Choosing an Appropriate Contingency Sum Estimating Methods for Highway Construction Projects in Nigeria: A Literature Review

Abstract

In order to establish a gap to be filled in a particular field, there is a need to gather information that allows the researcher to identify and analyse the current state of researches on the topic. Contingency sum estimation for projects plays an important role for inclusion for risk taken by the contractor on the bid amount. This is good in order to meet project objectives (cost, time, quality, health and safety, and environment). The main function of contingency sum is to cater for variations that arise during the construction phase of projects. The aim of the study is to identifying and examine the various methods for estimating contingency sum for projects with a view to propose an appropriate method which will be suitable for a specific project in order to increase accuracy and reduce cost overrun. A literature review of selected papers (journals, conference proceedings and theses) on contingency estimation was carried out. The major findings from this study is that most studies were carried out on building projects while few were carried out on highway projects. From the analysis carried out, no single method of estimating has been effective for all types of projects. These methods of estimating contingency sums have developed over the years as a result of shortcomings of one method after the other. It is therefore recommended that peculiarity of each project, ease of using each of the methods and accuracy of the estimates needed should be the basis of choosing method of estimating contingency sum. (2015) state that several studies establish that highway construction projects have higher risks than other construction projects. This is due to the fact that highway projects are capital intensive, take longer time to complete, spread over a wider geographic area and are threatened by underground conditions. Reeley and Brown (2004) posit that infrastructure and underground projects (of which highway projects) are complex and most of the time, span through several terrains, including sandy and rocky areas. Thomas, Kalindidi and Ganesh (2006) cited in El-Sayegh andMansour (2015) posits that highway projects involve very high risks due to long project duration, low market value of security packages and complex contract mechanisms and involvement of many participants with diverging interest and challenges. The required huge investment and difficult as well as complicated site conditions, according to Zayed, Amer and Pan (2008), make it imperative to have a robust contingency sum which can take care of this imminent risks inherent in highway projects. Cost contingency is included within a budget estimate so that the budget represents the total financial commitment for the project sponsor (Baccarini, 2006). Therefore, choosing an appropriate method of estimating cost contingency and its ultimate adequacy is of great importance to success of projects. Keywords