A Factor Approach to the Analysis of Risks influencing Construction Cost Flow Forecast

H Odeyinka, John Lowe, Ammar Kaka

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    Construction cash flow forecasting has attracted a lot of research interests over the last two decades. Researchers have employed forecasting methodologies, which include mathematical formula-based, statistical, computer simulation and artificial intelligence applications. In spite of the quantity of research efforts, accuracy of the forecast is still a major problem, largely due to risks and uncertainties inherent in construction. This paper presents part of three-year year programme of research aimed at evaluating the impacts of risk on construction cost flow forecast. The study which is at the end of the second year identified and assessed the risk factors responsible for the variation between the forecast and actual cost flow. The study was conducted through a questionnaire survey administered on contracting organisations. On a project by project basis, contractors' opinions were sought on the extent of occurrence of 26 risk variables considered in the study. An initial analysis was carried out using mean response analysis. This shows that the main factors responsible for variation between the forecast and actual cost flow are client's changes to initial design, inclement weather, variation to works (AI), labour shortage, production target slippage, delay in agreeing variation/day works, delay in settling claims, problems with foundations and underestimating project complexity. Further analysis based on factor analysis showed that the identified risk variables could be grouped into six generic groups; the most important factor group being delayed payment and variation to works. Other generic factors are economic changes, project disruption, project complexity, shortage of construction resources and natural inhibitions. These groupings are of significant value in providing a parsimonious reduction of the risk variables and they subsequently provide direction for developing a cost flow risk assessment model.
    Original languageEnglish
    Title of host publicationUnknown Host Publication
    EditorsR. Morledge
    Place of PublicationLondon, United Kingdom
    PublisherRoyal Institution of Chartered Surveyors
    Number of pages12
    ISBN (Print)1-84233-074-8
    Publication statusPublished (in print/issue) - Sept 2002
    EventRICS Foundation Construction and Building Research Conference (COBRA) - Nottingham Trent University
    Duration: 1 Sept 2002 → …


    ConferenceRICS Foundation Construction and Building Research Conference (COBRA)
    Period1/09/02 → …

    Bibliographical note

    Hard copy deposited at BERI Office


    • Construction cost flow
    • contractor
    • factor analysis
    • mean response analysis
    • risk variable


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