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Area Cost Factors: Methodology in Preliminary Construction Cost Estimating

Thomas Taam of the U.S. Army Corp of Engineers and Amarjit Singh of the University of Hawaii at Manoa
On major construction projects, the budget estimate is the most important cost estimate for any owner. In thus both the private and public sector, the budget estimate sets the stage for project success. For U.S. Department of Defense (DOD) projects that must acquire Congressional authorization and appropriation for its construction program, it is essential for project scoping and cost estimates to be accurate for the effective utilization of scarce taxpayer resources.
The DOD collects and normalizes historical bid data from projects that are executed throughout the country. In order for accurate programming cost estimates to be developed at various geographical locations, the DOD has developed a methodology to determine and maintain location factors. The simple purpose of these location factors is to empirically measure the costs of building construction at a given location versus the national average.
This monograph provides a detailed explanation of how the location factors, Area Cost Factors, are developed and applied. The methodology utilizes labor, equipment, and material (MLE) data collected at each geographic location and weighs it against a base city average that considers 96 cities within the Continental United States. The resultant weighting of MLE indexes yields the Overall Location Index.
Further data is collected on weather, climate, seismic activity, labor availability, labor productivity, mobilization/life support, and overhead and profit factors that is then utilized to develop another index called the Matrix Factor. Together, the Overall Location Index and the Matrix Factor are used to develop a geographic Area Cost Factor.
This is a unique methodology developed exclusively for construction preliminary cost estimating. It is a scientific and advanced method that stands validated over many decades of use. This book is sure to help cost engineers and estimators wanting a reliable method for preliminary area cost factor analysis.