Development of a risk allocation strategy for construction in the process industry: A knowledge approach

The lack of structured cost escalation models for construction activities in the process industry has lead to the development of this paper, which looks into the development of a methodology for improving cost management for construction works in the process industry, through the addition of a cost escalation factor. This paper reviews and discusses a knowledge based model for applying a risk / refinement allocation. The refinement allocation forms part of an overall cost escalation factor that derives out-turn costs from initial base estimates. Development of the knowledge for the refinement allocation strategy required three forms of elicitation; questionnaires, interviews and workshops. The deliverables, produced using these approaches, came in the form of influences and there affect on project cost escalation. The knowledge engineering process also showed the need for a two level contingency allocation related to the industry generically and the project specifically. The model is not intended to improve the initial cost estimate but insure improved management of the project throughout its life. Therefore, the accuracy of this escalation is imperative for client assurance and improved control of project costs.