Factors Influencing Contingency Sum Estimation in Construction Contract in UK and Nigeria

This study explores the factors influencing contingency sum estimation in construction contracts in the UK and Nigeria. It examines the methods used for estimating contingency sums and the strategies in place for accurate estimation. The research aims to provide insights into best practices in the construction industry globally.

FACTORS INFLUENCING CONTINGENCY SUM ESTIMATION IN CONSTRUCTION
CONTRACT IN UK AND NIGERIA
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Executive Summary
First the cost estimation is very significant for project scheduling and defining milestone.
Secondly, the cost estimation can be used for the purposes of monitoring and evaluation and
finally it can be used in the planning phase which involves workable designs. The construction
cost estimation techniques can play a significant role when it comes to project success or
otherwise of delivery of project. Different methods are adopted in Nigeria to assist in carrying
out the estimation of sum contingencies. Risks and changes are unavoidable in the construction
contracts and they are considered as the main cause of dispute and delay in construction
contracts. the sum of money provided for catering for the risks linked with construction project is
called contingency allowance: complexity if the project, size of the project, adequate of project
information, evaluated project risks, types of construction and the difference between the lowest
estimate and client’s estimates for the project contingency sum, major project factors that are
often perceived are the cost data of project as well as duration alongside their variability.

Contents
Executive Summary.....................................................................................................................................2
CHAPTER 1: INTRODUCTION................................................................................................................5
1.0 Introduction.......................................................................................................................................5
1.1 Problem Statement.............................................................................................................................6
1.2 Research aims and objectives............................................................................................................7
1.3 Research Questions............................................................................................................................7
1.4 Significance of the Research..............................................................................................................8
1.5 Research Structure.............................................................................................................................8
CHAPTER 2: LITERATURE REVIEW...................................................................................................10
2.1 Introduction.....................................................................................................................................10
2.2 The concept of contingency in Nigerian Construction Projects.......................................................10
2.3 Contingency estimation methods.....................................................................................................12
2.3.1 Deterministic estimation (Traditional percentage addition)......................................................13
2.3.2 Regression method....................................................................................................................14
2.3.3 Monte Carlo simulation............................................................................................................14
2.3.4 Artificial Neural Network.........................................................................................................15
2.3.5 Program evaluation and review method....................................................................................15
2.3.5 Estimate quality........................................................................................................................16
2.3.6 Method of moment...................................................................................................................16
2.3.7 The individual risk-Expected value method..............................................................................16
2.3.8 Cost estimation method............................................................................................................17
2.4 Key attributes of the concept to project cost contingency................................................................17
2.4.1. Risk..........................................................................................................................................17
2.4.2. Risk management.....................................................................................................................18
2.4.3 Total commitments...................................................................................................................18
2.4.4. Project outcome.......................................................................................................................18
2.5 Categories of contingencies.............................................................................................................18
2.5.1. Design contingency.................................................................................................................18
2.5.2. Construction contingency........................................................................................................19

2.6 Best practice in construction industry globally................................................................................19
2.6.1 Enhancement in prefabricated and modular contruction projects..............................................19
CHAPTER 3: METHODOLOGY.............................................................................................................21
3.1 Introduction.....................................................................................................................................21
3.2 Questionnaires.................................................................................................................................22
3.3 Secondary sources review................................................................................................................22
Advantages of secondary sources of information..............................................................................23
Disadvantages of secondary data sources..........................................................................................23
3.4 Case studies.....................................................................................................................................24
Benefits of case studies......................................................................................................................24
Limitations of case studies.................................................................................................................25
CHAPTER 4: DISCUSSION....................................................................................................................26
4.1 Introduction.....................................................................................................................................26
4.2 Factors influencing the contingency sum estimation in Nigeria.......................................................26
4.3 Estimation of percentage contingencies...........................................................................................27
4.4 Project Cost Data Presentation and Analysis...................................................................................28
4.5 Total sum of approved fluctuation...................................................................................................29
4.6 Comparison of the Contingency Sum to Total Approved Variation................................................31
4.7 Best practices in the construction industry.......................................................................................34
4.7.1 Green technology in construction.............................................................................................34
CHAPTER 5: CONCLUSION & RECOMMENDATIONS.....................................................................36
CHAPTER 6: REFERENCES...................................................................................................................39

CHAPTER 1: INTRODUCTION
1.0 Introduction
A contingency sums refers to the amount of money that is permitted in construction project
budget for project expenses which were unforeseeable and not foreseen during document
preparation. In most cases the contingency sum is utilised in the design as we; as construction
stages of any project (Perry, 2012, p.633). Using contingency sum enables the team tasked with
design to make progress in ordinary style even as they ensure they are off the estimated sum end
costs.
By adding contingency sum in every stages of a project, actual total, total end cost as well as
total cost may be more reliable estimate and team involved in the design may be able to confine
their working within the estimated budget which will be a reflection of the possible actual project
cost. Usually, the sum of contingency sum change depending on the kind of construction project.
For instance, a project that encompasses renovation, the contingency sum is likely to be more as
compared to a project of erecting a new structure. As various design elements are finished, the
amount of contingency sum would be lower even though the estimate ought to be inclusive of a
contingency sum for every stages of project construction which will be inclusive of the stages of
construction.
the design contingency is include in the budget during design phase when there are numerous
elements of proposed project which are not resolved or possibly not clearly comprehended yet,
contingency sum would be greater as a portion of entire budget. Even though an architect can
offer actual approximations of project, the accurate cost planning and the establishment of the
reliable project budget is a service of specialist professional usually done by the quantity

