Exploring cost and risk issues in the variability between design stage elemental cost plan and final tender sum

Abstract

Problem / Motivation: The reliability of final tender sums in traditional contracting depends on the accurate projections of baseline cost plans developed at the design development stage. However, no matter how much care and effort is put into the preparation of design stage elemental cost plans, deviations are usually observed. Accurate predictions are challenging and are attributable to the risk elements inherent in construction project developments. Knowledge gap: Knowledge on how risk factors combine to influence the variability between design stage elemental cost plan and final tender sum is required. Previous researches have not investigated the nature of this variability in a manner that a model can be developed to improve accuracy in tender sum predictions in New Zealand. Aim and objective: The aim of this study is to investigate the influence of risks on the variability between design stage elemental cost plan and final tender sum in building procurement, with a view to developing a model that could permit the prediction of final tender sum. Research methods: Preliminary data were collated from some case study projects (8) and followed by interviews with 5 key project participants. The analyses comprise descriptive statistics, thematic analysis and analysis of documents obtained from the archives of the interviewed practitioners to arrive at the research conclusion. Preliminary findings: The preliminary findings confirm the variability between elemental cost plans and final tender sums in the region of -14% and +13%. Client’s change, incomplete design information and site investigation information are the risks elements that have the major influence on the variability observed in the study. Research Significance: These preliminary results confirm a significant variability between elemental cost plans and final tender sums while the risk factors identified are responsible for the deviations observed. The primary contribution of this study to the construction industry is the emergence of a risk profile which represents an outcome corroborated by previous related researches to facilitate risk management and cost planning practice.