Risk Assessment Frame work for Cost Estimation in Case of Building Construction Projects

Abstract

Cost estimates would not provide information regarding the effect of uncertainty on costs unless cost estimation-related risk analysis is conducted concurrently. Different risk assessment approaches are utilized in cost estimation. However, there is a lack of comprehensive study on the selection of appropriate risk assessment methods for cost estimation depending on project conditions in an organized manner. No such studies are found that have a framework that assists in the selection risk assessment method used in cost estimation. Existing researches are either only on specific model of risk assessment used in cost estimation or address risk assessment independently from the cost estimation. As a result, a risk assessment framework is required to aid in the selection of the risk assessment method used in cost estimation based on project conditions. Therefore, this study will fill this research gap. Through the following objectives identify risk assessment methods used for cost estimation. Assess risk assessment methods and their application in the context of developing countries, the case of Ethiopia. Identify criteria that are used for the selection of the cost estimation risk assessment method. Develop a conceptual framework that helps cost estimators select a suitable method of risk assessment in cost estimation based on their project conditions. To achieve the research objectives both secondary and primary data was utilized. The primary data was analyzed quantitatively by using descriptive statistics with the help of SPSS version 22 software. The validity of the questionnaire used in this study was tested by using the Pearson correlation coefficient. The reliability of the questionnaire was tested by using Cronbach alpha in SPSS. The result from the study showed that 97% of the cost estimators in Addis Ababa use the traditional percentage or contingency estimate method to assess risk in cost estimation. Despite its inability to handle risk in any logical way. It is overly simplistic and heavily dependent on estimators’ faith and experience. Training and workshops about the advantages of probabilistic risk assessment methods in cost estimation should be provided to cost estimators.