surveyor (Levy, 2016, p.326). The moment the design of the project has been finalized, the
contingency sum serves a different purpose where by it is used to cater for the expenditure of the
unforeseen issue which arise during construction.
The construction estimate is the total amount predicted to be used to complete a construction
project. It is a prediction of the total amount of a given construction project based on the existing
information at the time of production. According to the Business Dictionary (2013) cost
estimation refers to an estimation of possible price of a product, project or program calculated
based on the existing data. Thus the more data available on a given project the more the
estimation tends to be reliable (Clark, 2014, p.224)
1.1 Problem Statement
The rates of construction costs overrun in Nigeria and United Kingdom in the recent past has
become of great concern to the contractors and consultants (Wass, 2015, p. 342). The rates have
become so alarming to an extent one keeping question and wondering the accuracy of the
estimate. Due to the uniqueness of the construction projects, some of the aspects are made
temporary and some of the unidentified and unforeseen events might come up during the
construction stage accounted for through the use of some risk management and cost control
tools. due to that high rates of construction costs overrun that have been witnessed in the recent
past there is need to determine the factors influencing contingency sum estimation in
construction contract in UK and Nigeria.

1.2 Research aims and objectives
The major aim of research is determination of factors influencing contingency sum estimation in
construction contract in UK and Nigeria. Following the sane, there were different specific
objectives which were outlined to aid in attaining the key aim and included:
 Determine factors considered by the construction cost experts incoming up with the
contingency sums
 To establish the techniques used in estimating contingency
 To find out what is happening with contingency sum estimation in Nigeria construction
contract
 To find out how contingency sum is described and practiced in Nigeria as well as UK
 To establish the strategy in place to cater for accurate estimation of contingency sum in
Nigeria
 To carry out a literature review in order to find out what other authors have done
regarding the factors influencing contingency sum estimation in construction contract in
UK and Nigeria
1.3 Research Questions
The study has the following research questions:
1. What are factors influencing contingency sum estimation in construction contract in UK
and Nigeria
2. Which methods are used in measuring contingency sums?
3. How is contingency sum described and practiced in Nigeria

4. What are the measures that have been put in place to cater for accurate estimation of
contingency sum in Nigeria?
5. Which procedures are involved in estimation of the contingency sum estimation?
6. What are the trends in the contingency sum?
7. What has been the best practice in construction industry globally and how has Nigeria
construction industry adhered to it?
1.4 Significance of the Research
Achievement of the objectives of construction project presents essential satisfaction of the
involved stakeholders. In engineering as well as construction projects, the cost estimates
alongside plans are drafted to ascertain work is performed to expectations as well as within the
provided timeframe and within the given budget (Barnes, 2018, p. 659). It has been established
that variation and uncertainties cannot be avoided in construction projects and the begin from
mind changes by consultants, clients all the way to unforeseen challenges as well as occurrence
brought up by contractors. The results of this study will be of significance to different parties
involved in construction industry by equipping them with knowledge regarding the methods used
to measure the contingency sums. The factors considered by the construction cost experts in
coming up with the contingency sums (Britain, 2016, p. 733). The strategies to cater for accurate
estimation of the continues sum and the best practices in construction industry globally
1.5 Research Structure
This dissertation has six chapters as discussed below
Chapter 1: Introduction-The research topic is introduced and a brief background given. The aim
and objectives, research questions as well as significance of study are outlines. The main purpose

if this chapter is to introduce and brief the reader of the dissertation on what is contained in other
chapters
Chapter 2: Literature review-Previous journals and works of other authors regarding to factors
influencing contingency sum estimation in construction contract in UK and Nigeria are
reviewed. The main purpose of this chapter is to equip the author and reader with a deep
understanding of the topic of the research.
Chapter 3: Methodology-The chapter discusses approach adopted in data collection as well as
various data collected techniques adopted
Chapter 4: Discussions-The information which was obtained from the literature review is
discussed in details with reference to research aims and objectives. In this chapter, the research
questions are answered.
Chapter 5: Conclusion-This chapter offers study summary of the research conducted.
Recommendations and final remarks are included in this chapter
Chapter 6: References-All information sources of the data used in the dissertation are noted in
this chapter and such include books, journals, and articles among other sources which contain
relevant information to the research topic.

CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
Risks as well as changes cannot be avoided in the construction and they are considered as the
main causes of disputes and delay in most of construction projects. The sum of money provided
for used in catering for eventualities related to construction project is called contingency
allowance. This any accurate contingency has to work as grounds for making decision regarding
financial workability of other changes as well as their control baseline. Creedy et al., (2010)
found out that construction type, the size of the project as well as the difference between the
client’s estimates and low bid are the factors that influence project cost overrun. The type of
construction, project size, percentage of design completed before the tender is awarded; number
of contractor used, appropriateness of information and method of procurement were identified by
Thal and Cook (2010). In measuring contingency the main variables or project variables are
project duration and cost data with their variability.
It is challenging to establish the overall estimate contingency since parts of construction project
would be fully defined at estimation time while rest may just be defined in a sketchy manner.
The contingency estimation has since been described as deterministic and subjective based on
intuition.
2.2 The concept of contingency in Nigerian Construction Projects
Risks are handles in a random manner or ignored in construction industry through the
introduction of an additional 10% contingency to approximated cost of construction projects
which is not a scientific manner of handling risks. Model building is predicted to be a key
approach in the future generation management. This has been seen in numerous research reports

that have been prepared by different researchers. The models are produced to act as the grounds
of estmimate of contruction cost to attain an enhanced reliability as well as accuracy of cost
estimates. Assurance of reliable and accurate construction cost would be of assistance to the
consultant quantity surveyor in the approximation practices to be informed of the project
variables which would probably affection their choice on contingency sum that applies to the
project construction.
Risks are considered to be interest in every project of construction from beginning all the way to
the completion stage. The risk may be predicted mathematically even though that is not possible
with uncertainty. From numerous construction projects which have been constructed in Nigeria,
they show reduced performance with regard to the cost as well as time targets thereby numerous
time and cost overruns are associated with the unpredicted evens that uncertainties would not
have been estimated in the correct manner.
The main purpose of the contingency is to achieve the project aims and objectives. the
contingency funds that are allocated in the development plan are to offer the project managers
with flexibly that is needed to address the uncertainties and other deviations which threaten the
project aims and objective. The contingency allowances are sued to take care of the occurrences
which were not foreseen within scope of the project. They are included to sow the total
construction project costs that imply the estimate is a representative of the total commitment of
finance for project.
The sums contingencies are utilized as financial treatment in strategies of risk management
hence cater for risks that are linked with given project. The contingency allocation objectives are
to ascertain the budget allocated for the undertaking is insufficient to manage the risk that is not

foreseen cost rises thus any actual contingency has to be in a position to act as the ground for
making decision regarding variations financial viability as well as the control baseline.
The contingency sums will be varied with regard to the unit type that is being considered.
Experience shows that value which is chosen ought to be on the highest end of range during the
inflationary period. There are three categories of contingency allowances:
 Well-approximated process design (previously constructed) around 5-10%
 Well-approximated process design (bottleneck kind) around 20-35%
 Very new process design (has never been built previously) around 15-30%
2.3 Contingency estimation methods
Contingency sum is integral part of whole approximated cost of construction project. From the
research and studies that have been carried out by various scholars and researchers that the term
contingency is most likely highly misinterpreted, wrongly applied as well as misunderstood
when it comes to project execution. The term contingency is elaborated by American Association
of Cost Engineer as the certain provision of money in approximation for unforeseeable or not
defined cost components within defined scope of project. Further it was defined to be a
categorical time provision or money in approximation for items that are not defined that
statistical studies of the historical data have indicated would most probably be needed.
The sum of money that is used in offering for the unforeseen items associated with the project
construction is known as contingency allowances. The Los Angeles Energy Department in the
United States of America as well defined the contingency sums as a provision that is given to
cover cost which might arise from designs that are not completed. Uncertainties as well as
unforeseen risks contained within the outlined scope of a contruction project.

Contingency sum is defined by various quarters as a reserve of amount added to the estimated
project cost in order to achieve specific project aims and objectives or at the same time enable
alterations which experience indicate are mostly likely to occur. It is as well explained as sum of
money or total time beyond the estimated project timeframe and project cost in order to lower
risk of overruns of the objectives of the project to a standard which is not accepted by the
organization.
2.3.1 Deterministic estimation (Traditional percentage addition)
This tends to be a subjective technique used in addition of a fraction on estimation that is
generally a derivation of instinct: past experiences, guess feelings and historical data. This
technique has been for a long time been described as a crystal ball which is mostly computed as a
percentage addition across-the-board. The contingency sum is normally experienced as
percentage mark on base estimation that is utilized in attempting to enable for unexpected
situations. This percentage figures often range between 5 and 10 is added to the highest predicted
estimate of final cost of unforeseeable works. This technique as reviewed has shown numerous
weaknesses as pointed out by various scholars and researchers.
The estimate is randomly arrived at and is very challenging to justify for the same or defend and
be criticized by researchers. It has been for a long time considered as an approach that is not
scientific and the argument why numerous projects are estimated way above the budget. A
fraction addition often leads to a one figure estimation of the total sum estimate which suggests
an extent which is not proved.
The percentage addition offers no indication of any possibility for reduction in cost and might
not indicate poor management of project execution. Since percentage takes into consideration all
risks with regard to cost contingency, it has the tendency of direction the focus off performance,

