Construction Cost Data Workbook

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CONSTRUCTION COST DATA WORKBOOK

Neil Sinclair, Philip Artin and Stewart Mulfrd

DMS Internatinal

Cnference n the Internatinal C!pari"n Pr#ra!

Wrld Ban$

Wa"hin#tn, D%C%, March &&'&(, )**)


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COLLECTION OF CONSTRUCTION COST DATA

WORKBOOK MODIFIED BILLS OF QUANTITY FORMAT

Introduction

DMS International, Inc. was requested to assist the World Bank with creating a

method of collecting construction cost data from member countries throughout the world

to assist with economic studies. The task of data collection is a difficult procedure and

can be prone to wide ariations. Based upon our e!perience as construction cost

consultants, estimators and quantit" sure"ors we chose to deelop a data collection

method based upon a workbook format. #ur workbook defines construction line items

and quantities for relatiit" simple building t"pes. In fact, four building t"pes hae been

chosen$

%esidential house

Warehouse

%oad

#ffice building

The workbooks would be sent to member countries to be completed b" local

contractors, estimators or quantit" sure"ors. When completed the data would be

collected and anal"&ed b" the World Bank as part of its oerall economic stud".

Before we e!plain further about our workbook format and design, reference must

be made to preious studies and methods of construction cost data collection. #ne

comprehensie reiew of past practices has been completed b" Dubner and Mc'en&ie (.

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This detailed stud" compares arious methods and documents the adantages and

disadantages of each method. The method that proides the best opportunit" for data

collection was noted as the Bills of )uantit" *B#)+ method. This method appears to

hae adantages oer the other methods but "et een with the B#) method some

potential pitfalls e!ist.

B#) is basicall" a listing b" trade of certain construction components that

make up the total pro-ect. The pro-ect ma" be an office building or a warehouse. The

B#) documents quantities for each element of the building t"pe such as cubic meters

of concrete foundations or square meters of roofing material. B#)s are used

frequentl" to assist in deeloping tenders or bids for pro-ects throughout the world. The

B#) ma" be proided b" an independent part" or in house b" the bidding contractor.

#nce the quantit" of concrete footing is known a unit price to coer for material, labor

and equipment is applied to deelop the cost of each line item or component. The total

pro-ect is basicall" a summation of all the indiidual line items. /arious leels of

sophistication in terms of measurement detail and description e!ist with B#)s but the

same principals appl". The paper prepared b" Dubner and Mc'en&ie(, suggests that

the B#) method offers the best opportunit" for data collection, though the" suggest

issues that must be dealt with to allow data collection to proe more successful than in

the past. The issues highlighted were$

Interpretation of specifications

0!pertise to price B#)

pplicabilit" of specifications to local design criteria

#er sophistication and requirement to price detail pro-ect work break downs

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Silke Stapel1also highlights arious issues with cost data collection along the similar

lines as Dubner and Mc'en&ie(. Stapel 1is part of 0urostat, an organi&ation that has

actuall" performed data collection on behalf of 02 member states. 3art of the 0urostat

data collection used detailed Bills of )uantities.

Stapel 1along similar lines as Dubner and Mc'en&ie(noted some issues such as$

Data collection was e!pensie in terms of resources required to implement

s"stem

Bills of )uantities adopted b" 0urostat appear too cumbersome in terms of leel

of detail and sophistication

It would appear that the 0urostat data applies to adanced 4ountries in terms of

construction management and professional e!pertise. The 0urostat sure"s collect

prices for about (5 Bills of )uantities. The t"pical Bills of )uantities could hae up to

(666 line items.

Modified pproach

In our approach, we hae attempted to incorporate improements into the

workbook approach such as$

3roide a consistent quantit" of materials and line items to price

7ine items are simple and comprise basic building materials common to most

countries *e.g. cubic meters of footings+

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)uantities and line items reflect appro!imate quantities according to a trade

break down. The trade breakdown adopted reflects merican Institute of

4onstruction Specifiers, (8 diisions trade format. The trade format reflects a

traditional worldwide understanding of how a pro-ect is built and categori&ed b"

specialt".

