U.S. Department of Transportation
Federal Highway Administration
1200 New Jersey Avenue, SE
Washington, DC 20590
Federal Highway Administration Research and Technology
Coordinating, Developing, and Delivering Highway Transportation Innovations
|Project Name:||Index-Based Cost Estimation Procedures with Accuracy and Precision Analysis|
|Start Date:||September 3, 2012|
|End Date:||December 1, 2014|
|Office:||Office of Infrastructure Research and Development|
|Team:||Infrastructure Analysis and Construction Team [HRDI-20]|
|Program:||Innovative Pavement Research and Deployment|
|Roadmap/Focus area(s):||Infrastructure Research and Technology Strategic Plan and Roadmap|
|Project Description:||This project study investigates the use of construction cost index data in developing project cost estimates, primarily for the engineer’s estimate, but also for planning-level estimates. The scope of the study covers various types, sizes, and scopes of transportation projects delivered by State highway agencies. (Although not the focus of this study, the applicability to major projects spanning several years should be addressed.) The study involves collecting, organizing, and analyzing data from various highway agencies and other facility owners. The research product is guidance for State highway agencies to assist them in determining how best to use cost index data to improve the accuracy and precision of project estimates. Deliverables include meeting summaries, a project work plan, an interim report, a final report, a TechBrief, and a Microsoft PowerPoint presentation.|
The objectives of the project are to:
(1) Determine the current state of the practice in using construction cost index data to develop project estimates. Identify gaps in the current knowledge base, as well as successful practices, that may exist.
(2) Develop a method for utilizing construction cost index data to improve the accuracy and precision of project cost estimates. Validate the method using historical data (or backcasting) to determine its effectiveness.
(3) Assist State highway agencies with improving their current estimation practices.
|Background Information:||Development of accurate cost estimates is an important part of delivering highway projects. State highway agencies must estimate the cost of projects at several stages of the project development process: from initial planning, through the design phase, and finally, advertisement and award. The agency’s engineer’s estimate (based on the final design) is compared to the bid prices received from contractors as part of the contract award process. Typically, agencies use one of two basic approaches to develop project cost estimates: historical bid-based estimation or cost-based estimation. In the historical bid-based approach, agencies use historical bid prices for contract items from past projects to develop the project estimate. Several methodologies exist to determine the estimated unit price of each item, including use of only the low bid on each project, using two or three of the lowest bids, or using all bids received. Additionally, these average unit prices can be adjusted based on inflation, project size and location, material quantities, time of year, schedule, or other factors, to determine the estimated unit price for each construction item. Cost-based estimation uses such factors as material and equipment costs, labor costs, production rates, and site-specific conditions to develop a project cost estimate. In recent years, the accuracy of project cost estimates has been affected by several factors. Fluctuations in prices for items such as steel, portland cement, asphalt, and fuel have been larger and less predictable than was typical in the past. State transportation budgets have been inconsistent from year to year, resulting in an unsteady flow of projects. The recent economic downturn, and corresponding slowdown in private sector construction, has resulted in lower bid prices in some regions of the country. Difficulty in producing accurate project cost estimates can lead to delayed or cancelled projects, as well as creating budget uncertainty at the program level. The use of a construction cost index-based approach to estimation holds promise for improving the accuracy of project estimates. A cost index measures the change in cost of a group of products over time. Inputs for a construction cost index (CCI) can include things such as material and labor costs, general monetary inflation, and measures of productivity. Several organizations publish construction cost indexes, including Federal Highway Administration’s National Highway Construction Cost Index (NHCCI), Engineering News-Record’s Construction Cost Index, and R.S. Means’ Heavy Construction Cost Index. An article in the November 2010 issue of Journal of Construction Engineering and Management titled “Time Series Analysis of ENR Construction Cost Index”(Baabak Ashuri and Jian Lu, Georgia Institute of Technology)determined that by incorporating predicted price variations derived from forecasts of the Engineering News Record's construction cost index, accuracy of both project estimates and contractor bids can be improved.|
|Test Methodology:||Backcasting of project estimates|
|Expected Benefits:||The expected benefit is guidance for State highway agencies to assist them in improving the accuracy of project cost estimates (both planning level and contract advertisement) by using construction cost index data.|
|Deliverables:||Final report documenting the research and presenting the recommended cost estimation method.|
|FHWA Topics:||Roads and Bridges--Construction and Project Management|
|FHWA Disciplines:||Construction and Project Management