quality as week as time of risks. This method is not in any way enhancing creativity in the cost
estimation practices which allows it to become a norm and a routine which may probably
propagate mistakes. In fact, criticism of this method has resulted in various techniques being
suggested in the estimation of the contingency sum since the technique features numerous
weaknesses.
The objectives of the contingency sum provision is one of the reasons which ensures that the
project cost which is estimated is sufficient and realistic enough to manage any expenditure that
might be serviced by risks as well as other uncertainties. Since the weakness of percentage
addition methods, the contingency sum by far outweighs the strengths lack of developing
creativity in the estimation and the unjustified manner in which they arrived at the percentage
both by academicians and the professionals in the training institutions and in the field
respectively tends to encourage and promoted poor management and monitoring of the
contingency sum and the constrict insecurity in United Kingdom and Nigeria.
2.3.2 Regression method
The method of estimation of contingency sum has been in place since 1970. The regression
approach makes application of parsimony principles which demonstrates the method ought to be
simple as well as fit for intended use of attaining reliable results. The main objective of the
technique is to estimate the correlation as well as nature of the dependent and independent
variables.
2.3.3 Monte Carlo simulation
This is more of a quantative approach used in the quantification of risk through allocation for a
restricted manner of establishing the contingency sum in certain construction project. The results
of approach are in probability distribution form for project total cost. The technique often offers

a tolerable value of not more than 5% or in other case 0% of a project that is properly defined.
Even though for the cases of big projects, a probability level of between 80 to 90% is selected for
contingency and at the beginning phase to the tune of 95% may be required.
2.3.4 Artificial Neural Network
This is a technique of cost contingency which makes application of an information processing
approach in the stimulation of brain. The method copies the central nervous system through
transmitting signals via the elements network with the use of various interconnections as well as
connectivity. This approach employs mechanism of capabilities of problem-soling through
detection of the invisible relationships within the given project data and once providing the most
appropriate solutions to the problem. This technique is categorically ideal for non-linear
modelling of data which contrast the linear techniques that utilize application of regression. The
se of this technique has rapidly gained popularity since it may be used in the prediction of cost
overruns in project through aiding management in the development of good contingency plan.
2.3.5 Program evaluation and review method
This methods call for some form of judgment regarding the probability density function that full
explains very cost item randomly variable picking the measurement between the highest and
lowest costs in estimated terms. The method makes use of a formula the same as the one used in
PERT as per the 5th to 95th percentile. Three approximations are needed in this method for every
item taken into consideration: the optimistic cost which is the lowest cost and the pessimistic
cost which defines the highest alongside the modal cost the cost that tends to be most likely. The
three approximations of cost may be pegged on judgment as well as experience or could be
pegged on the gathered data from the preceding projects (Levy, 2010, p.543)

2.3.5 Estimate quality
This method involves the development of a qualitative model in the prediction of the sum of the
cost of contingency depending on the cost estimate quality as well as the historical data cost. The
most estimate quality is a factor of four main determinants: the individuals that take part in the
estimation process, the project details as well as the estimate modes among other features. Such
determinants may further be broken down into 45 components for the determination of the
estimates quality. The prediction of the model is often given as y=mx+b in which y is
representative of the parentage contingency while x is the estimate score, b defines the intercept
as m shows the slope (Patrascu, 2011, p.511). The score is then used in the prediction of the level
of accuracy of estimates in which the accuracy tends to be greater when the score is higher and
thus the demand for more contingency sum for a selected level of confidence.
2.3.6 Method of moment
When such method is adopted, cos item in estimate is often denoted using probability
distribution which indicate uncertainties in cost item (Building, 2006, p. 52). The distributed
individual cost item has an anticipated variance as well as value. The anticipated cost item value
as well as variance is summed up at standard value and expected value for whole cost of project.
The entire cost of project may be assumed to in line with normal distribution depending on the
theorem of central limit which occurs when the cost item is independent. Using probability takes,
a contingency may be achieved from probability distribution on the expected levels of confident
for normal distribution (Ashworth, 2013, p. 822)
2.3.7 The individual risk-Expected value method
In the approach, the quantity of the contingency reserve maybe dependent on the anticipated
value for the uncertainties events. The expected value is average of probability distribution of
risk. In the application of such a technique, an estimate that is free from risk of a definite scope is

generate and the uncertainty as well as the cost with regards to a mean as well as the highest risk
allowance which is determined into two kinds: fixed risk and variable risk (Brook 2017, p. 43)
fixed risk are the risk events which will take place either in totality or not even one for instance
introduction of an additional access. Should it not be introduced there will be no risk incurred.
Hence the maximum risk allowance would be defined by the cost as the average cost becomes
the maximum product cost and the chances of occurrence.
Variable risks define such risk events which take place in the absence of a degree that is well
defines. the maximum risk allowance for such risks is often presumed to be having 10% chance
of mostly likely being exceeded and is often approximated by the project team bases on the worst
case event of risk which may occur (Holm, 2017, p. 117).
2.3.8 Cost estimation method
A contingency percentage is distributed for every cost items in the breakdown structure of the
project or the numerous other engagement packages in which there is estimation of the final
contingency as a weighted mean with every activity package perceived in a different manner as a
center of risk with separate contingency sum assigned (Colier, 2017, p. 62)
2.4 Key attributes of the concept to project cost contingency
2.4.1. Risk
The needed amount for contingency is often a reflection of the existence of a risk in a specific
project. Contingency sum often encompasses two groups including unknown as well as unknown
risk. The contingency covers the occurrences that fall within the outline scope of project which
are not foreseen, undefined, unexpected and unidentified.

