Analysis of factors influencing project cost estimating practice

TLDR

Although extensive research has examined factors affecting tendering and pricing, little addresses factors influencing cost estimating in construction projects. The study aims to understand the factors that influence contractors' cost estimating practice. A comparative study of 84 UK contractors across very small, small, medium, and large firms was conducted. The analysis identified project complexity, scale and scope, market conditions, construction method, site constraints, client financial position, buildability, and location as key factors, found no significant differences among firm sizes except for procurement route and contractual arrangement, and grouped variables into seven factors with project complexity as the most influential.

Abstract

Although extensive research has been undertaken on factors influencing the decision to tender and mark-up and tender price determination for construction projects, very little of this research contains information appropriate to the factors involved in costing construction projects. The object of this study was to gain an understanding of the factors influencing contractors' cost estimating practice. This was achieved through a comparative study of eighty-four UK contractors classified into four categories, namely, very small, small, medium and large firms. The initial analysis of the 24 factors considered in the study shows that the main factors relevant to cost estimating practice are complexity of the project, scale and scope of construction, market conditions, method of construction, site constraints, client's financial position, buildability and location of the project. Analysis of variance, which tests the null hypothesis that the opinions of the four categories of companies are not significantly different, shows that except for the procurement route and contractual arrangement factor there is no difference of opinion, at the 5% significance level, on the factors influencing cost estimating. Further analysis, based on a factor analysis technique, shows that the variables could be grouped into seven factors; the most important factor grouping being project complexity followed by technological requirements, project information, project team requirement, contract requirement, project duration and, finally, market requirement.