Contractor Cost Analysis: Data Sources - Essay Example

CONTRACTOR COST ANALYSIS: DATA SOURCES Introduction Economic performance plays a major part in the management and delivery of construction projects. With increase in technology, institutions, and commercial focus on various industries, competition for success becomes the order of the day. This competition digs much into production costs spelling out the need for analysis and thorough research goes into efficient management and service delivery. It is vital to put concerted effort towards accurate cost estimations and determine reliable cost data sources. A number of departments add up to the contract cost. Some of the basic and very crucial departments to consider are labor, materials, equipment, and energy (B. Y. McCabe 2002). The labor cost is generally accounted for based on perfect productivity of a project using local national average rates. The average labor rates may encompass fringes with exclusion of payroll taxes and compensation insurance hence contractors must include this in their analysis. Equipment cost is considered according to daily rental rates within the local country, which may be affected by many other factors. The rates of hire are dependent on individual equipment owners. Relationship between the hirers and the equipment owners will determine cost. The contractor may also consider purchasing new equipment. Equipment cost includes cost of electricity and cost of fuel. This is a mandatory addition to the project cost and fuel cost data can be obtained from relevant bodies. Most countries have energy regulation commissions which set fuel prices. Construction takes up materials, which are bought from site as raw materials. Depending with the nature of project undertaken, contractors must put these rates into perspective. Knowing the total estimates that might go into the entire process, contractors will have to come up with figures for the materials. Materials are priced by bulk; price per kilogram or any standard measure recognized by the contractor. Material costing estimates include cost for freight to project site. Depending with countries raw material policies, material sale price may factor in tax and VAT. Identification of sources of Cost data It is important that contractors be updated with current market figures in order to effectively compete with the rest of the world. By doing market research of prices of commodities, contractors stand a better chance. Contractors can contact companies that produce commodities in order to get the latest and reliable material costs. Local country government, publish labor cost range rates which contractors must adhere. This crucial data that government’s policy makers look at when drafting policy boost investment or aid contractors. In analyzing cost data, it is important to note that cost data is indexed by material, labor, and equipment. The material index is established on commodity indexes that are related to particular construction materials. To obtain Labor rates, contractors have to source information from published indexes that are available both in public and commercial institutions. Equipment cost rates have their index consistent with by the cost of borrowing money and the cost of energy sources; either electric or fuel (B. Y. McCabe 2002). So many factors play subordinate to the enumerated departments. These include market outlook of particular countries or the global market figures that ultimately have an effect on inflation. Costs are compared with inflation indexes. Inflation figures can be obtained form both public and commercial sources. The source of information at all cots should be credible be it public or private. Sources of construction cost data The world has institutions that are vested on the activity of researching and compiling cost data across the globe. Many companies are deemed credible sources of cost data. Some of which are Richardson construction cost trend reporter, Richardson International Cost Index, RSMeans Building Construction Cost Data, Helyar Construction Cost Guide, Saylor Current Construction Costs, Statistics Canada, Hanscomb’s Yardsticks, Engineering News Record, and Boeckh Cost Guide. Though efforts go into getting information on local rates of labor, materials and equipment, same quantities and units are put to use across the globe. Using these sources ensures limited errors because they have no assumptions for skill level in terms of labor costing, practices and requirements by the local building codes. Indices measure total construction cost of structures that were completed. This measure best illustrates the actual cost and refers to local labor skills, their availability, and associated output. Boeckh cost guide has been in print for the last 80 years. They provide more than 1000 index for locations across the world. They use the Milwaukee WI as their baseline owing to stability of economy in its year of establishment. The same has profile fit for national economic characteristics. They provide square ft. cost of Milwaukee WI. They represent data for various building models. Among the models Boeckh illustrated are offices, public building, lodgings, and basements. Materials for six superstructure feature in their costing review that include provisions for adjustments. Included are contractor fees and those of design and contingency (B. Y. McCabe 2002). Engineering News Records have been in existence since 1913. Labor input, cement costs, lumber, and steel costs are their main area of focus. Their indices give only variation of cost over time. They pin their discussion and information on 20-city average. According to engineering News Record, ENR, construction cost index makes up for specified material quantities. They give guide on amount of cement to be 1,128 tones, lumber 1,088 board-ft., and steel 25 cwt., 200 hours labor as priced locally at the 20-city average. This is consistent with Building Cost Index (BCI) but disperse at labor input of 68.38 hours. Hanscomb’s publish costs for installation in place of Canadian cities. Indices achieve application in estimating design work during the early stages of a project life cycle. Hanscomb’s publication comes with four illustrative sections. The publication sections include current market prices section, labor rates section, gross building costs section, composite unit rates section. Current prices of materials, installation labor, transportation, equipment, and profits expected. Gross cost section takes contractors through 35 different types of buildings. Each building has an average cost, low, and high price illustrated in square foot or meter. Various unions and relevant labor rates feature in the labor rates section. Helyar Construction Cost Guide publishes estimate ranges for an entire span of a year. These estimates are in the sections of construction presented in costs per sq. ft. They present information for 34 different buildings. However, this guide makes exemptions land costs, costs of financing, legality costs, engineer, and architectural costs. The cost guide makes separate estimations at 10% deviation from the mean. Their costing data have relativity to local factors like design costs. Richardson have existed and published costing for more than 40 years. Their publications entail sections of index for labor cost, index for construction cost, index for composite crew. They illustrate 16 trades for labor costs, 17 industry indexes, and more than 63 material prices of a particular location. They have an imagined location called Richardson, USA, and Canada. They produce indexes for more than 120 locations. They effectively compare labor rates. Richardson international makes detailed analysis and comparison of changes in cost for more than 20 locations worldwide. Richardson’s focus is meeting needs of owners, consultants, and contractors. To achieve this Richardson provides detailed information on political and regulatory information for special locations including their cost (B. Y. McCabe 2002). Statistics Canada have been publishing ICI index for buildings for 30 years. They information are intended for cost comparison across regions. StatsCan illustrates details of different costs for different building types. Its development was targeted at price deflators to ensure that they make real estimates. Scope of their construction price index encompasses monitoring changes in costs of machinery labor and materials for building. Conclusion By venturing into methods of determining cost, the guides go along way into reflecting on the final cost reports of various contractors. Depending with the interpretation and data sources from the listed institutions, information proves to be credible. In this light, the only option contractors have as they move forward is to be careful in assessing conditions prevailing before selecting applicable index to be used in initial cost estimation. To put in mind is the assumption prowess of the technical team that performs estimates. The activity is difficult but it is necessary for progress of the project. To project into the future with accuracy, analysis of existing situation and other related past incidences add up to a good preparedness into accomplishing a project. Reference B. Y. MCCABE, J. O’Grady, F. Walker (2002). A STUDY OF CONSTRUCTION COST SOURCES. In: NONE, (ed.). Annual Conference of the Canadian Society for Civil Engineering, University of Toronto, June 5-8, 2002. montreal, University of Toronto, 1-9. Read More