CONSTRUCTION COST DATA WORKBOOK

Neil Sinclair, Philip Artin and Stewart Mulf rd DMS Internati nal

C nference n the Internati nal C !pari" n Pr #ra! W rld Ban$ Wa"hin#t n, D%C%, March &&'&(, )**)

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" sur e"ors we chose to de elop a data collection method based upon a workbook format. #ur workbook defines construction line items and quantities for relati it" simple building t"pes. In fact, four building t"pes ha e 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" sur e"ors. When completed the data would be

collected and anal"&ed b" the World Bank as part of its o erall economic stud". Before we e!plain further about our workbook format and design, reference must be made to pre ious studies and methods of construction cost data collection. #ne

comprehensi e re iew of past practices has been completed b" Dubner and Mc'en&ie (.

This detailed stud" compares arious methods and documents the ad antages and disad antages of each method. The method that pro ides the best opportunit" for data collection was noted as the Bills of )uantit" *B#)+ method. This method appears to ha e ad antages o er the other methods but "et e en 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 de eloping tenders or bids for pro-ects throughout the world. The B#) ma" be pro ided b" an independent part" or in house b" the bidding contractor. #nce the quantit" of concrete footing is known a unit price to co er for material, labor and equipment is applied to de elop the cost of each line item or component. The total pro-ect is basicall" a summation of all the indi idual line items. /arious le els 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 pro e 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

Silke Stapel1 also highlights arious issues with cost data collection along the similar lines as Dubner and Mc'en&ie(. Stapel
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is 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 1 along similar lines as Dubner and Mc'en&ie ( noted some issues such as$ Data collection was e!pensi e in terms of resources required to implement s"stem Bills of )uantities adopted b" 0urostat appear too cumbersome in terms of le el of detail and sophistication

It would appear that the 0urostat data applies to ad anced 4ountries in terms of construction management and professional e!pertise. The 0urostat sur e"s collect

prices for about (5 Bills of )uantities. The t"pical Bills of )uantities could ha e up to (666 line items.

, Modified ,pproach In our approach, we ha e attempted to incorporate impro ements into the workbook approach such as$

3ro ide 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+

)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 di isions 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 pro ide materials used in nearl" all construction pro-ects such as concrete, steel, wood, and plumbing piping, irrespecti e of what countr" or location this pro-ect ma" be located. 3ro-ects chosen are eas" to understand allowing the estimator to grasp the o erall pro-ect massing and configuration. Workbooks contain outline drawings. 3ro-ect content pro ides for the basic construction products used e!tensi el" in an" pro-ect. This limits the specification issues that pro ide inconsistenc" among different 4ountries. Basic materials such as concrete are relati el" 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 indi idual 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.

#utline specifications pro ided show basic specifications that allow the estimator to use more locall" compliant products.

It.s accepted that the workbook could and should onl" be completed b" someone e!perienced in estimating construction pro-ects. To ha e 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 o erall success will e!ist. , person e!perienced in estimating construction costs should ha e 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 indi idual 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 indi iduals. 0 en with qualified indi iduals ariations will occur. Sinclair
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found that e en qualified estimators would not produce equal estimates gi en the same information from which to create an estimate. The balance of this paper identifies this :estimating; problem to allow the percei ed problems of collecting data ia workbooks to be put totall" into perspecti e. The author of this paper agrues that perfection of data collection can onl" be a goal but can ne er be achie ed.

The 0stimating 3roblem <ow does an estimator estimate the cost of a construction pro-ect= >or those reader.s not familiar with cost estimating, the process in ol ed is comple!. 7earning about cost estimating will help non?cost?estimators understand what is in ol ed and what limitations e!ist when re iewing cost data generated b" cost estimators.

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

>igure (.( illustrates sub-ecti e estimates attempting to hit the target, which is the actual cost. The sub-ecti e 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. <itting the target is not a common occurrence and is an inbuilt problem of estimating. Briefl", let us consider an estimator pricing a brickwork item. What are the difficulties presented= The" are as follows$ (. 4hoice of work method. 1. #utput of crew *gi en the firm.s unique efficienc"+.

