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Please use this identifier to cite or link to this item: http://hdl.handle.net/123456789/8550

Title: Determination of contingency sum for works procurement during tendering stage in Ghana.
Authors: Nyagormey, Julius Jubilee
Keywords: Procurement
Tendering
Works
Projects
Contingency and Risks
Issue Date: 8-Apr-2016
Abstract: The degree of risks and uncertainties in a project results from a combination of factors which differ from one project to another. One of the attempts to handle risks is by allocating contingency sum. Traditionally, construction professionals determine contingency sum simply by adding; say 10% contingency onto the estimated cost of a project. The Traditional method is arbitrary arrived at and difficult to justify or defend by cost experts. It is coupled with so many weaknesses. The aim is not only to examine into practices of contingency allocation for works procurement in Ghana but also to identify factors that have the utmost influence on the determination of contingency sum by using Pareto Principle (the 80/20 Rule). Literature review was carried out in line with the set objectives of the study. Questionnaires were distributed to a sample size of 103 construction professionals determined using the Kish (1965) formula. A total of 68 were completed and returned out of which 67 representing 98.5% were responsive. Descriptive statistics and the relative important index were used to analyse and explore the variables in the study on the methods and factors. Traditional Percentage addition, Lump sum allowance, Cost item allocation and Probabilistic estimation methods were identified as the most frequently used and widely known by the construction experts in estimating contingency sum. Despite the existence of a more scientific methods of calculating contingency sum, cost experts and practitioners in the construction industry are yet to explore the benefits of scientific methods as they are still glued to the conventional method of percentage addition. Unexpected ground conditions, poor contract management, Political Interference, Fraudulent Practices and Kick-Backs, Site Characteristics, project Specification, Design Considerations, Global Economy and Exchange Rates have emerged as the influencing factors in making provisions for contingency calculation. Revealed by 80%/20% Pareto principle that Unexpected Ground Conditions (Substructure works), Poor Contract Management, Political Interference, Fraudulent Practices and Kick-Backs, Site Characteristics, Project Specification and Design Considerations are the most critical and significant factors where attention is likely to yield the greatest benefit in the determination of contingency sum for works. The study concluded by advocating for a more scientific methods for calculating contingency sum and recommended among others the use of scientific approaches such as Monte Carlo Simulation, Estimating Using Risk Analysis and Regression. These methods are based on statistical analyses which rely on and require statistical or mathematical knowledge from the user hence one of its limitations since most of the Contract managers or Construction professionals do not have enough knowledge of these techniques to estimate contingency sum.
Description: A thesis submitted to the Department of Building Technology, College of Art and Built Environment, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirement for the Degree of Master of Science in Procurement Management, 2015
URI: http://hdl.handle.net/123456789/8550
Appears in Collections:College of Architecture and Planning

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