing the design stage cost estimate. Secondly, various factors affecting design stage cost estimating accuracy in construction practice were identified by demonstrating the theoretical context. The insights gained from the foregoing steps then helped in devising theoretical concepts for securing the design stage cost estimate as a reliable budgetary tool that guarantees cost certainty for building projects through risk-contingency analysis. © 2014 American Society of Civil Engineers.