Determination of the Contract Risk Buffer in the Construction Industry

This article presents an analysis of the volatility of construction project implementation costs, with a particular focus on medium- and long-term projects. Inherent fluctuations in the prices of construction inputs require contractors to use advanced methods of calculating bid prices and formulating base budgets, in accordance with best practices in cost risk management. The article presents an algorithm for determining the contract risk buffer resulting from the increase in the cost of construction work, taking into account the key determinants of risk and their impact on final investment costs. It also discusses legal issues, such as the allocation of risk between contracting parties, and economic aspects related to the construction sector, including the improvement of forecasting tools in the area of investment costs. In addition, the analysis covers issues related to the management of construction projects, the organization of construction processes and the complexity of project structures. The multi-criteria approach used enables a comprehensive assessment of the risks involved in estimating the cost of construction projects.