3ro-ects chosen offer little comple!it" that would impact construction means and

methods. The pro-ects proide materials used in nearl" all construction pro-ects

such as concrete, steel, wood, and plumbing piping, irrespectie of what countr"

or location this pro-ect ma" be located.

3ro-ects chosen are eas" to understand allowing the estimator to grasp the

oerall pro-ect massing and configuration. Workbooks contain outline drawings.

3ro-ect content proides for the basic construction products used e!tensiel" in

an" pro-ect. This limits the specification issues that proide inconsistenc" among

different 4ountries. Basic materials such as concrete are relatiel" similar from

4ountr" to 4ountr".

Designs chosen offer little comple!it" for pricing purposes. If the material or

component is not widel" used then an opportunit" e!ists for each indiidual

estimator to customi&e pricing based upon best local practices. This will occur to

some limited e!tent from 4ountr" to 4ountr" but as long as a substitute of equal

is priced then this ariable factor will be minimi&ed.

3ro-ect site work and substructures are quantified therefore minimi&ing pro-ect

cost ariances b" building on a flat site as compared to a steepl" sloping site.

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#utline specifications proided show basic specifications that allow the estimator

to use more locall" compliant products.

Its accepted that the workbook could and should onl" be completed b" someone

e!perienced in estimating construction pro-ects. To hae the workbook completed b"

ine!perienced estimators would onl" add to the potential for erroneous data. B"

keeping the models and format basic b" design the chances of greater oerall success

will e!ist. person e!perienced in estimating construction costs should hae little

problem working through the workbook and creating a complete price for each pro-ect.

The probabilit" of success with the collection of cost data must be iewed in two

parts. 3art one being the design and format of the actual workbook and part two being

the e!pertise of the person completing the workbook e!ercise. It would be rather foolish

to issue the workbook to an indiidual unqualified in pricing B#) or creating cost

estimates. The success of the workbook format will onl" e!ist if the data is priced b"

qualified indiiduals. 0en with qualified indiiduals ariations will occur. Sinclair 9

found that een qualified estimators would not produce equal estimates gien the same

information from which to create an estimate. The balance of this paper identifies this

:estimating; problem to allow the perceied problems of collecting data ia workbooks to

be put totall" into perspectie. The author of this paper agrues that perfection of data

collection can onl" be a goal but can neer be achieed.

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The 0stimating 3roblem

or those

readers not familiar with cost estimating, the process inoled is comple!. 7earning

about cost estimating will help non?cost?estimators understand what is inoled and

what limitations e!ist when reiewing cost data generated b" cost estimators.

>ig. (.( The estimating ob-ectie$ to hit the target.

>igure (.( illustrates sub-ectie estimates attempting to hit the target, which is the actual

cost. The sub-ectie alue chosen b" each estimator was considered to represent the

resources required b" each firm to complete an e!ample office?building pro-ect. We can

see that the estimates are all scattered around the target of actual cost.


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9. 4ost of labor

@. 4ost of material and selection of an appropriate wastage allowance.

5. ddition of oerheads and profit

3roblem ( ? 4hoice of work Method

There ma" be man" or onl" a few work methods aailable. >or instance, should

the estimator assume a three?man or a four?man crew, composed of two or three

brickla"er with either one or two laborers= Will there be central mortar mi!ing or

indiidual mi!ers for each crew=


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3roblem 9? 4ost of labor


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n estimator has to posses the skill and e!pertise to assemble the known facts and

rationall" sole the estimating equation. igure (.9 amplifies stages 5 and 8, here the estimator selects a range of most likel"

alues and, after a process of fine tuning and :weighing up; of the situation, the

estimator modifies his or her initial crude selection and finall" selects a alue that he or

she considers to be most likel".;

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>ig. (.9 >ine tuning an estimate.

The thought process preiousl" described and shown in fig.(.1 and (.9 applies to our

h"pothetical brickwork e!ample, but generall" indicates how and estimator arries at a

solution for each separate item of the cost estimate. total cost estimate consists of

numerous line items and specific sections relating to arious trades and specialists

subcontractors. This thought process will usuall" be repeated on numerous occasions

during the compilation of one single estimate or bills of quantit".

