Accuracy of estimating techniques for predicting residential construction costs – A case study of an Auckland residential construction company

Abstract

Estimating is one of the most important functions of a successful project. Accurate estimates optimise good contracting as well as the process of calculating and analysing all the costs that will enter into a particular job to arrive at a set total. The estimator is responsible for these estimates which serve to ensure the project will have a successful financial outcome and these estimates also influence the decisions made for budgeting and assist in clients’ decisions for contractor selection.

This research will determine the current practice of a case study company’s accuracy in estimation and will also identify the associated issues with the preparation of the estimates which can lead to inaccuracy.

The methodology for this research has been a triangulation from an extensive literature survey review and analysis, then followed by a document analysis of the case study company’s project accuracy over the last 5 years and then analysis which is an interpretation of the author’s understanding.

The findings have indicated that there are inaccuracies which can be from a range of factors identified in the literature as crucial indicators for deviations from the intended budget. This includes for the selection of provisional sum expenditures, historical data validity, factors affecting the accuracy of the estimate and model house base rate.

The conclusions that have been drawn are that there is only one method of estimation being used in the case study company and when a house becomes an architecturally design house, the model house base rate seems to become invalid completely. The historical data is not being regularly updated with feedback processes and the learning curve of the estimator reviewing each project after completion seems to be limited as the inaccuracies are being carried forward onto the new projects. The estimator’s judgement is identified in the literature as one of the most important factors to estimation; however, the data collected indicated that an inexperienced estimator has made decisions that have resulted in ramifications.