Changes In Construction Costs Research Articles

Methods and tools of a construction cost management system at the pre-project lifecycle stage of a construction facility

Introduction. The cost of construction is the most important indicator of any investment and construction project which is subject to change at every stage of its lifecycle due to the influence of many internal and external factors. Creation of an effective integrated construction cost management system, which allows controlling changes in construction costs in the process of developing a construction facility, is relevant for all participants of investment and construction processes. Certain methods and tools are applied at every lifecycle stage of a construction facility; they solve construction cost management problems. At the stage of capital investment planning and preliminary design, the main task is to determine trustworthy construction costs and possible limits of their change, taking into account any risks and uncertainties. This task turns more complex due to the lack of initial data about the facility and tight deadlines. This article is focused on the system of methods and practical tools used to determine construction costs at the stages of capex planning and preliminary design of a construction facility.
 Materials and methods. In the course of the study, current construction cost calculation methods were analyzed. Methods of analysis, synthesis, expert and comparative evaluation were applied.
 Results. As a result of the analysis the main principles of this methodological approach and a set of practical tools were developed to find reliable construction costs.
 Conclusions. The proposed methods and practical construction cost management tools can be applied in the process of implementation of investment and construction projects of any complexity.

The ratio of changes in construction costs and development index of the standard analysis of construction costs for state buildings

Wages rate and material price are an important part of a construction cost. The Construction Cost Index (CCI) that has been developed which applies to a certain area or period a basis for determining the bid price. This index is also very useful to forecasting construction cost which should reflect the comparison of wages rate and material price changes over time. Standard Construction Cost Analysis per m2 is one of the performance budget instruments to assess the budget of a construction project. Surabaya City Government applies that standard in set up government budget. SCC is composed of several Unit Price Analysis with a certain volume that design has been standardized. The composition of the labour and material price index, as a cost driver for Standar Construction Cost Analysis based on time units are expected to be used in the preparative of cost estimates for Building Construction and further research related to the effect of price increases on construction costs. The results obtained from this study are the construction cost change ratio in Surabaya for 2013-2016 increased average 17.3% per year; start from 2016 - 2020 increased not over 6,5% per year. Where as material cost change ratio tends to increase every year, except for 2014 - 2015 which has increase dramatically. In the other hand the labour price index indicate a constant increase because it was related to the Surabaya City Minimum Wage Rates, but in the early year in data (2013-2014) the Minimum Wage Rates significantly increased. In 2017-2018 labour cost change ratio increased more higher and material cost change ratio turn to decreased because the analysis used new guidelines for Analysis of Work Unit Prices for Public Works (Regulation of the Minister of Public Works and Public Housing of the Republic of Indonesia number 28 / PRT / M / 2016). The average component weight of the CCI according to the development of price are labour and foreman (41,3%), stone / brick (10,7%), roof truss and cover (10,4%), cement (8%), floor cover and paint (7,4%), wood (6,8%), iron bar (5,6%), accessories and complement (5,6%) and sand (4,2%). Material cost index tends to increase every year, except for 2018 and 2019 which has decreased. Whereas labour cost index indicated a constant increase because it was related to the UMK (City Minimum Wage) Surabaya. So that the CCI from 2013 to 2020 has increased from 1,00 to 1,93.

The Dynamics of Housing Prices in Malaysia: Findings from Focus Group Discussions

Background of the Research: This study examines the factors influencing housing prices in Malaysia. The study explores qualitatively whether there is housing bubble in Malaysia, and whether the housing prices are associated with changes in construction cost, land cost, compliance cost, housing speculation, and mortgage rate. Methodology: The paper is exploratory in nature. The data were collected via focus group discussions among nine property industry players in Malaysia and were analysed using qualitative research methodology. Main Findings: The study reaches the qualitative outcomes that rising housing prices are mainly due to cost factors and housing speculation but may not necessarily be influenced by mortgage rate. The findings suggest that the residential property market is currently not facing housing bubble issue. However the problem is partly due to PTPTN blacklisted borrowers. Conclusion: It is imperative for the Malaysian government to put in further efforts to control housing prices in order to maintain affordability of homeownership.

A Dynamic Generalized Cost Based Logit Model for Passenger Corridors

In order to scientifically compute the supply allocation of various transportation modes for passenger corridors, a dynamic generalized transportation cost based Logit model is proposed according to the theory of random utility and discrete choice model. The model's robustness and accuracy were verified via MATLAB programming using the Zhengzhou-Xi'an Passenger Corridor as a study case. The analysis result indicates that transportation construction cost changes with the share, which is influenced by travel time and the random perception coefficient. Compared with existing models, the changes of sharing rate and that of transportation construction costs in this paper are not in the same direction. For the dynamic changing of generalized transportation costs, the sharing rate calculated only by a static travel time and ticket price is unreliable. The model proposed in this paper cannot only meet the individual demands of travelers, but can also keep the sustainable operation of transportation. The sharing rates calculated by the model for the Zhengzhou-Xi'an Passenger Corridor are more reasonable than those calculated by traditional models.

