Uncertainty and Contingency: Implications for Managing Projects

Gregory Howell1

1President, Lean Construction Institute, Box 1003, Ketchum, ID 83340, +1-208/726-9989; ghowell@leanconstruction.org

Abstract

Uncertainty about what to build and how, is reduced as projects move from concept to completion through conceptual planning, design, and construction. Owners, designers, contractors and suppliers include additional time and money in their estimates to absorb uncertainty. Likewise, owners may include addition space or capacities in their program to cope with changes, and architects and engineers make provisions for the unexpected and unknown in their designs. These contingencies2, established to absorb uncertainty, may be reduced as the project matures, as what and how become clearer and more stable. The Last Planner® System (LPS) reduces uncertainty by improving the predictability of workflow on a project, in effect reducing the uncertainty caused by the way work is managed. Collaborative design and management practices reduce conflicts, missing information and change the structure of work to improve constructability. A relationship between uncertainty in projects and the provision of contingencies such as time, money, additional capacity to resist forces or other forms of ‘insurance’ for reasonably expected if unknowns so seems reasonable and normal. Data on the extent of uncertainty faced on projects was collected in 1990 in research conducted for the Construction Industry Institute and again at the end of 2011 using the same instrument. This data is reviewed and discussed. Implications for the application of contingencies are discussed and the question is asked: Is contingency waste to be eliminated or value to be protected? The paper closes with a proposal for a larger research initiative.

Keywords

Uncertainty, Planning, Risk, Project Management, Last Planner® System (LPS)

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Reference

Howell, G. 2012, 'Uncertainty and Contingency: Implications for Managing Projects' In:, Tommelein, I.D. & Pasquire, C.L., 20th Annual Conference of the International Group for Lean Construction. San Diego, USA, 18-20 Jul 2012.

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