Introduction
1.1 Background of the Study
Construction by its nature involves certain unavoidable risks. There are many variables affecting the outcome of a building project especially its final cost. Contractors are required to accept a certain level of risk due to unforeseen costs that are incurred during construction. Risk is also a thing of concern for clients (Mak and Picken, 2000). To account for the various risk that lead to cost increase, many owners and contractors allocate a contingency amount to each project.
Project owners allocate contingency fund to the budgets for proposed projects, while contractors attach a contingency amount to all their submitted bids. Ford (2002) postulates that, project budgets are one of the most important and widely used project management tools. Project complexity and the inherent uncertainty of the financial performance of constructed facilities, development funding, and the control of costs and schedule makes exact budget needs impossible to forecast accurately.
These characteristics also cause projects to deviate from plans. In the same vein, Akintoye and Fitzgerald (2000) identified the causes of inaccuracy in cost estimation, as lack of practical knowledge of construction process by those responsible for estimating function, insufficient time to prepare cost estimates, poor tender documentation, wide variability of sub-contractors price, change in owners requirements, poor communication between the estimating team and construction team. Cost estimation is particularly difficult in the construction industry, often leading to considerable cost overruns that are explained by large uncertainties and uniqueness of projects (Bukeret al).
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