KPMG Major Projects Advisory Project Leadership Series: Budgeting, Estimating and Contingency Management for Construction Projects
Oct 05, 2012
From the Global Energy Institute
This installment of Major Projects Advisory Project Leadership Series is designed to provide insight about some of the common challenges identified when assessing construction projects and the resources available to owners to minimize their risks.
The process of developing a comprehensive project budget with a reasonable contingency amount is critical for the project to be considered a success upon completion. The project budget is refined as the project progresses from the conceptual phase to the "check estimate" or bid phase.
The contingency fund should be developed as part of a project risk assessment and should adequately address project risks, while not overly restricting the use of capital funds that can be assigned to other projects.
Managing the contingency fund proactively allows the owner’s project management team to analyze trends and respond to cost pressures relative to the overall budget.