SCENARIO-BASED COMPARATIVE ANALYSIS OF RISK AND BIAS EFFECTS ON COST ESTIMATION IN CONSTRUCTION CONSULTING

Abstract

The aim of this study was to understand cost estimation in the construction industry by service providers such as consultants and construction contractors. The study was focused on determining how industry professionals estimate cost for projects while addressing risks and to understand the impact of subjective bias on the cost estimate. Initial questionnaire results reflected that the number of years of experience in the field plays a role in the accuracy of the cost estimate. Therefore, scenario based interviews were conducted and the data collected was then compared with the actual project data to determine if there is a relationship between experience and accuracy of the cost estimate. Through regression analysis a positive relation was observed concluding an increase in experience resulting in estimation accuracy increase. Additionally, two other scenarios were presented to understand the role of subjective decisions on valuation for expected risks faced during the construction project duration and the contingency planning for any unforeseen risks. Results from ANOVA suggested no statistically significant difference between the percentage cost multipliers for risk from internal delays and client design changes and experience levels. This suggested that other factors influenced the heavily subjective decision of accounting for risks. However, there was a difference found between the contingency allocation by entry level/ juniors and the senior/ experts.