The dictionary defines a parameter as follows:
pa.ram.e.ter
Pronunciation: pa-'ram-e-ter
Function: noun
Etymology: New Latin, from para- + Greek metron measure -- more at MEASURE
Date: 1656
1 a : an arbitrary constant whose value characterizes a member of a system
(as a family of curves); also : a quantity (as a mean or variance) that describes
a statistical population b : an independent variable used to express the coordinates
of a variable point and functions of them -- compare.
Stated more simply for our purposes, we can use something we can measure, like the length of a roadway or the capacity of a storage tank, to calculate the cost of construction. Construction costs lend themselves particularly well to this kind of parallel measurement and are the main focus of this course.
It should be noted, however,
that other kinds of costs can also be developed. The cost of design, surveys,
inspection, testing to name a few are often estimated using the parameter
cost concept.
In most cases of construction cost estimating the choice of the parameter to use will be fairly obvious. For pipelines, for example, one would probably choose both length and diameter and then calculate costs in units of dollars per inch of diameter per lineal foot of pipe. For a pump station costs are often calculated in dollars per gallons per minute of capacity or dollars per installed horsepower. Roadway costs are often calculated in dollars per lane mile.
In every case the parameter chosen is usually the most important "dimension" of the thing to be built. Dimension is used here in the broadest sense to mean any measure of the thing which can be related to cost.
In the examples below, many other kinds of parameters are illustrated.
Wherever you obtain your cost data; whether it be from actual bids, cost guides, or projects built by others, it is important to be clear about what the costs include and do not include. In most cases, you will want to identify the actual construction cost, including Contractor overhead and profit. You will want to separate out such costs as design, survey, inspection, testing, legal, administrative, financing and other peripheral costs. Doing so will greatly simplify you task .
Bids may vary from lump sum contracts to unit price proposals. In a few cases bids may also be accepted on an hourly, labor, materials and equipment basis. Lump sum bids provide the least useful information to the estimator but can still be used for some kinds of projects.
Unit price contracts are often used
in civil/site work where the exact amount of work to be done cannot be known
in advance. Changed field conditions can lead to over and under runs in the
quantities of things like excavation, base rock, leveling course rock, etc.
The unit price contract allows these changes to be handled easily without
renegotiating the contract. There are limits to this but generally unit prices
work very well for many kinds of construction.
spreadsheet continued below
spreadsheet concludes below
In addition to this advantage, the unit price contract provides the estimator with much useful information on many items of work which may be common to other types of projects.
Many Contractors prepare their bids by making estimates of the time, material and equipment which will be needed to do the work. Such estimates can be among the best sources of cost information if the Contractor is experienced and thorough in his work. Use these when you can as they will be among the most reliable estimates you can find.
This notion should guide you as you gather the data to develop your parameter costs. If you can't separate out the peripheral costs easily you may have to find sources of "mixed" data which will help to identify the probable percentage of these peripheral costs.
In the next section we'll try to identify the most likely sources of cost data, roughly in order of their reliability.
Your Own Experience
Like charity, data gathering should begin at home. Actual costs from projects already built are the best indicator of the probable cost of future similar construction. If you work in a very large organization which does the same kinds of work over and over again, you will probably find much data within your own organization. A State Highway Department is the kind of organization where this is often true. Building, repairing and planning miles and miles of roads, such agencies can often develop their own parameter costs "in house" and may seldom need to look outside their own offices.
This can be useful to you, however, even if you don't work for such an organization. Remember that cost data in public agencies in most states is "public information" available to you for little or no cost. Take advantage of this fact when you need data of the kind some public agency is likely to have.
For most of us though, we'll need to look beyond our doors.
Your Professional Colleagues
Your fellow Architects, Engineers and Contractors are probably your next best sources of reliable cost data. It has long been a habit of the author to share cost data, voluntarily, with colleagues. Treating such information as "confidential" or "secret" unless your are required to do so by your client, is simply short sighted and harmful to all members of the construction team.
Cultivate your colleagues and you'll
be well repaid at times when their experience is broader than your own.
Published Sources
While not meant to be a comprehensive
list, the following are some of the publishers of construction cost data:
- Engineering News Record
- R. S. Means Company, Inc.
- Dodge Reports
- Building Design & Construction
Magazine
- American City and County Magazine
- Some State Highway Departments
- U.S. Environmental Protection Agency
- Architectural Record
And many other professional and trade publications.
An example of building costs published in Building Design and Construction Magazine will give you an idea of the kind of very useful information which is, from time to time, available.
Unpublished Sources
You will also find that many sources
of cost data are not routinely published but may be available to you. Consider
the following list as possible treasure troves of useful data:
- Vendors and Manufacturers
- Large Specialty Contractors ( e.g.
Butler Building Systems )
- City or County Building Departments
- State or Federal Regulatory Agencies
(e.g Environmental Quality, Health Departments )
- State or Federal Funding Agencies
( e.g. HUD, FmHA, etc.)
