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Abstract
Business failures among construction contracting firms occur at a rate which place contractors among the highest risk customers to banks. Many, if not most, contractor failures can be traced to the inability of contractors to properly evaluate the cost of a project for purposes of submitting a bid in a competitive market. Improper evaluation of project costs results from poor organization of the estimating function, overuse of shortcut procedures, and failure to consider all elements which contribute to cost.
This dissertation examines the reasons for poor estimates, reviews methods in use to minimize estimating error, and develops an overall system for production of an estimate which fully considers all features of the project which contribute to its cost.
The study concludes:
1. Current methods of cost estimating employed by construction contractors are haphazard and often grossly in error, especially on large, complex construction jobs.
2. Commercially available textbooks on construction cost estimating do not provide adequate background for an estimator entering the construction field in areas other than small building construction.
3. Cost estimating is not. adequately integrated with other cost engineering functions within construction firms.
4. Inadequate attention is given by estimators to cost items other than those directly related to permanent material quantities.
5. The effects of time on cost are given minimal attention in estimating.
6. Systems in use for estimating do not facilitate follow-up study of estimated costs versus actual performance as a means to attribute overrun/underrun cost problems to poor estimating, poor construction management, or other problems.
7. Codes of accounts, if used, are generally designed primarily for cost control purposes and find little use in other cost engineering functions, particularly estimating and scheduling.
8. Construction estimators are not taking advantage of the powerful tools of probability and statistics to systematically evaluate the uncertainty and risk inherent in construction.
9. Modern computer technology makes possible the development of sophisticated estimating systems which minimize potential for estimating error, increase the speed of estimate preparation, incorporate detailed consideration of risk, and directly support other cost engineering functions, such as budgeting and scheduling, as well as related functions, such as procurement.
10. The key to integration of cost engineering functions is a code of accounts.
Additionally, the study develops:
1. A Proposed System for Bid Development which integrates the cost engineering functions, gives proper emphasis to all cost elements, takes advantage of modern computer technology, brings scheduling into bid preparation, provides reasonable consideration of risk, allows evalua-tion of the effect of time on costs, facilitates resource budgeting during bid preparation, and facilitates direct review of estimated versus actual performance as a project is underway or after completion.
2. A Proposed Code of Accounts which supports the Proposed System for Bid Development. This code also supports subsequent cost control functions, such as reporting, analysis, and development of historical data files.
3. Two possible standard forms which can be adapted to serve as guides and checklists for cost engineers in bid development.