9. 4ost of labor @. 4ost of material and selection of an appropriate wastage allowance. 5. ,ddition of o erheads and profit

3roblem ( ? 4hoice of work Method There ma" be man" or onl" a few work methods a ailable. >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

indi idual mi!ers for each crew= <ow will the brickwork be constructed= Will trestles or proper standing scaffolding be used= Where will work commence from= What

restrictions will the other trades impose on the masonr" work= ,ll possibilities must be in estigated, and the most economical possibilit" should be chosen.

3roblem 1? #utput of crew The output chosen will be based on past performance, since the estimator will assume that this performance will be repeated in the future. ,s will be e!plained later, recording and properl" documenting -ob site performance is helpful to the estimator when he or she considers future pro-ects. Manipulation of these historical data ma" occurA for e!ample, decreasing output to allow for restricted working condition. Whate er manipulation occurs, the estimator is faced with the difficult" of tr"ing to assess what output will be achie ed.

3roblem 9? 4ost of labor <ow much will the contractor be required to pa" for labor= The estimator must predict this cost. The labor cost will ar" depending on -ob location, a ailabilit" of skilled labor, contract wage regulations, union or open shop labor requirements, general market conditions, and so on.

3roblem @? 4ost of Material This can be predicted with a fair degree of accurac" if the material in question is in read" suppl" and is frequentl" purchased. The quantit" of material required must be accuratel" measured from the drawing and is not dependent on the crew performance or work method adopted. ,lthough the estimator must not onl" consider the finished in

?place quantit" of material, but also must allow for a wastage factor, this factor can ar" dramaticall" and is highl" dependent on the performance and work procedures adopted b" the crew.

3roblem 5 ? ,ddition for o erheads and profit This amount will depend on compan" polic", market condition, and man" other ariables that will be discussed later. It is, as "ou can imagine, er" important to

incorporate o erhead and profit into the final estimate.

3roblems (?5 ha e been presented simpl", but "ou can begin to imagine their comple!it".

,n estimator has to posses the skill and e!pertise to assemble the known facts and rationall" sol e the estimating equation. <ow this is done is best e!plained b" reference to the decision tree diagram shown in figure (.1.

>ig. (.1 <"pothetical decision tree diagram.

>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 Bmost likel".;

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

The thought process pre iousl" described and shown in fig.(.1 and (.9 applies to our h"pothetical brickwork e!ample, but generall" indicates how and estimator arri es 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-ect.s 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 e er"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 ha ing its own particular difficulties that the contractor must o ercome.

/arious locational difficulties are described$ (. %emoteness 1. 4onfined sites 9. 7abor a ailabilit" @. 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 a ailable, 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 deli eries 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. Ci en 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 pre iousl" worked on. , er"@ found that if the material was fragile or ha&ardous, then transport costs fluctuated widel" depending on distance. <e also disco ered that the bulk materials with low initial cost, such as sand and gra el, tend to be the most ad ersel" affected b" distance and difficult transport conditions. >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 con enient domestic water suppl", e en 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 in ol ed must be considered in the estimate. If no power source is a ailable, then power must be pro ided b" generators.

4onfined Sites The problems associated with confined sites generall" take the form of congestion resulting in restricted working areas resulting in low producti it" 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 in estigation of the

problems likel" to be associated with each particular site will allow a realistic assessment of factors such as producti it" to be made. 3ro-ect startup requires a

careful utili&ation of resources in order to pro ide production outputs that ma!imi&e profits. 4onfined sites create logistical problems. Material mo ement should be

minimi&ed$ each time an item of material is mo ed, its cost to install in place increases. When materials are deli ered to a confined site, the material should be used

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immediatel". If this is not possible, a storage area should be a ailable to recei e 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 effecti e management of the -ob, the worker producti it", and the amount of labor in ol ed 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 a ailable skilled and unskilled labor,

depending on the condition of the local econom". If labor of an" kind is not a ailable locall" *as ma" be the case in remote areas+, then labor must be imported from other location. In order to mo e labor from one area to another, a financial incenti e is usuall" required. The magnitude of this incenti e will ar" depending on the state of the labor market. If labor is imported, accommodations ma" ha e to be pro ided. 7abor camps comprising full time kitchen staff, dormitories, leisure facilities, etc., ha e been set up on ma-or construction pro-ect to house the contractor.s labor force. The leisure facilities keep the labor force rela!ed and occupied during an" rest periods. 7i ing and working on a remote construction site can be er" demorali&ing, after a while, and b"

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keeping the morale le el high, labor turno er is reduced. importing labor will follow the laws of suppl" and demand.