The influence of the building shape on the costs of its construction

PurposeThe choice of a particular architectural solution when designing a building considerably influences the costs of its construction. The aim of this paper is to present the indexes which may relate to the complexity of the building shape, and which were then specified and compared on a particular example.Design/methodology/approachThe article analyses various indices of building shape evaluation, their influence on the changes in construction costs and their sensitivity to the changes in the dimensions of the building. The methodology adopted in this article concerns the analysis of the selected simple factors assessing the shape of the building against the cost‐effectiveness of constructing the basic elements of the building.FindingsThe authors established the best building shape in relation to the costs of constructing the walls and foundations (square), and to the layout of the inside of the building (rectangle). They believe that the best evaluations of building shape were achieved by the LBI index, which evaluated the shape correctly in all of the analysed examples and which is the most sensitive to the changes in building parameters in correct proportions to the changes in construction costs.Originality/valueThe article presents the indexes which may relate to the complexity of the building shape. The authors established the best building shape in relation to the costs of constructing. The authors provide the degree of the floor area usability in buildings of various shapes.

Improving Revenue Adequacy by Indexing the Gas Tax to Indicators of Need

The current crisis in highway finance in the United States is mostly driven by greater vehicle fuel efficiency, substantial rises in construction costs and automobile use, and fixed per gallon fuel tax rates that do not increase with inflation. These factors give rise to questions about the adequacy of the gasoline tax (or gas tax) structure to generate sufficient revenue. We argue that the public will be more willing to increase the gas tax if it is restructured to be directly connected to measures of need and is adjusted upward in small, regular increments. We examine how state variable-rate fuel taxes, by incrementally adjusting the gas tax rate on a regular basis, would affect gas tax revenues. This is done by simulating gas tax revenues given different adjustment formulas for the gas tax rate (based on changes in construction costs, general inflation, and improvements in fuel efficiency), and comparing gas tax revenues to determine revenue-generating capacity of variable-rate approaches.

On reasons of uncontrollable construction cost based on the ABC analysis method and the complete decomposition model

In view of the previous studies on uncontrollable construction cost, which mostly were based on the practical experiences and subjective speculating, the conclusions were empirical and lack of data support. In order to solve this problem, the quantitative analysis methods are introduced here. The application of ABC analysis method can distinguish the minor-key factors from tremendous factors which influence the cost changes. And the complete decomposition of construction cost changes can decompose the main effects of the cost changes to define the key effects. Through applying these two methods, the construction cost can be controlled by mainly controlling the key factors and effects of the projects. Besides, project data of uncontrollable construction cost can be accumulated to provide objective and scientific suggestions on controlling cost. A completed small civil engineering is presented as an example.

The Application of the Complete Decomposition Model in Analyzing the Incontrollable Construction Cost

At present, the main methods of analyzing the reasons why construction cost always got out of control are qualitative analysis based on the practical construction experiences in the construction cost management. And these analyses were easily affected by subjective factors. By introducing a complete decomposition model, the influencing factors of the incontrollable construction cost in the construction stage can be decomposed to the effect of quantity changes and the effect of unit price changes of each kind of construction. A quantitative analysis will be carried on subsequently to analyzing these effects to find the main effects of the whole construction cost changes. This model made the analysis more objective and scientific, and can accumulate the data for new or planned similar constructions. To illustrate, the decomposition on construction cost changes of a small civil project is carried out.

Causality Relationship between Housing Prices and Construction Costs

The present study hypothesizes that the relationship between housing prices and construction costs is a dynamic long—term relationship. Results from an error correction model (ECM) and a standard causality model support the hypothesis that it is a lead—lag relationship. Results also suggest that construction costs do not lead to changes in housing prices, instead housing prices lead to changes in construction costs. The ECM result also suggests that the Hong Kong housing market is efficient because deviations between construction costs and housing prices disappear in the long—term equilibrium. If there is a short—run housing price shock, it is able to make quick adjustments and return to the long—term equilibrium level. This finding provides new insight into the housing market analysis, especially with respect to the supply side.

Modeling Cost Escalation in Large Infrastructure Projects

Cost overruns in large infrastructure projects have been commonplace in the past decades. Budgeting for cost escalation is a major issue in the planning phase of these projects. In this paper, we first review various methods of forecasting escalation factor and study the changes in construction costs in the past 25 years by analyzing movements of a cost index. We then introduce a system for modeling the escalation uncertainty in large multiyear construction projects. The system uses a Monte Carlo simulation approach and considers variability of project component durations and the uncertainty of escalation factor during the project lifetime and calculates the distribution for the cost. System application is demonstrated using a numerical example. The system can be used by planners and cost estimators for budgeting the effect of cost escalation in large projects with multiyear schedules.

