Impact of aleatoric, stochastic and epistemic uncertainties on project cost contingency reserves

David Curto, Fernando Acebes, Jose M Gonzalez-Varona and David Poza

Papers from arXiv.org

Abstract: In construction projects, contingency reserves have traditionally been estimated based on a percentage of the total project cost, which is arbitrary and, thus, unreliable in practical cases. Monte Carlo simulation provides a more reliable estimation. However, works on this topic have focused exclusively on the effects of aleatoric uncertainty, but ignored the impacts of other uncertainty types. In this paper, we present a method to quantitatively determine project cost contingency reserves based on Monte Carlo Simulation that considers the impact of not only aleatoric uncertainty, but also of the effects of other uncertainty kinds (stochastic, epistemic) on the total project cost. The proposed method has been validated with a real-case construction project in Spain. The obtained results demonstrate that the approach will be helpful for construction Project Managers because the obtained cost contingency reserves are consistent with the actual uncertainty type that affects the risks identified in their projects.

Date: 2024-05
New Economics Papers: this item is included in nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in International Journal of Production Economics 253, 108626 2022

Downloads: (external link)
http://arxiv.org/pdf/2406.03500 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2406.03500

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().