THEORETICAL FRAMEWORK AND SCOPE OF STUDY. WHAT IS ACCURACY OF AN ESTIMATE?

Gross floor area (GFA) is the forecasting of the cost of a project during the planning and design stage. According to Skitmore (1991), his describes the accuracy of early stage estimation as comprising two aspects, namely, bias and consistency of the estimate when compared with the contract or accepted tender price. Bias is concerned with the average of differences between actual tender price and forecast while consistency of estimate is concerned with the degree of variation around the average. FACTORS AFFECTING ESTIMATING ACCURACY An overview of previous studies suggests that a large number of factors may influence the accuracy of an estimate. According to Gunner and Skitmore (1999a) reviewed previous studies and summarized the factors as follows: building function, type of contract, conditions of contract, contract sum, price intensity, contract period, number of bidders, good/bad years, procurement basis, project sector (public, private or joint), number of priced items and number of drawings. Gunner and Skitmore (1999a) analyzed the estimates of 181 projects in Singapore. They found that a majority of the factors influenced the accuracy of estimates. Using data from 42 projects in Singapore Ling and Boo (2001) found similar results when they compared five variables against Gunner and Skitmores (1999a) work. Skitmore and Picken (2000) studied the effect that four independent factors (building type, project size, project sector and year) had on estimating accuracy. They tested the four factors using data from 217 projects in the United States of America. They found that bias in the estimate of the projects is influenced by project size and year, while consistency in the estimates is influenced by project type, size and year. In a study of 67 process industry construction projects around the world, Trost and Oberlender (2003) identified 45 factors contributing to the accuracy of early stage estimates. They summarized the factors into 11 orthogonal elements. Of the 11 factors, the five most important include: process design, team experience and cost information, time allowed to prepare estimates, site requirements, and bidding and labour climate. All these studies suggest that there are a large number of variables that may substantially influence the accuracy of an early stage estimate. According to Gunner (1997) the factors influencing accuracy of estimates are interrelated so that the true bias of one factor could be masked by one or more factors. For example, Gunner and Skitmore (1999b) theorize that Price Intensity alone is both necessary and sufficient to account for systematic bias (inaccuracy) in building price forecasting. Price intensity is the total cost of a building divided by the gross floor area. Price intensity theory states that buildings with low unit rates (cost/m2 gross floor area) would tend to be overestimated, while those with high unit rates would tend to be underestimated. In a study of 89 construction projects in Hong Kong, Skitmore and Drew (2003) support the price intensity theory.

In another study, Skitmore and Picken (2000) using data from 217 projects in the United States found that year was the underlying variable responsible for the bias and inconsistency in cost estimates, after partial ling out confounding effects of the four factors put forward. The finding contrasts Gunner and Skitmores (1999b) price intensity theory. However, their result supports Gunners (1997) theory which states that interrelations among variables cause confounding effects. It also supports Gunner and Skitmore (1999a) in their suggestion that a single underlying variable is the cause of bias and consistency seen in estimates. PRELIMINARY ANALYSIS OF DATA FROM PAST PROJECTS. TREATMENT OF DATA. Data obtained from the 56 projects were analyzed by project size (measured by project value, gross floor area and number of storey), location, procurement route, project type, principal structural material and price intensity. Time of estimate was controlled by transforming the pre-tender estimate and contract sum of each project. for example, to the December 2006 price using the building price index published by Rawlinsons (2006, 2007). Also, differences in estimating processes and approach were understood to have been controlled because projects analyzed were undertaken in the same company under the same quality assurance procedure. Project sector (whether private or public or joint) was also excluded from the analysis because the 56 projects did not provide a large enough spread of data to enable statistical analysis of the impact of project sector. There were too few samples of projects procured by the private sector. There were also too few samples of projects procured jointly by the public and private sectors. IMPROVING THE ACCURACY OF ESTIMATES There are 12 methods that could be used to improve the accuracy of estimates. The methods were identified from the literatureparticularly Ling and Boo (2001). According to research by Aibinu and Pasco, Respondents were asked to rank the effectiveness of each method on a scale of 1 to 5 (where 15 least effective and 55 most effective). The REI was then used to rank the methods. Australian quantity surveyors perceive ensuring sufficient information is available at the time of estimating as the most effective method of improving estimating accuracy (first), followed by increased cost planning and control during the design phase (second) and checking all assumptions with clients and consultants during the estimating period (third). The result is similar to that of Ling and Boo (2001), who found that the most effective methods of improving accuracy according to Singapore quantity surveyors were ensuring design information is sufficient and available for estimate preparation checking all assumptions when preparing the estimate providing a realistic timeframe for estimating activity. The similarities indicate an international sentiment regarding methods of improving the accuracy of estimates. Simulation, probability and utility function is considered by

respondents as the least effective method of improving the accuracy of estimates (ranked twelfth). REDUCING ESTIMATE INACCURACIES IN PRACTICE According to research by Aibinu and Pasco, the respondents were asked to list internal review mechanisms in place in their company aimed at improving the accuracy of pretender building cost estimates. Overall, 33 of 41 survey respondents (80%) listed at least one review mechanism used in their firm. In total, 77 review mechanisms were listed and content analysis was performed on the 77 items. Similar mechanisms were grouped together and named by the researchers. Figure 4 shows the frequency of 13 mechanisms identified from the content analysis Overwhelmingly, benchmarking is the most popular method used by firms to improve the accuracy of estimates, followed by internal peer review and communication with the market which both have relatively smaller frequencies when compared with benchmarking. This suggests that estimates are largely based on cost data from past projects rather than on internal peer review and market research. This reinforces the explanation that errors in estimates are transmitted from past projects to new projects. This could be responsible for the lack of improvement in estimate bias over time. The content analysis revealed that the use of computer estimating software is not frequently mentioned as a method to improve the accuracy of estimates (mentioned by only three out of 41 firms 7%). Also, identification and incorporation of future market trends into estimates was mentioned only seven times. These results also agree with the ranking of the effectiveness of 12 methods of improving the accuracy of estimates which shows that incorporation of market sentiments into estimates using simulation, probability and utility function is the least effective method of improving the accuracy of estimates according to the respondents. Probability estimation or simulation to predict future cost trends or to extrapolate new estimates from past estimates could reduce bias in cost estimates for new projects. However, the results suggest that it is scarcely used. This indicates that there is potentially low uptake of computerized statistical techniques such as cost modeling in the industry.

REFFRENCES Construction Management and Economics Volume 28, Issue 12, PDF : Research by Aibinu and Pasco.