Thesis (M.Eng.) - Asian Institute of Technology, 1999

A thesis submitted in partial fulfillment of the requirements of the degree of Master of Engineering, School of Civil Engineering

A cost estimate is an instrument intended to predict the total anticipated expenditure required to complete a particular construction project. The process starts with a measurement of work that is followed by pricing of quantities. Due to the risky nature of construction practice, the process of pricing quantities introduces the elements of risk and uncertainty into estimating and it leads to the cost overruns. In most cases, the actual project cost is higher than the estimated cost before adding any allowance to the estimate. To cover the cost overruns situation, an allowance of contingency should be added to the estimate. There is no fixed rule on how to allocate the right amount of contingency to construction cost estimate. The traditional practice is to allocate a certain percentage mark-up of estimated cost as an allowance of contingency. Although adequate contingency allocation will reduce the chance of cost overruns, a theoretical approach of contingency allocation to cost estimate is not widely used. This study attempted to find the most cost overrun areas of a construction project based on its estimate and contingency is assessed individually for each. All of the project prices data were collected from the nine construction firms located in Yangon area. The collected data was analyzed by probabilistic theory to develop a reliable contingency allocation approach than the traditional practice. This development will cover the possible future risk and uncertainty to a project and tends to increase the chance of the actual project cost not exceeding than the base estimate plus contingency. It also shows the cost overrun areas of a project and contingency is allocated to each area by the amount of its cost overrun.