Lim, B; Nepal, M P; Skitmore, M and Xiong, B (2016) Drivers of the accuracy of developers' early stage cost estimates in residential construction. Journal of Financial Management of Property and Construction, 21(1), pp. 4-20. ISSN 1366-4387
Abstract
Purpose – Preliminary cost estimates for construction projects are often the basis of financial feasibility and budgeting decisions in the early stages of planning and for effective project control, monitoring and execution. The purpose of this paper is to identify and better understand the cost drivers and factors that contribute to the accuracy of estimates in residential construction projects from the developers' perspective. Design/methodology/approach – The paper uses a literature review to determine the drivers that affect the accuracy of developers' early stage cost estimates and the factors influencing the construction costs of residential construction projects. It used cost variance data and other supporting documentation collected from two case study projects in South East Queensland, Australia, along with semi-structured interviews conducted with the practitioners involved. Findings – It is found that many cost drivers or factors of cost uncertainty identified in the literature for large-scale projects are not as apparent and relevant for developers' small-scale residential construction projects. Specifically, the certainty and completeness of project-specific information, suitability of historical cost data, contingency allowances, methods of estimating and the estimator’s level of experience significantly affect the accuracy of cost estimates. Developers of small-scale residential projects use pre-established and suitably priced bills of quantities as the prime estimating method, which is considered to be the most efficient and accurate method for standard house designs. However, this method needs to be backed with the expertise and experience of the estimator. Originality/value – There is a lack of research on the accuracy of developers' early stage cost estimates and the relevance and applicability of cost drivers and factors in the residential construction projects. This research has practical significance for improving the accuracy of such preliminary cost estimates.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | cost estimate accuracy; developers; historical cost data; preliminaries; project uncertainties; residential construction industry |
| Index terms: | estimating, suitability, estimator, practitioner, construction project, methodology, residential project, Queensland, documentation, budgeting, accuracy, literature review, project uncertainty, interview, cost estimate accuracy, cost variance, project control, house design, cost estimate, bills of quantities, estimate, residential construction, monitoring, preliminaries, Australia, construction cost, historical cost data, case study |
| Subjects: | data analysis and analytics, economic analysis, financial and cost management, practitioner, control systems, profession, data collection methods, design criteria, financial analysis, Geography, production management, design process, project management theory and practice, professional development, financial management, economic development, research methods, construction integration |
| Topics: | Design Practice, Urban Studies, Site Management, Geographical Context, Project Management, Research Practice, Information Management, Business Strategy, Cost Management, Roles and Professions |
| Descriptive scope: | 5 PCTEA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here