Estimating Cost Contingency for Highway Construction Projects Using Analytic Hierarchy Processes

Winning a bid at a price that yields a profit, is one of the contractor's major goals from bidding. One of the significant components of markup is the risk allowance (contingencies). Therefore, contractors should be wise to consider the likelihood that a particular risk will occur, identify the potential financial impact, and determine the suitable contingency allowance if the risk was to be mitigated through contingencies. Based on previous research, usually, most of the contractors set a percentage of the cost as contingencies. This approach of setting the contingency percentage intuitively could either lead to losing the bid or leaving money on the table. Therefore, the objective of the presented research in this paper is to identify the financial impacts of the risk factors during the bidding stages that affect cost contingency and develop a fast and reliable model to estimate the expected cost contingency of highway construction projects. A survey was conducted on ninety construction companies and experts in Egypt. The data obtained from the survey was then processed using Analytic Hierarchy Processes (AHP) technique on the most important fourteen factors out of 175 ones that affect cost contingency. The developed model was tested using historical completed projects and results show that the predicted cost contingency matches with (96.31%) the average estimated contingency for real case projects. The developed cost contingency model showed robust results