2.4.2. Risk management
There exists an avalanche of plans of risk management for risks in each given project for
example risk reduction, financial treatment for retained risk as well as risk transfer. In such a
way, contingency is adopted alongside other strategies of risk treatment (Higgs, 2016, p. 823)
2.4.3 Total commitments
Usually the project costs estimation is prepared and the contingency allowances included
showing the probable project cost. Th provision of contingencies within the budget estimate of
the project insinuates the estimate is representative of the whole financial commitments of
project
2.4.4. Project outcome
The contingency sum may be having a significant effect on project outcome for the sponsors of
the project. In case where the project contingencies tend to be very high, it may encourage
sloppy cost management which would in turn change the project to be uneconomical and hence
abandoned which would lead to locking up the money that are unavailable for catering for the
activities of the organization (Jacob, 2017, p. 81). In cases where the contingency sum turns out
to be very low, it is likely to be rigid and result in a financial environment that is not realistic and
thus end up in a performance outcome which is not satisfactory.
2.5 Categories of contingencies
2.5.1. Design contingency
This refers to the contingency allowances given for the changes that are likely to be done during
the design process of a project (Seelay, 2011, p. 31). The contingency allowance covers the

activities including incomplete definition of scopes as well as inaccuracy of the methods of
estimation and data.
2.5.2. Construction contingency
This is a contingency allowance provided to cater for the changes that are likely to be done
during the process of construction. Within the tradition procurement arrangement, project
sponsors used to procure a professional to generate the design before they competitively chose
the construction contractor (Hendrickson, 2017, p. 721). The contract was agreed between the
sponsor of the project and the contractor that often composed of the variation sections which
allowed for variations as well as provided for a strategy for establishment as well as estimating
the worth of the variations. Construction contingency is in place to cater for such variations
under the agreement between the project contractor and sponsor. The contingencies may be
comparable with total value of approved variations of contract in order to evaluate contingencies
accuracy.
2.6 Best practice in construction industry globally
2.6.1 Enhancement in prefabricated and modular contruction projects
The use of modular as well as prefabricated construction technology is increasing owing to the
small amount of materials needed, flexibility of the structures as well as the time required. This
construction form is able to economise of numerous resources as well as time for the companies
Other best practices globally include:
 Better safety equipment
 Sustainability practices in construction
 Efficient project management solutions

 Applications of Building Information Modelling in construction
Such practices are highly practices in Nigeria and have significantly assisted in the reduction of
the level of risks which occurs during the construction practices. With the adoption of these
practices in the construction industry, the amount of contingency allowances provided during the
projects allocation has significantly increased (Pratt, 2013, p. 54)

CHAPTER 3: METHODOLOGY
3.1 Introduction
Research methodology defines the willingly approach that aids the researcher with the collection
of data that is deemed to be most appropriate and relevant or to conduct an analysis of the data
that is linked to his topic through the use of numerous strategies of research. The key aim of this
study if find out the factors influencing contingency sum estimation in construction contract in
UK and Nigeria. The research objectives and aims were determined to aid in the achievement of
the study main objective. To have an enhanced and wide comprehension of the research topic,
there was need to conduct a review to find out the factors influencing contingency sum
estimation in construction contract in UK and Nigeria.
It was of great importance to have an understanding of the different characteristics of the topic of
the research. Hence qualitative approach alongside conducting a literature survey was utilized in
the course of the study. the chosen approach of research is very ideal in conducting this study as
the literature reviewed to be conducted offer in-depth data in find out as well as documenting
diverse variations in finding out the factors influencing contingency sum estimation in
construction contract in UK and Nigeria.
The chosen research methodology offers a summary of the studies which were conducted on the
very topic and simultaneously offer a brief overview on establishing as well as documenting the
various changes in finding out the factors influencing contingency sum estimation in
construction contract in UK and Nigeria. The literature review was conducted to enable the
researcher has a better comprehension of the topic of the research as well as aid in the

