In construction industry, contingency planning requires a special attention because it influenced overall success of the project and its outcomes for the organization. The budget can be controversial in administration circles, in terms of whether it is well conceived and whether it would have lasting and beneficial effects. Both should assess their relative contributions to the total project management task and view each other as alternative and supporting resources. As alternatives project managers present management with different means of budgets. The problem at this level is one of deciding what proportion of the total budget should be allocated to each. Conceptually, the decision of the relative amounts to be spent on each is straightforward. Economic theory furnishes the marginal approach (Clough et al, 2000).
Following Donaldson (2001) contingency budgets can reach 30% of the total cost of the project influenced by unstable economic situation, political risk and high inflation rates. But this optimal amount is impossible to determine because manages cannot get such data, and also because it assumes an adequate budget. Even if data are not available, it behooves management to think of the total project task that match resources with market potential. For example, with a relatively small budget many alternatives are not feasible. Once a total budget is set, project management should think in terms of the possible impact of different combinations: the extremes of spending the total budget, and the results expected from different combinations of each. Here again, although it is impossible to get precise data, management estimates can be made. There is at least an advantage to thinking in terms of inputs of alternative mixtures and resulting outputs (Clough et al, 2000).
In construction industry, the contingency perspective on organizational structure rejected the quest for one common set of principles to guide organizational design. What remains for examination once this foundation has been accepted and understood is the peculiar distortion of both decision making and worker participation created by long-term accumulation of decision-making power in the hands of narrow technical and functional specialists (Clough et al, 2000). Thus, this situation prevents the organization from effective contingency planning which covers all aspects of organizational performance. The main problems of contingency budgets is that as organization and technology became increasingly complex, structure remain, but decision making begins to fragment into a variety of specialized technical domains..Aside from the unsupportable assumption that experts have all the answers, the error of this role design resides in assuming that all or even most decisions are best made by a functional expert and that experts from different functions with conflicting purposes will consistently resolve their differences productively. Neither assumption is fully tenable. Messy, unstructured problems are best handled by a team composed around diverse perspectives, as suggested by the contingency model. In the construction industry, the insular independence of technical specialists makes no provision for problems outside their technical domain nor the teamwork they demand (Clough et al, 2000).
Team collaboration among technical experts who neither understand nor respect one another’s functional perspectives is difficult at best. It can become impossible where each feels accountable for full execution of his or her functional objectives. This is not the formula for effective contingency budgets. Managers are often left only with the most trivial decisions. They spend the largest part of their time mediating the political battles of subordinates and dissenting experts. Political skill and experience now more often shape cross-functional policy decisions and operational effectiveness than do organizational objectives.
References
- Clough, E.H., Sears, G.A., sears, S. K. (2000). Construction Project Management. Wiley; 4 edition.
- Donaldson, L. (2001). The Contingency Theory of Organizations. Thousand Oaks, Calif.: Sage.