A cognitive process model of how an estimator judges cost risk allowances in highway construction projects

Cost overruns are a prevalent issue in highway construction projects, primarily stemming from unforeseen costs resulting from residual risks. Principal contractors must add cost risk allowances into their project base costs to cover these unforeseen costs. Accurately estimating these allowances is imperative for reducing the probability of cost overruns and enhancing project success. However, deterministic methods employed by principal contractors to estimate cost risk allowances, which heavily rely on project estimators’ judgements, have been criticised for being imprecise, vague, and subjective. To address this issue and improve the reasonability of estimators’ judgements, this study aims to develop a cognitive process model to comprehend how estimators judge cost risk allowances in the principal contractor’s tender prices for highway construction projects.

Critical realism was adopted as the philosophical and methodological framework for investigating estimators’ judgement-making processes. Through a critical review of literature on expert judgement, five cognitive mechanisms primarily underlying the judgement process, twelve potential sources of bias influencing experts when judging cost risk allowances in construction projects, and three forms of knowledge (i.e., episteme, techne, and phronesis) mobilised in expert judgement have been identified. Building upon these findings and Hogarth’s dual-process framework, a preliminary model depicting how experts make judgements in the construction industry was developed.

To contextualise the preliminary model, twelve individual semi-structured interviews were then conducted online with experienced estimators employed by principal contractors in the UK. Through analysing the data via content analysis, the results suggest that estimators’ judgement-making processes comprise five cognitive mechanisms, namely attention to risk owners, understanding of risk elements, perception of risks, consideration of particular circumstances of each project, and long-term memory. Techne and phronesis were found to play prominent roles in this process, enabling estimators to make reasonable judgements. Additionally, eleven sources of bias influencing estimators’ judgements were identified, categorised as individual characteristics, organisational characteristics, and tender situation.

To validate the contextualised model, an online focus group study with another seven estimators was conducted, which confirmed most of the interview findings, with minor modifications. Notably, the judgement process is found to be iterative rather than one-way. The final cognitive process model indicates that estimators’ judgement-making processes on cost IX risk allowances are irrational processes, and various sources of bias and estimators’ knowledge can significantly influence their accuracy. The model developed in this research serves as a foundation for principal contractors to develop targeted strategies to enhance the reliability of estimators’ judgements and to create more effective tools and methods to accurately estimate cost risk allowances.