Cenerall", the cost of

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, remo ing ice from formwork, and protecting the freshl" placed concrete from dropping below the specified temperatures must be taken in to account b" the estimator. Dot 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 alternati e 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 achie e the design strength and qualit". ,ll these precautions and procedures increase the cost of pouring, placing, and curing concrete. 0!posed sites ma" ha e problems associated with high winds, which affect crane and hoisting operations, and the contractor.s dust control program. ,dditional

temporar" bracing to partl" completed structures ma" be required to pre ent 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 pre ent damage to a structure before, during, and after a hurricane. It would be prudent to allow for the costs in ol ed in bracing, tieing down structures pro iding 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 producti it" is also associated with the weather. During poor weather

when it is cold, damp, and wind", the morale of workers e!posed to ad erse elements, drops, which in turn results in a decline of producti it". During da"s when it ma" be impossible to work, such as during a torrential rain, the producti it" 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" a ailable 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

intensi e. If the same techniques must be repeated, then the estimator must be familiar with the procedures in ol ed. If workers are required to use traditional, building methods

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with which the" are unfamiliar, then a learning cur e cost needs to be built into an" unit price. The local climate also dictates the designer.s choices in mechanical and electrical s"stems and in the choice of materials and design of the building en elope. Material resources will fluctuate from location to location throughout the countr", and the designer must in estigate what materials are locall" and economicall" a ailable. >inall", each localit" tends to ha e 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. 3rotecti e measures can be e!pensi e, for e!ample, when 1@?hour guard ser ice and perimeter enclosures, are required. The le el 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 producti it" 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 e er"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 le el; with their quantit" take offs. 5. 2nsatisfactor" with special items. 8. 3oor with field labor. F. >ail with o erhead markups. E. 4o erage 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 pre iousl" discussed, the author belie es 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 se eral assessments, such as what subcontractor price for dr"wall should be used in the cost estimate or what labor producti it" 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 acti it" required to complete the o erall 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$ 3re iousl" recorded data *historical data+ The estimators own past e!perience. 3re ious e!perience of others. <unches.

The final assessment is sub-ecti e. The estimator will decide what producti it" to allow, or what dollar allowance or unit price to use. 0 en though the estimator has consulted with subcontractors, suppliers, site superintendents, pro-ect managers, and others, when compiling his or her estimate, it is the estimator who will decide what alue will be used in the estimate. This sub-ecti e act is the main reason wh" estimates ar". If "ou gi e identical drawings and specifications to (66 estimators, "ou will get (66 different cost estimates. >igure (.@ indicates the factors influencing ariance in an estimate.

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

<istorical Data <istorical Data is used frequentl" b" estimators when compiling cost estimates, with their attendant ad antages and disad antages. followed, which are e!tremel" important$ There are some rules to be

,lwa"s understand the source of the historical data. ,lwa"s understand what the historical data represent ,lwa"s understand what time period the historical data reflect. ,lwa"s understand full" how to update and pro-ect the historical data to the present time.

,lwa"s understand how to manipulate the data to represent "our particular pro-ect, since no

Two pro-ects are the same.

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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 a ailable, such as published price books, cost information publication ser ices, trade -ournals, and, most important, cost feedback from actual pro-ects that the estimators firm has been in ol ed 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 effecti e, 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 effecti el" within the industr". To quote the Business %ound Table %eport on modern management s"stemsF$ :0 en within companies, a feedback of actual costs is not consistentl" used to re iew 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 pre iousl" performed. The cost data, if proper feedback

procedures ha e been adopted, will ha e been refined o er 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 in ol es the assessment of probabilities and risks making complete accurac" impossible. <owe er within the limits of achie able accurac", it can be stated that the greater the accurac", the higher the cost of achie ing that accurac". There is usuall" a point be"ond which the cost in increasing and estimate.s accurac" is greater than the benefit to be gained.