- Local Public Works Departments
Most cost data you gather will be "historic". Some may be quite old but even recent data has a fairly short "shelf life". You obviously need a way to bring all your cost data up to date or at least up to a common point in time. Cost indexes do this for you by tracking the cost of key construction items over a long period of time.
The index not only allows you to update old costs but you can use it to project costs into the future.
The oldest and best known of these indexes (to Engineers) is the Engineering News Record Construction Cost Index (ENR-CCI).
ENR also publishes the Building Cost Index which many Architects, in particular , find useful.
Less well known, but very useful to those who work for, or in, public agencies is the American City and County Magazine. A sample page, below, will give you an idea of what it is and what other general purpose indexes it tracks.
Specialty Indexes
In addition to these, there exist a number of indexes aimed at tracking costs of specific kinds of construction. Some of these have gone into disuse and disappeared. Others may still be around but may be difficult to find. Nevertheless, it may be worth your while to search for them if you have a need. The Internet, of course, makes this all much easier, so surf away and you may be able to find indexes similar to the following:
- US EPA Construction Cost Index...Wastewater
Treatment & Collection Systems
- Bureau of Reclamation...dams
- BBR-DYK...prestressed concrete tanks
- Handy-Whitman Index...Water Treatment Plants
The ENR-CCI uses 200 hours
of common labor, multiplied by the 20-city average rate for wages and fringe
benefits. The ENR-BCI uses 68.38 hours of skilled labor, multiplied by the
20-city wage fringe average for three trades--bricklayers, carpenters and
structural ironworkers. For their materials component, both indexes use 25
cwt of standard structural steel at the mill price, 1.128 tons of bulk portland
cement priced locally, and 1,088 board-ft of 2x4 lumber priced locally. The
ENR indexes measure how much it cost to purchase this hypothetical package
of goods and services compared to what is was in the base year.
Contractor Organizations
Daily/Weekly Construction Newspapers
Plan Centers
Cost Data for Similar Work
Material Costs Only
Very often, complete cost data is not readily available. In such cases two things may save you and allow you to make at least a reasonable estimate of costs.
The first is that for most heavy construction, the single most significant cost is the cost of skilled labor at the jobsite. That labor component typically accounts for two thirds to three quarters of the total cost of an item. This is a very broad generalization, of course, but may be the only way you have to make even a guess at the final construction cost if all you know is the cost of materials.
Second, although total "in place" costs may not be known, material costs are usually not difficult to determine. Local suppliers and vendors will generally provide these to you, if asked.
A better way to use this approach is
to use one of the many published cost guides published. These guides will
typically break costs down into three categories:
- labor
- material
- equipment
Using this information and material costs you believe to be reliable, you can get a pretty good idea of the total likely bid price.
A simple example will illustrate the method most clearly.
Gravity Wall Height = 10 feet
Suppose that we know the 1990 costs, derived from one of the many cost guides available. We wish to update these costs to mid 2000, but know only the approximate cost of the materials in the work. Knowing the material costs we can derive the figures shown in red assuming the percentages remain the same, which is very often the case.
| 1990 | 2000 | ||
|---|---|---|---|
| ENR-CCI = 4732 | ENR-CCI = 6400 | ||
| Item | Cost | LF Percent of Total Cost | LF |
| Labor | $386 | 31.6% | $470.53 |
| Materials | $490 | 39.8% | $597.30 |
| Equipment | $356 | 28.9% | $434.00 |
| Totals | $1,232 | 100.0% | $1,501.80 |
Indexing
The published cost indexes provide an easy way to bring old costs up to date and allow the projection of costs into the future. The wall example above might have been approached in this way. Knowing the ENR-CCI in mid 1990 and the ENR-CCI in mid 2000, we might have simply mutiplied the 1990 cost per LF by the ratio of these two:
ENR-CCI (2000) = 6400 = 1.35
ENR-CCI (1990) 4732
And,
$ 1,232 / LF x 1.35 = $ 1,666 / LF in year 2000.
Which of these two results you use depends on some judgement on your part and on the use you wish to make of the estimate. But it is clear they are about the same order of magnitude.
Scaling
Economies of scale pervade the construction industry and can usually be estimated, at least roughly, based on past experience. Reductions in the cost of producing a product as the scale of output increases is common to many kinds of work. An illustration of this is shown by the plot below of the cost of steel water tanks versus tank capacity.
While they are not the main focus of this course, costs other than construction can often be significant factors in construction projects. These costs may include legal costs, right of way and acquisition costs, administrative and legal fees, financing costs and a host of others. Usually, they are estimated as a percentage of construction costs and may range from as little as a few percent to well over 25 percent.
However they are calculated, it should be recognized that they too can often be treated as parameter costs, although the choice of the appropriate parameter may not be as easy to identify.
