Risk-contingency fund in the design stage elemental cost planning function: a theoretical exploration
Effectiveness of contingency fund management can strongly influence project success as contingency is proportional to the risk present in a project. However, the traditional allocation of a contingency fund in construction projects using lump sum or percentage addition method to cover risks in elemental cost plans and tenders has been challenged and criticized leading to the evolution of analytical and scientific methods. Therefore, the purpose of this study is to signify design stage elemental cost planning as a function of risk-contingency fund. The work presented in this paper is a literature-based theoretical exploration, and a preliminary stage of an on-going doctoral research on the budgetary reliability of design stage elemental cost plan. As a first step, a detailed review of related literature was made to establish the risks inherent in preparing the design stage elemental cost plan. Secondly, various contingency fund estimation methods available for application in construction practice were identified by demonstrating the theoretical context. The insights gained from the foregoing steps then helped in devising theoretical concepts for securing elemental cost plan as a reliable budgetary tool for construction projects through risk-contingency analysis that guarantees cost certainty.