!-- Facebook Pixel Code -->

Even little projects need love!

Tiny cabin as illustration of small construction project

A study of 155 capital construction projects by an Australian energy company‡ (Gary Jackson at Queensland University of Technology) illustrates quantitatively the need for improvements in the calculation of contingency budgets for smaller projects.  This research shows that smaller (under $1M) construction projects have much wider variance between the planned total budget and the final budget (due to underfunded contingency).  An accompanying survey demonstrates that project managers do not have the time or permission to perform more formal and rigorous risk assessment, on these smaller projects.  

Even though these projects are smaller, the author makes a strong case that even informal risk assessment, would greatly reduce the financial risks to the construction company or owner’s representative, on these smaller projects.

The excerpt to the right, from G Jackson’s paper, illustrates the financial risk of NOT performing some level of risk assessment, when determining contingency budgets.  The research shows a marked increase in variation (standard deviation of 30%) between final and planned budgets, for smaller construction projects.  Larger projects, which presumably have done more formal risk assessment, have much lower variance from plan.

graph of variance for small to large construction projects

“Contingency for cost control in project management: a case study”, Gary Jackson, School of Construction Management and Property, Queensland University of Technology, Australia.  The full article can be found here.

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

budget4cast Upgrade Promotion

Thanks for checking out our powerful, affordable project budget management app!  Since you've spent some time exploring our site, I want to offer you this promotional deal on upgrades to our free trial:

3-month free trial for our Cash Flow feature (normally $79/month).  This a no-risk trial.  Cancel anytime prior to the end of the trial period, and you are out nothing!

Just fill out the info below, or send us a request via our Contact page.  Let's get started!