7ocation

Since a construction pro-ects location affects the final cost, an estimator must

understand what particular locational factors will be encountered and what

considerations should be taken into account when formulating the estimate. 0stimators

are aware that costs in Boston are different that costs in Miami, but not eer"one is

aware that the locational ariation within the Boston area or within the Miami area also

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influence construction costs. >or e!ample, the pro-ect location ma" be a restricted cit"

center infill site or a remote countr" site, each haing its own particular difficulties that

the contractor must oercome.

/arious locational difficulties are described$

(. %emoteness

1. 4onfined sites

9. 7abor aailabilit"

@. Weather

5. Design considerations *related to location+.

8. /andalism and site securit"

%emoteness

remote construction site, for e!ample, a pro-ect site located high in the Blue

%idge Mountains of /irginia, poses a contracting organi&ation with a difficult set of

problems to cope with.

4ommunication 3roblems

If adequate communications such as telephone are not aailable, then a radio or

cellular?t"pe installation is required. telephone is a requisite to an" construction

pro-ect$ lack of communication during the construction process can result in ma-or,

costl" errors. In addition, because the pro-ect location is further awa" from the head

office, additional long?distance telephone charges will be incurred.

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Transportation 3roblems

ll material and labor must be transported to the building site. If the transport

route is poor *if, indeed, an" route e!ists at all+, then dela"s in material delieries ma"

occurA large ehicles ma" damage narrow bridges or other items of propert", whose

replacements costs must be borne b" the contractor.

It ma" be necessar" for the contractor to widen the e!isting route or construct a

bridge to allow material trailers access into the -ob site. The route that is proposed

should be studied carefull" b" the estimator. 0!isting capacit" of e!isting bridges on

route should be established to erif" if equipment loads can be accommodated of if the

bridge needs to be strengthened b" the contractor. >inall", the cost of hauling items of

equipment to the -ob site increases as the distance increases. Cien these

considerations, the requirement for management to make the correct equipment

selections becomes er" important.

Increased Material 4ost

Increased material cost is primaril" due to increased transport charges such as

when distance for haulage from the depot to a remote -ob site is longer than the haulage

associated with other construction pro-ects the estimator has preiousl" worked on.

er"@ found that if the material was fragile or ha&ardous, then transport costs

fluctuated widel" depending on distance. err" crossing or bridges with tolls increase

the basic cost of materials.

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3ower and Water

3ower and water are a necessit" for building construction. Water is needed for

materials such as concrete, for cleaning the building, and for man" other uses. Salt

water is not acceptable in most specifications for concrete or mortar mi!ing, so remote

pro-ects without a conenient domestic water suppl", een if the site has access to

thousands of gallon of seawaterA require water to be trucked to the -ob site. The cost of

water depends on the hauling costs. In some instances wells can be dug to pump water

to the surfaceA of course, the costs inoled must be considered in the estimate.

If no power source is aailable, then power must be proided b" generators.

4onfined Sites

The problems associated with confined sites generall" take the form of

congestion resulting in restricted working areas resulting in low productiit" from labor

and equipment. These difficulties are generall" associated with downtown sites, but this

need not alwa"s be the case.

In e!treme cases, congestion can limit the choice of work methods, t"pes of

equipment used, and si&e of crew to be emplo"ed. 4areful inestigation of the

problems likel" to be associated with each particular site will allow a realistic

assessment of factors such as productiit" to be made. 3ro-ect startup requires a

careful utili&ation of resources in order to proide production outputs that ma!imi&e

profits. 4onfined sites create logistical problems. Material moement should be

minimi&ed$ each time an item of material is moed, its cost to install in place increases.

When materials are deliered to a confined site, the material should be used

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immediatel". If this is not possible, a storage area should be aailable to receie the

material, or, if possible, the material should be offloaded directl" at its intended

utili&ation point.