identification of the research gap. Among the methods adopted in collection of data in this
research included:
3.2 Questionnaires
The primary data that was used for this research were got through structured questionnaire which
were administered to the tenure professionals as well as practising quantity surveyors in client
alongside consulting organizations. Purposive sampling was deployed in the selection of the
respondents. A good number of the organizations had projects distributed across the countries
and were thus representing what obtains in the full population of study. The secondary data for
the research was obtained from records of previous projects within the organizations in accessing
the cost data variables needed for analysis of the research. A data collection schedule was as well
used in the generation of cost data of previous projects from the firms. The schedule was
composed of 14 variables got from the records of the successfully completed projects or even
those projects that are still under construction. Correlation Regression, Analysis of Variable,
Mean Score as well as Descriptive Statistics were among the tools and methods of data analysis.
The inferences that were drawn from the analysis were used in making concluding remarks on
the factors influencing contingency sum estimation in construction in construction contract in
UK and Nigeria.
3.3 Secondary sources review
A literature review which was conducted encompassed a review of the contributions that had
been made by other researchers as well as scholars in finding out the factors influencing
contingency sum estimation in construction contract in UK and Nigeria. By using this technique,
the writers of the different secondary sources which were reviewed were in a position to share
and pass understanding and knowledge regarding the factors influencing contingency sum

estimation in construction contract in UK and Nigeria. The utilization of secondary sources turns
out to be of immense significance in the achievement of the objectives as well as aims of the
research. Using secondary sources as well play is significant roles in the attainment of all study
aims of research including getting summaries of the factors influencing contingency sum
estimation in construction contract in UK and Nigeria.
Advantages of secondary sources of information
Using secondary sources in collecting data serve to significantly save on time as well as
resources that would be wasted in the file during collection of information. At the moment,
accurate and reliable data is obtainable the use of various search engines. Most of the libraries in
various regions of around the globe are characterised with digitalization of their collection to
allow students as well as other researchers in the carrying out of greater and enhanced
researchers.
The secondary sources may as well be accessed easily via the use of internet as well as other
materials of the library. One just needs the internet in order to have access to billions of sources
of information online.
Secondary sources significantly aid in the generation of refined insights in the sense that the
researcher can be informed on the research topic following the analyses of the past. Data
reanalysis may as well result in non-anticipated new findings.
Disadvantages of secondary data sources
In as much as there are numerous benefits that are attached to the use of secondary sources in
research, there are in place limitations that have come along with them including:

 No control on data quality: While government as well as other formal institutions often
guarantee that the data available online is accurate, some of the data sources which are
kept with the institutions tend to be biased as well as corrupted during the update of the
existing databases
 Data inappropriateness: The data that is often gathered first hand by the researcher tend to
be more accurate since the researcher gathers the data with solid idea in the memory
which is often answering the research question or otherwise meeting the objectives of the
research.
3.4 Case studies
A case study research encompasses an extensive as well as elaborate study of an event, object,
and idea or in some cases an individual with the aim of gaining a thorough understanding of the
same. Case studies are often naturally qualitative and owing to this fact, they lead to a narrative
elaboration of the experience otherwise character. Case studies are not often used in the
determination of effect and cause neither is they usable in the discovery of generalizable truths or
even make any substantive predictions. Instead, case studies provide emphasis in description as
well as exploration of object phenomena. The main feature of case studies is their narrow focus
thus offering a great extent of details as well as being able to bring together subjective as well as
objective data in the achievement of deep understanding.
Benefits of case studies
Numerous benefits are associated with using case studies in carrying out research:
 Case studies offer emphasis on deeper content
 They are perceived to be highly flexible in comparison to other research methods

 Data is often gathered in natural context as well as setting
 Case studies result in examination of new hypotheses that are later testable
Limitations of case studies
Case studies are as well associated with numerous limitations including:
 The data is often unique hence are not replicable
 For a good length of time now, concerns have been raised on the generalizability, validity
as well as reliability of the findings
 Case studies tend to have some degree of subjectivity and the bias of the researcher could
be a significant challenge

CHAPTER 4: DISCUSSION
4.1 Introduction
From the analysis that was carried out it was found out that the majority of the professionals
within the Nigeria construction industry make use of the traditional percentage approach to come
up with the contingency sum. It was also noted that there is not scientific approach which is
followed to research at the use this technique.
4.2 Factors influencing the contingency sum estimation in Nigeria
Factors that are considered to be very essential in making the allocation of the construction
project contingency are complexity of the project, size of the project, adequacy of project
information, evaluated project risks, types of construction and the difference between the lowest
estimates and the client’s estimates which are the main factors influencing the project cost
overrun. In the process of estimating for the project contingency sum, major project factors that
are always taken into consideration include duration as well as project cost data alongside their
variability.
Important to note is that the past experienced about estimating the real cost have indicated the
unforeseeable occurrences including outbreak, incremental in conditions of weather, picketing by
the workers and others will ever tend to enhance the costs of projects (Ahuja, 2012, p. 342). It
usually becomes more challenging to establish the overall estimate reliability since some of the
components of a project could be defined completely during estimation while the other could just
be done in a sketchy manner.
There are numerous factors in Nigeria that affects the construction cost of a project which have
generally been grouped into three: technical, economic as well as environmental or institutional