Housing Prices and General Economic Conditions: An Analysis of Chinese New Dwelling Market

This paper presents an investigation of the interaction between housing prices and general economic conditions in China for the period of 1986-2002. The empirical results indicate that housing prices in China are predictable by market fundamentals, which could explain most of the variations in housing prices. The results of Granger causality tests confirm that unemployment rate, total population, changes in construction costs, changes in the consumer price index (CPI) are all Granger causalities of housing prices, with feedback effects observed to affect the vacancy rate of new dwellings, changes in CPI, and changes in per capita disposable income of urban households. Studies with impulse response functions further illustrate these relationships in terms of the degree of the impact on housing prices from the determinants and the feedbacks. The findings indicate that there is a long-term equilibrium relationship between housing prices and market fundamentals in China and it is the identified fundamentals that drive housing prices up, rather than a bubble.

Predicting Changes in Construction Cost Indexes Using Neural Networks

Construction cost indexes provide a comparison of cost changes from period to period for a fixed quantity of goods or services. Back‐propagation neural‐network models have been developed to predict the change in the ENR construction cost index for one month and six months ahead. A training set of macroeconomic data was developed for the period from 1967 to 1991. The neural‐network models use inputs including recent trends in the index, the prime lending rate, housing starts, and the month of the year. Output from the neural‐network models was compared with predictions made by exponential smoothing and simple linear regression. The prediction produced by the neural network gave a greater error than either exponential smoothing or linear regression. It can be concluded that the movement of the cost indexes is a complex problem that cannot be predicted accurately by a back‐propagation neural‐network model.

The Sensitivity of Book Storage Strategy Decisions to Alternative Cost Assumptions

Academic libraries house the major portion of their collections in open stack facilities. When there is little space left in the stacks, alternatives such as using compact shelving or building off-campus storage facilities are explored. This article examines the cost of these alternatives. In particular, it looks at how changes in construction costs and circulation costs affect the choices of an alternative book storage strategy. The article shows that, even though construction costs are high, circulation costs dominate the decision of what kind of facility to build. The decision is very sensitive to the number of times a book circulates: whether an average item circulates three as opposed to eight times over its life can have a substantial impact on which type of facility should be chosen for storage. If the library has the physical space on its campus, the article shows that the most economic alternative for a large range of construction and circulation cost alternatives is to convert existing ground sp...

Residential development in an open city

This paper investigates the residential development process using a dynamic model of an open city. The model is used to analyze how the density and timing of development at various sites respond to changes in exogenous trajectories and functions. In particular, the impact of income and equilibrium utility trajectory variations as well as transportation and construction cost changes are evaluated for the general model with no specific functional forms assumed. Sufficient conditions for predicted responses are derived and interpreted.

Construction Costs of Water Supply and Sewage Networks in Poland 1961-1970

The paper presents the results of studies of the structure and changes in construction costs, as well as sales profitability, of water supply and sewage networks constructed from 1961-1970 in Warsaw and Lodz, Poland. The level of sale prices and building costs of water supply and sewage networks is determined by hydrogeological conditions, cost of removal of other installations, technical and other solutions used by contractors, obstacles met during construction, and the level of estimated prices for construction. The price level is planned by the state in Poland. The included data show that the water supply lines consisted of 46% cast iron, and 54% asbestos cement, with 42.1% of 100-mm diam, 41.5% of 150-mm diam, and 16.4% of 200-mm diam; for sewage networks 30% was 200-mm diam, 19.4% was 250-mm diam, 31.4% was 300-mm diam, and 19.2% was 400-mm diam.

LONG-RANGE OUTLOOK FOR FINANCING

FOR THE FIRST TIME in more than twenty years, the business community is in a period of sustained concern about tight money and high interest rates. During the past few years, we have watched the yield on seasoned Aaa corporate bonds, for example, rise from a low of 2.85 per cent to a recent level of over 3.70 per cent. The cost of new money has increased even more rapidly. The average yield on new issues of high-grade utility bonds has risen from about 2.90 per cent in early 1954 to about 4.30 per cent at present. This increase is more than one and one-half times the rise in yield on similarly rated seasoned utility issues. The rise in interest rates, particularly for new money, reflects the increase in demand for investment funds. During the first three quarters of 1956, gross private domestic investment was at an annual rate of $64 billion, about 6 per cent above the previous record high in 1955. This increase in demand for funds, due primarily to business requirements for plant and equipment, exceeded the rise in supply from internal sources of business and, as a result, there was also an increase in funds required from new corporate security issues. Demands for funds for public construction this year have also risen to new highs, with the value of public construction in 1956 exceeding the previous record in 1955 by over 7 per cent. While the increases in these sectors have been partially offset by a slackening in the requirements for new housing and for consumer finance, the net effect has been to put the capital markets under an unaccustomed strain. During the coming decade, demand for capital will probably depend largely on such factors as the growth of the economy as a whole; rates of mechanization, improvement and replacement of plant and equipment; and changes in construction costs and in equipment and machinery prices. Taking the first of these, I believe that the United States is in an era of dynamic expansion which, despite periodic interruptions, is likely to continue for many years. This is because so many of the factors conducive to economic growth are present in our free enterprise system.