Improvement of Risk Management in Cost Estimation in the Building Construction Industry in Uganda

Abstract

The cost performance of construction projects is a crucial success factor. However, risks in construction projects make exact budgetary requirements challenging to forecast accurately, resulting in underestimation and overestimation. Inaccurate cost estimates could further result in unnecessary financial loss to project stakeholders and the loss of reputation and trustworthiness of construction professionals. In Uganda, risk factors are either ignored or subjectively taken care of by simply allowing a contingency figure ranging from 0% to 10% of the project cost. However, this method is sometimes unreliable and difficult to justify to project owners. Therefore, there is a need for a reliable and justifiable risk-based cost estimation method. The current study aimed to improve risk management in cost estimation in the building construction industry in Uganda. The specific objectives were to establish the risk factors, assess the effects of the risk factors and develop a reliable model that can be used for risk-based cost estimation in the building construction industry in Uganda. The study adopted a mixed-method approach by utilising quantitative and qualitative research methods. The collection of data was done using a self-administered questionnaire and an interview guide. The data was first sorted, coded and entered for analysis using the Statistical Package for the Social Sciences (SPSS) and Microsoft Excel. The risk factors in cost estimation were identified through a detailed literature review. The study revealed that the top five risk factors influencing cost estimation were: cost of materials, inflation, fraudulent practices and kickbacks, incomplete scope definition, and incomplete design and specification. The study concluded that the risk factors with the most severe effects on cost estimation were inflation, proficiency in estimating, cost of materials, incomplete design and specification, fraudulent practices and kickbacks. The study proposed a model developed using the analytic hierarchy process (AHP). The study recommends more research on the efficiency and effectiveness of risk-based cost estimation models.