factors. Two construction projects can never cost the same amount of money regardless of the
level of similarity. The essential costs of a project depends on the realistic cost of labor,
materials, land and equipment on the identified site in which construction of the project is to be
done (Hendrickson, 2012, p. 32)
A total of 100 copies of the questionnaires were administered to both cost experts and quantity
surveyors in three various organizations in the construction industry. 60 of the issued
questionnaires were returned a representation of 60% response rate. 70% of the respondents were
from organizations of clients while 30% were coming from consulting firms. The highest
qualifications with regard to academics of a respondent was an MSc which made up to 20% of
the responses while BSc. holders of degrees constituted 50% and the remaining HND holder
constituted 30%. Most of the respondents were professionally qualified where 70% of them were
corporate members and 10% were fellow members of the UK Institue of Quantity Surveyors.
The remaining 20% belonged to the probationer Institue members. This was an indication that a
great percentage of the respondents were of adequate if not extensive comprehension of
professional practice.
4.3 Estimation of percentage contingencies
The findings of the research established that between 0 to 5 per cent contingency was commonly
applied followed closely by 5 to 10 per cent with the application of contingency more than 10
per cent being seldom. The ranking of the means of widely used figure percentages by cost
experts are as shown in table 1

Table 1: Estimating percentage contingencies
The findings established that 5% of was the commonly applied percentage and was closely
followed by 7.5% as well as application percentages that were less than 5%. This grounds the
notion that in most cases, surveyors used percentages which were not more than 5% of the
estimate. The 10% addition estimation falls in the same categories as 7.5% and less than 5%. The
allocation of 20% or more as contingency barely exists since the values of their mean scores
were almost 1 which illustrated never (Ader, 2008).
4.4 Project Cost Data Presentation and Analysis
Data were received from 20 organizational and was inclusive of information related to 100
projects of different contract type as well as sizes. The information below was named for every
project in the sample used:
 Client Type (Public or Private)
 Nature or project (Refurbishment or New)
 Project type (Residential, Health, Educational, Industrial, Office, Recreational, Religious,
Others)
 Project Location
 Lowest Bid
 Initial contract sum

 Estimate of client or consultant
 Amount approved for contingency
 Planned duration of project
 Gross floor area
4.5 Total sum of approved fluctuation
The initial statistical analysis to be conducted involved the use of a scatter plot diagram in the
identification of the outliers where five projects were eliminated from a sum of 100 projects that
left the ital. number of the projects that could be analysed at 95. The subsequent step involved
checking the variability between the projects with the aid of variance (ANOVA) in the detection
of if 95 sample sizes would not be in violation of the assumption of homogeneity of variance as
well as whether the 95 projects are different statistically significantly. The variables adopted
included total variation which was inclusive of fluctuation on the approximated value of contacts
(i.e. minus contingency sum) as well as the contingency sum (Ader, 2008). Similar analysis was
done on the percentages of the estimate variation ad well as percentage on contingency on
estimated value of the contract.

Figure 1: Histogram with Normal curve indicating the distribution of Percentage Contingency on
Estimate for 95 project data
Figure 2: Histogram with Normal curve indicting distribution of Percentage Variation Estimate
for 95 project data

The histogram of the line distribution of all 95 project data of the two percentage variables is as
illustrated the in the figures above. A one-way between the collections analysis of variance was
carried out on the 95 project samples where the significant figure for Levine’s test demonstrated
that there was no violation of the assumption of homogeneity of variance while the ANOVA
table indicated that there was seemingly statistical significant different between the various
projects (Seelay, 2011).
4.6 Comparison of the Contingency Sum to Total Approved Variation
The percentage of contingency variable C% on net approximated sum of the contact as well as
the V% that represents the variation percentage on net approximated sum of contract were
determined for every project with the aid of Microsoft Excel that resulted in the formation of two
more variables that were used for SPSS analysis
Variation V%=total variation/estimated sum of contract*100
Contingency C%=contingency sum/estimated sum of contract*100
Table 2: Mean values of percentage contingency (C %) & percentage variation (V %) on
estimate

The C% and V% values were produced for the 95 variables; SPSS was utilized in the analysis of
the description statistics in the generation of the mean values of percentage contingency C% as
well as variation V%. The outcome of the descriptive statistics as illustrated in the table above.
The outcome demonstrates that the construction contingency mean 5.5% of the approximated
sum while variation averaged 11.5%. To establish the contingency effective accuracy in
percentage: C%/V%*100=48%. This shows that the contingency only covered 48 per cent of the
approved contract variation and hence did not cover for the 52%. The variations variable (V%)
of 184% an estimated by the coefficient of variation (from mean as well as standard deviation)
tends to be greater as compared to the variability of construction contingency (C%) that was 90%
(Seelay, 2011).
This is a relative significance difference that was earlier shown by the ANOVA outcomes. A
fundamental observation is that the percentage contingency is not equal to the total variations on
project and it is approximated at around half of the expected value. The results validated the
research hypothesis which states that the contingency sum is not equal to the total amount of
fluctuation and variation approved.
The figures 1 and 2 showed significant information that was of relevance to the research work.
After discovery of the average contingency percentage as well as variation on projects, variations
as well as the range of percentage contingency the summary of the results are shown in the figure
below. The analysis indicated that 0-5% contingency is used for almost 60% of projects followed
closely by 5% to 10% that is covering yet another 30% of all projects. Contingency of 10% was
applicable to about 7% of the total projects.

