EVALUATION OF PROJECT RISK AND THE DETERMINATION OF CONTINGENCY SUM FOR BUILDING DEVELOPMENTS IN NIGERIA

EVALUATION OF PROJECT RISK AND THE DETERMINATION OF CONTINGENCY SUM FOR BUILDING DEVELOPMENTS IN NIGERIA

ABstract

Due to its fragmented and competitive nature, the construction industry is characterized by inherent risks and uncertainties. Therefore, it is difficult to accurately estimate the cost of construction projects. To achieve the goal of completing work primarily from a cost and quality perspective, we divide the total contingency to account for unanticipated work items that are likely to occur. Therefore, this current study aims to assess project risk in order to determine appropriate funding for contingencies to improve project performance. Data were obtained through a structured questionnaire similar to that of F.C.T, using a quantitative approach. Managed by active construction professionals. Abuja, and a pro forma survey to collect archival data from completed construction projects. 402 questionnaires were returned (44.4% response rate) and proved useful for further analysis, and 47 projects were also deemed suitable for investigation. Data were analyzed using relative importance index (RII), severity index (SI), correlation and regression analysis. The study found that the deterministic method (adding a percentage to the baseline estimate) was the most commonly used method, the success amount normally assigned to construction projects was inadequate, and other risk factors is not taken into account for allocation. The study concludes that determining the degree of success has little to do with the perceived level of inherent risk in construction projects (R2 = 7%). Also, the relationship with cost overruns is weak. Based on this, a more scientific approach should be used in estimating success rates, rather than an empirical approach that often leads to underestimation or overestimation of construction costs. Success amount.

chapter One
Foreword

1.1 Research background
Buildings, by their very nature, entail unavoidable risks. There are many variables that affect the outcome of a construction project, most notably the final cost. Contractors must accept the risk of unexpected costs incurred during construction. Risk is also a problem for customers (Mak and Picken, 2000). Considering various risks that increase costs, many owners and contractors assign a guaranteed amount to each project. The project owner allocates emergency funds to the budget of the proposed project, while the contractor adds emergency funds to all bids submitted. Ford (2002) posits that the project budget is one of the most important and widely used project management tools. The complexity of projects and the uncertainties inherent in managing the financial performance of constructed assets, development financing, and cost and schedule make it impossible to accurately predict exact budget requirements. These characteristics also mean that projects deviate from plan. Similarly, Akintoye and Fitzgerald (2000) attribute the inaccuracy of cost estimates to lack of practical knowledge of the construction process by those responsible for functional estimating, inadequate preparation of cost estimates. time, inadequate bidding documents, and high variability in contractor sub-price. Changes in owner requirements, lack of communication between calculation and construction teams. Estimating costs is particularly difficult in the construction industry, often leading to large cost overruns explained by large uncertainties and project uniqueness (Buker et al.).