Drivers of the accuracy of developers' early stage cost estimates in residential construction

Lim, Brendon, Nepal, Madhav Prasad, Skitmore, Martin, & Xiong, Bo (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.

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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.

Impact and interest:

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ID Code: 91682
Item Type: Journal Article
Refereed: Yes
Keywords: Cost estimate accuracy, Preliminaries, Developers, Residential construction, Project uncertainties, Historical cost data
DOI: 10.1108/JFMPC-01-2015-0002
ISSN: 1366-4387
Divisions: Current > Schools > School of Civil Engineering & Built Environment
Current > QUT Faculties and Divisions > Science & Engineering Faculty
Copyright Owner: Copyright 2016 Emerald Group Publishing Limited
Copyright Statement: This article is (c) Emerald Group Publishing and permission has been granted for this version to appear here ( Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.
Deposited On: 10 Jan 2016 23:40
Last Modified: 11 Apr 2016 03:44

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