The International Journal Of Engineering And Science (IJES) || Volume || 4 || Issue || 7 || Pages || PP -01-06|| 2015 || ISSN (e): 2319 – 1813 ISSN (p): 2319 – 1805 www.theijes.com The IJES Page 1 Cost Overrun Estimation of Construction Project with Significant Risk Factors 1, Salahi Pehlivan, 2, Ali Erhan Öztemir 1 PhD Candidate, Construction Management, Girne American University,Girne, North Cyprus. 2 Assistant Professor, Civil Engineering Department, Cyprus International University, North Cyprus. ---------------------------------------------------------- ABSTRACT----------------------------------------------------------- The objective of this study is to generate fast, consistent and reliable outcomes for the risk analysis of construction projects. Proposed method uses discrete values for risk factors. Accordingly allots value range which influences cost figures in a bounded probability. The analysis formed on MS Excel add-in @Risk software creates the range of possibilities that generates probable scenarios. In addition, input data of the project simulated with Latin Hypercube Sampling (LHS) method. Effect of each factor can vary according to its influence degree on cost item. Conducted study simplifies the risk assessment on cost figures, which indicates the importance ranking of risk factor on cost item. Also, developed model concurrently provides better estimate for the total cost of project. Used method has applied on a real case study. The results of the case study indicates high risk of cost overrun. In order to complete without overrun probability is %0,3 which is contracted amount for the selected project cost. On the other hand, there is a %99,7 probability of cost overrun, which indicates maximum cost overrun is approximately %10,1 of contracted amount. Also, the analysis identified which risk factors are more effective on total cost of project. --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 06 July 2015 Date of Accepted: 30 July 2015 --------------------------------------------------------------------------------------------------------------------------------------- I. INTRODUCTION One of the major problem of construction projects is cost overrun. Risk analysis can mitigate the risks to avoid negative impact on project cost. Contracted construction projects have some constrains, from the contractors perspective, completing the project on time and on budget are the main constrains. For the risk analysis, where unanticipated cost can go beyond limits to delay project and/or additional cost. In order to progress as planned and achieve project goals, risk analysis is an essential step for the completion of project. Also, identifying probabilistic effect of risk factors on project can support cost estimate. In this regard, intensive researches have conducted to find out risk factors and effect that causes cost overrun in construction industry. A research study points out cost overrun as 24.8% from 4 different cases [1]. Cost overrun is common and recurring problem for construction projects. Another recent research emphasized cost overrun mean as 12.22% for the total of 276 construction and engineering project [2]. It has been researched by many researchers what creates this gap between the contracted amount and actual cost [1] [3]. From this point, risk factors are the main reason which needs to be considered that can generate unexpected scenario for the project. Risk factor identification and its effect on projects are researched in studies in different countries [4] [5] [6] [7]. Determining the effect of these risk factors, also what causes delays, can change the work plan and/or to take possible precaution in advance. Otherwise projects’ progress and completion time can be interrupted by the emphasized risk factors. Estimation of risk data can be noted as qualitatively or quantitatively. Nevertheless, combining these risk factors effect in different formats can create misunderstandings and confusion. It is one of the most challenging task to create fast and reliable data for the risk analysis. A practical way has to be used, to set up a uniform and useful data. Developed method aims to use individual effect of factors on cost items in order to identify most important factors which needs more attention to overcome possible problems. Effect of each factor can vary with the severity of risk factor and the probability of risk occurrence rate. Risk influence are multiplication of severity and frequency [8]. A practical way is to use the effect of risk factors on project as influence degrees of risk factors. One of the way to mitigate risk of project overrun is a contingency which is defined as [9] “the amount of funds, budget or time needed above the estimate to reduce the risk of overruns of project objectives to a level acceptable to the organization”.