The estimator needs to consider the unique logistical problems associated with

each -ob site. These problems, including restricted access, restricted material la" down

area, restricted equipment storage areas, and restricted location for site trailers, affect

the t"pe of equipment that can be used, the effectie management of the -ob, the worker

productiit", and the amount of labor inoled in handling material. Since confined sites

nearl" alwa"s pose logistical problems, the unit prices used b" the estimator must

account for the increased costs.

7abor ailabilit"

0ach location has ar"ing amount of aailable skilled and unskilled labor,

depending on the condition of the local econom". If labor of an" kind is not aailable

locall" *as ma" be the case in remote areas+, then labor must be imported from other

location. In order to moe labor from one area to another, a financial incentie is

usuall" required. The magnitude of this incentie will ar" depending on the state of the

labor market. If labor is imported, accommodations ma" hae to be proided. 7abor

camps comprising full time kitchen staff, dormitories, leisure facilities, etc., hae been

set up on ma-or construction pro-ect to house the contractors labor force. The leisure

facilities keep the labor force rela!ed and occupied during an" rest periods. 7iing and

working on a remote construction site can be er" demorali&ing, after a while, and b"

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keeping the morale leel high, labor turnoer is reduced. Cenerall", the cost of

importing labor will follow the laws of suppl" and demand.

Weather

Since the building process is highl" weather dependent, e!treme conditions can

greatl" affect building costs. These e!treme weather conditions include large amount of

rain or snow, occurrences of ice and frost, and high humidit" and heat. Their effects on

cost include the following situation. 4oncrete pours in temperatures below @6 degrees

>ahrenheit require special precaution. With cold weather concreting, the cost of

admi!tures, insulation the formwork, remoing ice from formwork, and protecting the

freshl" placed concrete from dropping below the specified temperatures must be taken

in to account b" the estimator. ot onl" does cold weather affect concrete, but hot

weather concreting has its associated problems as well. During periods when the

temperature e!ceeds E6 degrees >ahrenheit, special precautions are required to reduce

and maintain the concrete below this temperature. >or e!ample, ingredients such as

the water ma" be cooled or chopped ice can be utili&ed. nother alternatie is to use

liquid nitrogen to cool the concrete. dmi!tures and low heat cement can be used to

control the set and hardening times of the concrete to achiee the design strength and

qualit". ll these precautions and procedures increase the cost of pouring, placing, and

curing concrete.

0!posed sites ma" hae problems associated with high winds, which affect crane

and hoisting operations, and the contractors dust control program. dditional

temporar" bracing to partl" completed structures ma" be required to preent a collapse

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due to high wind gusts. In areas where hurricanes occur, the estimator should consider

the cost of temporar" measures required to preent damage to a structure before,

during, and after a hurricane. It would be prudent to allow for the costs inoled in

bracing, tieing down structures proiding sand banks, garaging equipment, and storing

particular materials such as doors and windows off the -ob site, unless safe, dr", and

secure storage e!ists on the pro-ect.

7abor productiit" is also associated with the weather. During poor weather

when it is cold, damp, and wind", the morale of workers e!posed to aderse elements,

drops, which in turn results in a decline of productiit". During da"s when it ma" be

impossible to work, such as during a torrential rain, the productiit" is &ero.

Design 4onsiderations *related to location+

The location of a pro-ect has certain aspects that must be considered b" a

designer. >or e!ample, in historic >rederick, Mar"land, all designs must harmoni&e with

the e!isting historical buildings. 3lanning committees ma" dictate the material

selections and configurations that designers must abide b" to suit certain local

conditions.

These design considerations can create estimating problems in historic districts.

The estimator must know if the materials specified are, in fact, locall" aailable of if local

labor e!ists to carr" out complicated historical work, such as ornate plaster workA if not,

a specialist will be required. Traditional building techniques tended to be labor

intensie. If the same techniques must be repeated, then the estimator must be familiar

with the procedures inoled. If workers are required to use traditional, building methods

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with which the" are unfamiliar, then a learning cure cost needs to be built into an" unit

price.

