Cost contingencies and cost contingency estimation methods in construction investment projects

Abstract

ABSTRACT:
Construction investment projects are always associated with risks, including cost risks. Therefore, to ensure the project's success, it is necessary to estimate the contingency budgets to deal with the risks. This article introduces the views of contingency in the world, compared with the point of view on contingency cost in Vietnam reflected in the legal regulations on construction cost management. The article reviews the traditional and non-traditional methods for estimating the project cost contingencies to point out that Vietnam is applying a innovative approach in estimating contingency budgets for construction projects, especially projects funded with the state capital. However, this approach has many shortcomings, failing to link contingency costs with project risks. Therefore, further research should be carried out to apply non-traditional approaches for estimating contingency budgets.

Keywords: construction cost management, project cost risks, cost contingencies, cost contingency estimation methods, range estimating,
expected value, parametric modeling