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This paper evaluated the use and application of probability analysis in the assessment of construction risk. It has been a usual practice to estimate a single-price value for the cost of a project and a certain percentage allowance to cater for risk. A more realistic approach is to adopt the policy that the single point forecast is the most likely price with a range between the lowest price and the highest price. To demonstrate this, a typical project was used as a case study. The contract sum together with its breakdown into respective trade variables were collected. The data collected were analysed using probability analysis. The analysis and result presented provides guide in arriving at this range of values. It is concluded that the successful application of this technique into the estimation of construction project's cost will help in the management of construction risk. Introduction All human endeavours involve risk. The success or failure of any venture depends on how we deal with it. Construction industry is not an exception. This industry has had poor reputation for coping with risk with many projects failing to meet deadlines and cost targets. The participants, public and others have suffered as a result (Thompson et ai, 1992). Sources of risk can be in terms of payment, security deposit and retention, time of commencement and completion, variation, delay and cost of delay and liquidated damages. Size can be one of the major causes of risk; so. can changes in political or commercial planning. Other factors carrying risk with them include the complexity of the project, location, speed of construction and familiarity with the type of procurement system. These risks need to be properly assessed, analysed and managed for efficient operation of the industry. Norris et at (1992) and Thompson et at (1992) identified the most useful and main techniques of risk analysis tc be sensitivity and probability analyses. Chapman (1990), rated probability analysis over sensitivity analysis in that the former overcomes many of the limitations of the latter by specifying a probability distribution for each risk and then considering the effect of the risks in combination. This paper describes the concepts of probability analysis and its application in the management of construction risk. This is Illustrated by a case study.
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