>igure (.8 indicates the accurac" ersus econom" dilemma. ,s more of the estimator.s time and effort are de oted to the preparation of the cost estimate, a point is reached where obtaining the utmost accurac" is not economical. ,s we ha e discussed (66J accurac" is impossible.

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>ig. (.8 0stimating time required for a K1,666,666 building *L %.S. Means, Inc., (66 4onstruction 3la&a, 'ingston, M,, reproduced from Mechanical and Electrical Estimating Workbook.)

>igure (.F indicates the general accurac" that is e!pected b" emplo"ing amounts of estimating manpower.

ar"ing

>ig. (.F 0stimate accurac" ersus costs of estimate.

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The 3areto Distribution in 0stimates The estimator will price *or at least consider+ each item he has disco ered, 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 disco ered 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. In estigation 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 Feasibility of Applying the Pareto Principle to SMM ills of !"antities of #ost Planning$ 3ro-ect %eport, 7oughborough 2ni ersit", 2'.+
1

At the end of the 19th century 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 ad antage b" appl"ing strict control o er the ma-or itemsA the chance of ma-or errors and discrepancies occurring is therefore reduced. #wing to the time constraints in ol ed with preparing a competiti e bid, the 3areto effect should be taken ad antage of. 0stimators should be quick to recogni&e what the ma-or items of cost importance are and de ote 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 ha e attempted to pro ide

concise and specific line items in the modified work book approach to accomplish ma-or resource sa ings 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 MN? (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 acti it" 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 acti ities within each trade. Creater ariances within estimates occur when uncertaint" e!ists, such as in e!ca ation work. #ur workbook

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format e!cludes site work and ar"ing site related features thus eliminating an area of ma-or uncertaint".

4onclusions The modified workbook approach attempts to simplif" "et increase the qualit" of information recei ed through cost data collection methods. It.s agreed b" both Stapel 1 and Dubner and Mc'en&ie ( that the preferred tool is the Bills of )uantit" Method. #ur workbook format is based upon abbre iated Bills of )uantities that pro ide a consistent set of line items that can be priced without difficult" b" a local estimator qualified in construction cost estimating. arious le els such as$ 4ost per building t"pe 4ost of each trade 4ost of indi idual line items such as concrete footings The line items proposed can pro ide information on

These le els of information can be used to formulate :basket; of data that could be anal"&ed e en further. Merging of the Basket of Coods 4ollection Method and the Bills of )uantit" Method is possible gi en the simplified format of the modified workbook approach.

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%eferences$

Dubner and Mc'en&ie, ,ustralian Bureau of Statistics paper submitted to international conference on I43, World Bank, Washington, D4 *((?(9 March 1661+.

1 Stapel Silke, 0urostat, 3aper submitted to international conference on I43 World Bank, Washington, D4 *((?(9 March 1661+. 9 D. Deil Sinclair, 0stimating for ,bnormal 4onditions, Industrial 3ress, Inc., Dew Oork, Dew Oork, (HEH @ D.W. , er", :3roblems of 7ocalit" in 4onstruction 4ost >orecasting and 4ontrol,; in "ilding #ost %echni&"es, edited b" 3.>. Brandon, 0.>.D. Spon 7td., Dew

Oork, Dew Oork, (HE1.

5

<.4. Wendes, The 0ight >acets of the 0stimating Diamond, <eatingN3ipingN,ir 4onditioning, #ctober (HF8, pp. 5(?58.

The Business %oundtable, Modern Management Systems, The Business %oundtable, Dew Oork, Dew Oork, %eport ,?8, Do ember (HE1.

%. Brown, Investigating into the Feasibility of Applying the Pareto Principle to SMM ills of !"antities and #ost of Planning , 3ro-ect %eport, 7oughborough

2ni ersit", 2'.

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