Examining the Effects of Early Cost Drivers on Contingencies

The accuracy of early cost estimates is critical to the success of construction projects. The selected tender price (clients' building cost) usually is seen in previous research as a holistic dependent variable when examining early stage estimates. Unlike other components of construction cost, the amount of contingencies is decided by clients/consultants with consideration of early project information. Cost drivers of contingencies estimates are associated with uncertainty and complexity and include project size, schedule, ground condition, construction site access, market condition, and so on. A path analysis of 133 United Kingdom school building contracts was conducted to identify effects of nine major cost drivers on the determination of contingencies by different clients/cost estimators. This research finds that gross floor area (GFA), schedule and requirement of air conditioning have statistically significant effects on the contingency determination. The mediating role of schedule between gross floor area and contingencies (GFA→Schedule→Contingencies) was confirmed with the Soble test. The total effects of the three variables on contingencies estimates were obtained with the consideration of this indirect effect. The squared multiple correlation (SMC) of contingencies (=0.624) indicates the identified three variables can explain 62.4% variance of contingencies, and it is comparatively satisfactory considering the heterogeneity among different estimators, unknown estimating techniques, and different projects.