Methodological approaches to risk assessments during cost plan production

Abstract

Reliable prediction of final tender sums of building projects from the cost plan is of great importance to construction clients and practitioners to prevent unpleasant consequences of cost overrun, disputes and project abandonment. Researchers over the last two decades have employed forecasting methodologies which utilize various elements of price forecast equation. However, in spite of these research efforts, a model that could improve the accuracy of final tender sum predictions is yet to be developed for New Zealand. Different countries may require specific empirical studies to investigate budget / cost overruns, but a similar methodology could be used and findings compared. The research reports part of an on-going research concerned with assessing the impacts of risks during pre-tender cost estimating, and data will be obtained through survey in New Zealand. It attempts to review the needs for project information during cost planning, with a view to identifying risk factors inherent in cost plan development. A review and conceptual classification of tender price forecasting methodologies is undertaken towards developing a conceptual framework for risk assessments in traditionally procured commercial projects. The framework described, allows improved assessment of the impacts of risks on the variability between design stage elemental cost plan and final tender sum. Overall, it suggests an economical predictive-model for the New Zealand construction industry.