The local climate also dictates the designers choices in mechanical and

electrical s"stems and in the choice of materials and design of the building enelope.

Material resources will fluctuate from location to location throughout the countr", and the

designer must inestigate what materials are locall" and economicall" aailable.

>inall", each localit" tends to hae its own construction trade practices, and the

estimator should be familiar with them.

/andalism and Site Securit"

Site integrit" is an important problem in urban areas. 3rotectie measures can be

e!pensie, for e!ample, when 1@?hour guard serice and perimeter enclosures, are

required. The leel of securit" will depend on the risk to the pro-ect from the

surrounding neighborhood. The local police should be consulted.

/ariabilit" of 0stimates

The following are where cost ariances between one estimate and another can

occur$

(. )uantit" take off.

1. Material 4osts.

9. 7abor 4osts.

@. 7abor productiit" forecasts.

5. Work Methods.

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8. 4onstruction equipment costs.

F. Indirect Gob costs.

E. Subcontractor quotations.

H. )uotations from material suppliers.

(6. 2nknown site conditions.

((. 7ocational >actors.

(1. 4ost associated with the time element of the construction pro-ect and escalation

costs.

(9. Staging and pro-ect start up costs.

(@. #erheads.

(5. 3rofit element.

(8. 4ontingenc" and risk allocation.

(F. 0rrors in estimate formulation.

(E. Basis of information used to formulate estimate.

(H. Market forces.

Wendes5, commenting on the estimating abilit" of estimators lists the following points

concerning their performance when estimating pro-ects$

(. %easonabl" correct with shop labor if eer"thing is standard.

1. Cood with raw material and equipment pricing.

9. :#ka"; with subcontractor quotes if the" are familiar with the workA :bomb out; if the"

are unfamiliar.

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@. t the :high school leel; with their quantit" take offs.

5. 2nsatisfactor" with special items.

8. 3oor with field labor.

F. >ail with oerhead markups.

E. 4oerage of profit is in the realm of wishful thinking.

/ariances between estimates and actual costs do occur. The estimator,

unfortunatel", alwa"s appears to be incorrect, since an estimate is an :estimate;, which

is a forecast of the anticipated future cost. Man" forces can, in realit", cause the actual

cost to ar" from the estimated cost. It sometimes appears to owners and management

that, when the estimate does not equal the actual costs, a mistake has been made.

Because it is an estimate, it should alwa"s be e!pected that the actual cost will ar"

somewhat from the estimated cost. It is the -ob of the estimator to minimi&e the e!tent

of ariance between estimate and actual cost. n" data collection s"stem must be able

to recogni&e that ariances e!ist.

0!planation of /ariances ? Wh" Do The" #ccur =

s preiousl" discussed, the author beliees that there are (H ma-or areas where

differences between cost estimates can e!ist. When compiling the cost estimate, each

of the (H categories has to be dealt with b" the estimator. In dealing with each

categor", the estimator has to make seeral assessments, such as what subcontractor

price for dr"wall should be used in the cost estimate or what labor productiit" shall be

used for the carpenters installing intricate millwork. The total cost estimate is made up

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of numerous smaller cost estimates for each actiit" required to complete the oerall

pro-ect. The estimating equation is therefore composed of a series of calculations, the

estimator has to assess and propose a monetar" solution. The total cost estimate is the

total of all the minor monetar" solutions.

0ach assessment the estimator performs is based on$

3reiousl" recorded data *historical data+

The estimators own past e!perience.

3reious e!perience of others.


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>ig. (.@ Basic reasons for ariances being introduced into cost estimates the sub-ectie assessment.


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lwa"s be war" of working with historical data that "ou are not familiar with.

