An investigation of the preference of conventional over scientific methods in determining construction contingency sums
The process of predicting contingency sum on most construction projects lacks a well defined framework since most cost experts to date continue to use conventional methods such as percentage addition and lump sum allowance methods that lack scientific justification since they are based on past experience, historical data, intuition, personal feelings and organizational culture. As a consequence, this has resulted in cost overruns on construction projects since risk and uncertain events inherent on a project are not appropriately analyzed, assessed and estimated. This study therefore sought to establish significant weaknesses of conventional methods of contingency determination and to find out why construction cost experts continue to use conventional methods in spite of the existing scientific methods which are perceived to predict accurate contingency sum. In addition the study also attempted to ascertain whether construction cost experts had formal policies and management guidelines for estimating, controlling and reviewing the use of contingency sum and also to find out ways in which construction cost experts can continuously improve on their prediction methods and skills when determining contingency sum. The findings of this study revealed several weaknesses of conventional methods of contingency sum determination. These included inability to analyze risk elements on projects, arbitrariness, lack of scientific basis, highly based on estimator’s feelings, double counting of risk, predicts unrealistic contingency sum, promotes poor management of projects, lacks theoretical justification and creativity, results in many litigations and application restricted to similar projects. Out of the eleven weaknesses only one was found to be significant i.e. application restricted to similar projects. Regarding the reasons for continued use of conventional methods in spite of the existing new scientific methods the study established that the most important reasons were; simplicity in application, heavy reliance on historical data, less research on scientific methods in Kenya and limited knowledge on use of scientific methods. Other reasons though not found to be important included; lack of reliable data on scientific methods, complexity of scientific methods and resistance to change. The following reasons though not tested in the study were however mentioned by the respondents to be also important; limited time in preparation of estimates for construction projects, corruption among the cost experts, inadequate training in tertiary institutions on diverse methods of contingency sum determination and simplicity in scope and specifications of projects which does not warrant the use of scientific methods. The study also established that the above reasons were not related to the professional background of cost experts. Concerning the policies and guidelines for proper management of contingency sum, the study ascertained that most cost experts had policies for filling and signing contingency sum forms by Client & Project Manager, allocation of contingency sum to specific risk elements and outlining standard templates for plan on use of contingency sum. In addition, most cost experts did not have policies for assessing potential risks inherent on a project, accountability on the usage of contingency sum, continuous training on proper management of contingency sum and procedures for reviewing and updating contingency plan templates. On the strategies for cost experts to continuously improve their prediction skills and methods when determining contingency sum the study established the following to be important; formulation of policies and guidelines for proper management of contingency sum, proper understanding of the process of budget making, gaining experience on application of diverse methods of contingency sum determination, generation and continuous update of historical data, adoption of risk management process, integration of risk education in built environment courses, enhanced project integration and communication, exploration of scientific methods of contingency sum determination and adoption of risk breakdown structure. In view of the above findings cost experts should aim at learning, adopting and using diverse methods of determining contingency sum that have a scientific basis and are capable of assessing and managing risks associated with uncertain events on construction projects. This will help to minimize cost overruns on construction projects and also to effectively manage and control expenditure on contingency sum. In addition, researchers in the Construction Industry and cost experts must endeavor to simplify scientific methods in order to reduce their perceived complexity in application. Tertiary institutions such as universities and technical colleges that train cost experts must integrate risk management education in their built environment courses so as to make future cost experts graduating from these institutions aware of the tools and techniques of managing risks and uncertainties which if not properly managed can result in cost overruns.