An Assessment of Risk Factors Impacting Budget Variability in New Zealand Commercial Construction Projects

Johnson Adafin, James O. B. Rotimi, Suzanne Wilkinson, Jasper I C Mbachu

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Abstract

A review of several authors shows that various risk factors abound which potentially impact on the outturn tender sums (OTS) of construction projects from the design-stage elemental cost plans (ECPs)/budget estimates. Proper risk analysis could at least partially solve this problem, by lowering the variation between the design-stage ECPs and their OTS. The concern of the current study is the variability between design-stage ECP and OTS, whereas the conjecture is that risk could be responsible for the observed variability. Empirical data was obtained from 208 practising New Zealand (NZ) construction consultants through an online survey. A quantitative analysis was performed to determine the most critical risk factors that impact ECPs. Findings revealed variation between ECPs and OTS (inflated risks) within the region of +1% and 23.86%. These verify discrepancies in the budgeted costs of commercial projects at preconstruction phase, and the risk factors responsible should be the initial focus of construction project consultants. The research provides invaluable insights from practice that could propose and strengthen the development of an effective mitigation strategy by using risk management approach which promotes risk/cost management integration in project delivery for the construction industry. This study therefore attempts to influence government policy to develop support mechanisms to encourage effective risk management practice in the construction industry in NZ.
Original languageEnglish
Title of host publicationProceedings of the 35th Annual ARCOM Conference, 2-4 September 2019
EditorsChris Gorse, Christopher J Neilson
Place of PublicationLeeds, UK
PublisherAssociation of Researchers in Construction Management
Pages44-53
Number of pages9
ISBN (Print)978-0-9955463-4-9
Publication statusPublished - 3 Sep 2019

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Costs
Construction industry
Risk management
Risk analysis
Construction project
New Zealand
Risk factors
Chemical analysis
Consultants
Discrepancy
Online survey
Empirical data
Cost management
Quantitative analysis
Government policy
Mitigation
Project delivery
Management practices

Cite this

Adafin, J., Rotimi, J. O. B., Wilkinson, S., & Mbachu, J. I. C. (2019). An Assessment of Risk Factors Impacting Budget Variability in New Zealand Commercial Construction Projects. In C. Gorse, & C. J. Neilson (Eds.), Proceedings of the 35th Annual ARCOM Conference, 2-4 September 2019 (pp. 44-53). Leeds, UK: Association of Researchers in Construction Management.
Adafin, Johnson ; Rotimi, James O. B. ; Wilkinson, Suzanne ; Mbachu, Jasper I C. / An Assessment of Risk Factors Impacting Budget Variability in New Zealand Commercial Construction Projects. Proceedings of the 35th Annual ARCOM Conference, 2-4 September 2019. editor / Chris Gorse ; Christopher J Neilson. Leeds, UK : Association of Researchers in Construction Management, 2019. pp. 44-53
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Adafin, J, Rotimi, JOB, Wilkinson, S & Mbachu, JIC 2019, An Assessment of Risk Factors Impacting Budget Variability in New Zealand Commercial Construction Projects. in C Gorse & CJ Neilson (eds), Proceedings of the 35th Annual ARCOM Conference, 2-4 September 2019. Association of Researchers in Construction Management, Leeds, UK, pp. 44-53.

An Assessment of Risk Factors Impacting Budget Variability in New Zealand Commercial Construction Projects. / Adafin, Johnson; Rotimi, James O. B.; Wilkinson, Suzanne; Mbachu, Jasper I C.

Proceedings of the 35th Annual ARCOM Conference, 2-4 September 2019. ed. / Chris Gorse; Christopher J Neilson. Leeds, UK : Association of Researchers in Construction Management, 2019. p. 44-53.

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

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Adafin J, Rotimi JOB, Wilkinson S, Mbachu JIC. An Assessment of Risk Factors Impacting Budget Variability in New Zealand Commercial Construction Projects. In Gorse C, Neilson CJ, editors, Proceedings of the 35th Annual ARCOM Conference, 2-4 September 2019. Leeds, UK: Association of Researchers in Construction Management. 2019. p. 44-53