/arious sources of historical data are aailable, such as published price books,

cost information publication serices, trade -ournals, and, most important, cost feedback

from actual pro-ects that the estimators firm has been inoled with and therefore most

knowledgeable of.

ctual cost feedback is the best information to use if it were recorded and

documented properl". The feedback c"cle *see >ig (.5+ is of critical importance. In

order for estimating to be effectie, feedback from the -ob site must occur. ctual costs

should be compared with estimated costs to inform the estimator of his or her

performance during the estimating phase. 2nfortunatel", the feedback process is not

carried out effectiel" within the industr". To quote the Business %ound Table %eport

on modern management s"stemsF$ :0en within companies, a feedback of actual costs

is not consistentl" used to reiew and ad-ust the basis for estimating future pro-ects.;

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>ig. (.5 4ompan" cost feedback c"cle.

Sound estimates are produced from a combination of e!perience and recorded

cost data of similar work preiousl" performed. The cost data, if proper feedback

procedures hae been adopted, will hae been refined oer time to reflect accurate

costs for performing certain operations. The estimator can use these data to formulate

estimates accuratel" for future work. If the data to formulate are incorrectl" used or

formulated, then mistakes will undoubtedl" occur.

ccurac" /ersus 0conom"

0stimating inoles the assessment of probabilities and risks making complete

accurac" impossible. igure (.8 indicates the accurac" ersus econom" dilemma. s more of the

estimators time and effort are deoted to the preparation of the cost estimate, a point is

reached where obtaining the utmost accurac" is not economical. s we hae discussed

(66J accurac" is impossible.

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The 3areto Distribution in 0stimates

The estimator will price *or at least consider+ each item he has discoered, such

as cubic quantit" of concrete footings, walls or slabs. These items ma" be in the form of

a detailed quantit" take off or some other form sufficientl" detailed to enable confident

estimating to occur.

0ach of the items discoered b" the estimator has a cost importance that aries

in magnitude. Some items are of more cost importance than others, since the" form a

larger percentage of the total cost than the minor items do. The 3areto(effect is seen

to occur, that is, a small proportion of the items account for a er" large proportion of

the cost. Inestigation into the cost structure of items in Bills of )uantities b" Brown E

has shown that, t"picall", 16J of the items priced contained at least E6J of the total

cost. *See >ig (.E+

>ig. (.E 3areto principle applied to estimating. *%eprinted from %. Brown, Investigating into the Feasibilityof Applying the Pareto Principle to SMM ills of !"antities of #ost Planning$ 3ro-ect %eport,

7oughborough 2niersit", 2'.+

1At the end of the 19 thcentury an Italian economist, Vilfredo areto, de!elo"ed a cur!e #no$n as %areto&s 'a$ of

(istri)ution*+

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The 3areto effect can be used to great adantage b" appl"ing strict control oer

the ma-or itemsA the chance of ma-or errors and discrepancies occurring is therefore

reduced. #wing to the time constraints inoled with preparing a competitie bid, the

3areto effect should be taken adantage of. 0stimators should be quick to recogni&e

what the ma-or items of cost importance are and deote attention to these items. When

faced with abnormal conditions, the search for the critical items of cost ma" take longer,

but the 3areto principle should still appl". Both Dubner and Mc'en&ie( and Stapel1

recogni&ed this aspect with current B#) methods. We hae attempted to proide

concise and specific line items in the modified work book approach to accomplish ma-or

resource saings at er" little, if an", e!pense of qualit".

It has been noted that wide ariances do occur between estimates. If (66

estimators prepared an estimate for the same pro-ect using identical drawings and

specifications, then (66 different estimates would be submitted. %emarkabl", though,

the bottom line of the estimates would be within an acceptable range of some N? (6J

of each other. This is often the case when contractors submit bids for pro-ects. The

bids submitted b" the ma-orit" of bidders are quite often er" close to each other.

Though, when e!amination of the bidders estimates occur, the cost difference between

each of the trades differ greatl" *up to 15J+ and when e!amination of the cost to

complete each actiit" within each of the trades occurs, the cost differences between

each bidders numbers can be as much as 56J. The degree of difference between

estimates will therefore differ depending on whether "ou are e!amining the bottom lines,

the trade amounts, or the cost of actiities within each trade. Creater ariances within

estimates occur when uncertaint" e!ists, such as in e!caation work. #ur workbook

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Construction Cost Data Workbook

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Transcript of Construction Cost Data Workbook