Empirical Comparison of Methods for Estimating Location Cost Adjustments Factors

Abstract

Location factors are used to adjust conceptual cost estimates by project location. Presently, the construction industry has adopted a simple, proximity-based interpolation method to estimate location factors for missing locations. Although this approach is widely accepted, its validity has not been statistically substantiated. This study assessed the current method of adjusting conceptual cost estimates by project location and compared its performance against two alternative spatial interpolation methods. A Moran’s I test was used to confirm the presence of strong spatial autocorrelation, which supports the use of proximity-based methods. Additional statistical evaluations of current and alternative methods were also conducted. Results provided statistical justification for the current method. However, an alternative method was proven to outperform the current method. Moreover, several opportunities for future research were identified as a result of this exploratory study.