A Cognitive Process Model of How Project Estimators Judge Cost Risk Allowances in Highway Construction Projects

Cost overruns are a previlent problem in highway construction projects. Principal contractors normally add cost risk allowances to tender prices to reduce cost overruns. However, the estimate of cost risk allowances mostly depends on their estimators’ judgements, which are criticised as subjective and imprecise. Therefore, this research aims to investigate how estimators judge cost risk allowances to improve their judgement-making process. A critical literature review was first conducted to understand the process of expert judgement from three aspects: the underlying cognitive mechanisms, the sources of bias involved, and the forms of knowledge mobilised. Then, through conducting interviews with twelve estimators working for principal contractors in the UK construction industry, the cognitive process of how estimators judge cost risk allowances for highway construction projects was analyzed. The findings suggest that estimators’ judgement process involves an interplay of Type 1 and Type 2 processing, which are mainly underlay by the cognitive mechanisms namely attention, encoding, pattern recognition, working memory, and long-term memory. In addition, eleven sources of bias affecting estimators when judging cost risk allowances were identified, among which estimators’ previous project experiences, risk attitudes, and assumption of the controllability of risks were the most significant ones. The research also finds that techne and phronesis play primary roles in estimators’ judgements, while episteme plays a negligible role. The research findings enable contractors to better understand the judgements made by their estimators, in order to enhance their reliability and thus reduce cost overruns.