Is the Owner's Construction Contingency Impacted by the Maturity and Accuracy of Front End Engineering Design (FEED)?

A project owner's construction contingency is often an amount of funding added to a cost estimate to cover a certain degree of risk or uncertainty. As the name indicates, the owner contingency is controlled by the owner and included in the owner's project budget. The hypothesis of this study is that the understanding of the maturity and accuracy of front end engineering design (FEED), which is a critical component of front end planning (FEP), would lead a project team to set a better-informed contingency percentage for their project. The levels of FEED maturity and accuracy affect the owner's ability to make informed and reliable decisions, including cost predictions. Currently, due to the lack of a consistent understanding of FEED maturity and accuracy, contingency values used for a project may not necessarily be correlated with the project's FEED maturity and accuracy levels. This paper presents the analysis of owner's contingency versus FEED maturity and accuracy, for the first time, in the large industrial construction sector. The research presented in this paper follows a scientific research method that included a literature review, data collection workshops, and statistical analysis of contingency data. One major finding shows the levels of FEED maturity and accuracy did not impact the level of contingency assigned on projects. This result, combined with earlier findings that FEED maturity and accuracy are significantly impacting cost growth, and other key performance metrics, shows there is considerable room for improvement. Owners can start using FEED maturity and accuracy scores as part of the indicators when assigning contingency for projects.