Project variables influencing contingency on construction contract in Nigeria

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Bello, W. A
Odusami, K. T
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In most construction contracts, risk is either ignored or dealt with in an arbitrary way by adding a percentage allowance in form of contingency sum for changes that experience shows will likely be required without considering the project variables. Contingency is used to cater for events that are unforeseen which threaten the achievement of objective within the defined project scope. The aim of the study is to assess the influence of project variables in determining the contingency sum applied to the construction cost estimate in Nigeria construction industry. The study identifies correlation between contingency and project characteristics and variables. In order to achieve the objectives, information of past projects were collected from 21 organisations and included project variables of ninety-nine projects of varying sizes and contract types. Correlation analysis was used to establish the strength and direction of linear relationship between the project variables with special attention on variation to determining future contingency. Analysis of variance (ANOVA) was also used for the analyses of data in exploring relationships among variables and compare groups respectively. There was a strong, positive correlation between variation and five of the variables: consultant estimate, contingency sum, planned duration, gross floor area, and lowest bid and also there was a strong positive correlation between contingency and five of the variables including consultant estimate, planned duration, total variation, the lowest bid and gross floor area with high value of the variables associated with high value of contingency. The result of the ANOVA indicated that there is no statistical significant difference in the contingency applied on project based on nature of project, type of project and type of client. Therefore, contingency by cost expert is not really dependent on these three variables.
Project management , Construction maangement , Budget , Variation
Bello, W. A. and Odusami, K. T (2009). Project variables influencing contingency on construction contract in Nigeria. Paper presented at the RICS COBRA Research Conference, University of Cape Town.