Table 3: Percentage range of contingency on estimate
Approximately between 15-20% was applicable to just 2% of total projects while just 1 out of
the 95 projects had a contingency allocation that was more than 20%. This analysis as well
injects more strength to the notion of the respondents that a range of 0 to 5% of percentage
contingency was most and commonly applicable (Seelay, 2011). This proposes that an agreement
should be made between the idea of the respondents as well as the project cost data on the
percentage range that would be used in the estimation of contingency.
Table 4: Percentage range of variation on estimate
On every occasion, the finding of this study is validated within the study through making a
comparison between the project cost data and the opinion of the respondents and consistently
accurate with other findings of research. When compared, the percentage variation range on such

projects was as well calculated to guarantee how well the contingency could foretell the eventual
variation on project the results of variation (V %) of 95 projects.
It was established that in 20 out of 95 projects, the approximated contract sum was lowered by
the variations (negative variations) and 40 projects had their variations ranging between 0 and
5%. Hence in aggregate contingency allowance has been appropriate when it comes to
accounting for the variations or otherwise evading cost overrun in about 40% of projects. A
fundamental observation that raises significant concern refers to the number of projects whose
variations are more than 20% accounting for about 20 projects. From the foregoing, it can be
deduced that the effectiveness as well as accuracy of contingency may be defined as the different
between percentage contingency and the percentage variations on each of the projects.
4.7 Best practices in the construction industry
Following the continued evolution as well as growth experienced in the construction industry,
there are numerous efficient practices carried out in the industry including:
4.7.1 Green technology in construction
With the climate changes and global warning, green construction is one of such fields that are
fast growing in the sector of construction industry. More structures as well as buildings are
including green technology into construction process (Seelay, 2013, p. 528). Green technology
refers to the process of constructing construction projects in a manner that is not only resource
efficient but also environmental friendly. The concept begins from the planning all the way to
design and finally construction and demolition stages. Such technology is not very unique from
the classical technology of building as the utility; durability as well as economy is very important
facets in the stages.

Along with construction of the green building, research has increased about green construction
(Shan, 2047, p. 178). There are numerous building facades that scrub carbon, bricks baked out of
reused cigarette butts.

CHAPTER 5: CONCLUSION & RECOMMENDATIONS
To conclude, from the analysis carried out it can be deduced that the professionals in the
construction industry in Nigeria make use of conventional parentage as well as estimate quality
technologies that are often determined by using arbitrary calculations. Majority of the
professionals provide for the contingency sum in an estimated project cost to cater for the risks
and the uncertainties that are likely to occur within the defied project scope.
From the research carried out, it can also be conclude that complexity of the project, size of the
project, adequacy of project information, evaluated project risks, types of construction and the
difference between the lowest estimates and the client’s estimates which are the main factors
influencing the project cost overrun. In the process of estimating for the project contingency
sum, major project factors that are always taken into consideration include duration as well as
project cost data alongside their variability. In Nigeria that affects the construction cost of a
project which have generally been grouped into three: technical, economic as well as
environmental or institutional factors.
Based on the conclusion made on the research it is of importance to note that complete project
budget that has a precise contingency sum is fundamental for considering a project as a success.
The contingency allowances ought to be design as an aspect of risk assessment of a project and
thus it ought to address the risk associated with the given project adequately. Managing the
contingency funds proactively allows the management team of the client to analyse and give
response to cost pressure in relation to the entire budget. The experts in the construction industry
may borrow a lot from this study as it creates an arena that aids in realizing the objectives of
project cost contingency with the aim of attaining their challenges of estimation.

The following recommendations are thus deduced from the research:
 A lot focus should be put on the main factors that influence construction in order to
ensure a reduction in the cost of construction, improve construction performance as well
as confidence within the construction industry at large
 The Quantity Surveyors ought to become a little bit more lively with regard to their
responsibilities as cost experts ascertaining the make use of the approved and appropriate
methods of estimation
 Thorough cross-checking of the estimates should be conducted on the updated price
information to avoid any mishaps in the estimation
 There should be adequate coordination as well as communication among the different
stakeholders who are working on a given project to enhance management control issues
as well as lower any delays which may be avoided.
 Clients ought to identify their needs and requirements clearly, if they can achieve them
with their existing financial ability to minimize issues with payments
 Contractors are supposed to come up with precise as well as cleared strategy and plan
prior to the onset of a project. Project planning as well as scheduling of cash, labor
alongside equipment early enough in conjunction with proper bidding strategy would aid
in obtaining efficient work at adequate price
 All stakeholders are supposed to take responsibility in adopting the preference solutions
in the minimization of the cost of construction
 Since there is often an agreement between the contractors and the consultants on the
extent of severity of the factors influencing the cost of construction, they should work

jointly to ascertain they offer the client quality for the money without going beyond the
contract sum.

CHAPTER 6: REFERENCES
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Chapter 6: References
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Sears, G. A., 2011. Lump Sum Contracts: The Red Book. 4th ed. Texas: IchemE
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