method for estimating contingency based on project complexity

• Online Access: http://hdl.handle.net/2047/D20194045

Accurate cost estimates are important in every construction project for owners to prepare their budgets and construction plans. In transit projects, estimators for construction projects make estimates from historic data on every detailed level of construction needs like rails, ties and vehicles and then sum up these costs to get the final estimates for projects. However, transit projects usually experience cost overrun and budgets are rarely sufficient. This paper proposes a methodology to enhance estimates for transit projects and analyze the cause of general lack of accuracy in cost estimates. By analyzing the fundamental background of transit project phases, some of the reasons for insufficient estimates are identified. Then by analyzing the actual cost data from transit projects provided by the TCRP Final-G07 report, a new methodology is developed to try to help estimators to make better judgments. Federal Transit Administration's Standard Cost Categories (SCC) for Capital Projects, divides a transit project's cost into 10 categories. Previous research has shown that the cost for the details in each category (rails, tracks and ties etc.) follows a lognormal distribution. For each detailed estimate, it is suggested that the estimator provides the most likely value (mode) for the distribution as the cost estimate. In other words, the estimate is the mode of that particular lognormal distribution. However, in reality, the average cost of the whole project cost is the mean value of the cost distribution. Since the mode and mean of a lognormal distribution is not the same, a difference occurs. By performing mathematical analysis on the normal distribution for the whole project cost and lognormal distribution of the detailed estimates, a new methodology is developed. The results are verified using actual project costs provided by the TCRP Final-G07 report and the FTA-2007 report.