Estimating Cost Contingency for Highway Construction Projects Using Analytic Hierarchy Processes
Winning a bid at a price that yields a profit, is one of the contractor major goals from bidding. One of the significant components of markup is the risk allowance (contingencies). Therefore, contractors should be wise to consider the likelihood that a particular risk will occur, identify the potential financial impact, and determine the suitable contingency allowance if the risk was to be mitigated through contingencies. Based on previous research, usually most of the contractors set a percentage of cost as contingencies. This approach of setting the contingency percentage intuitively could either lead to losing the bid or leaving money on the table. Therefore, the objective of the presented research in this paper is to identify financial impacts of the risk factors during the bidding stages that affect cost contingency and to develop a fast and reliable model that can be used in estimating the expected cost contingency of highway construction projects. A survey was conducted on ninety construction companies and experts in Egypt. The data obtained from the survey was then processed using Analytic Hierarchy Processes (AHP) technique on the most important fourteen factors out of 175 ones that effect on cost contingency. The developed model was tested using historical completed projects and results show that the predicted cost contingency matches with (96.31%) the average estimated contingency for real case projects. The developed cost contingency model showed robust results.
Keywords: Bid, Risk, Uncertainty, Risk Assessment, Contingency, Analytic Hierarchy Processes (AHP).
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ABOUT THE AUTHORS
Ahmed S. El-Touny
He has more qualifications in teaching and training for all construction management programs. He has an experience in the construction management field such as construction finance, bidding and contracting, scheduling techniques.
Ahmed H. Ibrahim
Dr. Ahmed H. Ibrahim is an Assistant Professor of Construction Engineering and Management at the Construction Engineering Dept., Zagazig University, Zagazig, EGYPT. He has more than 20 years of teaching, training, research, and consulting experience in Egypt. Dr. Ibrahim’s research interests include construction engineering management, total quality management & risk management, value engineering, construction finance, bidding and contracting, scheduling techniques. His teaching and training focus on the construction scheduling, cost estimating, project management and control, construction economics, and construction engineering. Dr. Ibrahim has many publications in national and international journals and conference proceedings.
Mohamed I. Amer
Dr.Mohamed I. Amer is an Associate Professor of Construction Engineering and Management at the Construction Engineering Dept., Zagazig University, Zagazig, EGYPT. He has more than 25 years of teaching, training, research, and consulting experience in Egypt. Research interests include construction engineering systems, bridge & tunnel construction, value engineering, construction finance, bidding & contracting, scheduling techniques, and TQM. His teaching and training focus on the construction scheduling, cost estimating, project management and control, construction economics, and construction engineering. Dr.Mohamed has many publications in national and international journals and conference proceedings.
Ahmed S. El-Touny
He has more qualifications in teaching and training for all construction management programs. He has an experience in the construction management field such as construction finance, bidding and contracting, scheduling techniques.
Ahmed H. Ibrahim
Dr. Ahmed H. Ibrahim is an Assistant Professor of Construction Engineering and Management at the Construction Engineering Dept., Zagazig University, Zagazig, EGYPT. He has more than 20 years of teaching, training, research, and consulting experience in Egypt. Dr. Ibrahim’s research interests include construction engineering management, total quality management & risk management, value engineering, construction finance, bidding and contracting, scheduling techniques. His teaching and training focus on the construction scheduling, cost estimating, project management and control, construction economics, and construction engineering. Dr. Ibrahim has many publications in national and international journals and conference proceedings.
Mohamed I. Amer
Dr.Mohamed I. Amer is an Associate Professor of Construction Engineering and Management at the Construction Engineering Dept., Zagazig University, Zagazig, EGYPT. He has more than 25 years of teaching, training, research, and consulting experience in Egypt. Research interests include construction engineering systems, bridge & tunnel construction, value engineering, construction finance, bidding & contracting, scheduling techniques, and TQM. His teaching and training focus on the construction scheduling, cost estimating, project management and control, construction economics, and construction engineering. Dr.Mohamed has many publications in national and international journals and conference proceedings.