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Building Estimates and Tendering: Factors Influencing the Accuracy of Early-Stage Construction Cost estimate

Case Study: 14 story residential apartment’s tower: Milsons Point, Sydney

Introduction

The construction process is composed of different phases. Each part requires a high level of accuracy of execution in order to ensure safety in costs at the end of the project. It all starts with the decision by the owner of the project. This has to be well analyzed before it can be put into implementation. Then, this is followed by a consensual approach of the architect who does the designing part, offers advice on the best conception model to adopt incorporating the shape, materials, finishes, and design colors (Rumane, 2016, p. 302). The third phase in the project realization involves a cost consultant, who, with the help of the design plan offered does the estimates and allows for the best bid by the contractor to be adopted. Then, the visible construction stages are ready to be carried on.

The construction of a 14 story residential apartment’s tower at Milsons point, Sydney did adopt the same procedures for its execution. Both the 2D and 3D designs from the architect showed complexity but achievable with the advice he had provided. A total surface area of 80 m2 was designed to be used with each bedroom allocated a total surface area of 12 m2.  An addition of 3 basements was as an advisor for the parking lots. The basements and the ground floor adopt same floor plan design, while the rest of the floors being of different shapes. The terrace part is accessible and contains a gym and swimming pools. It is designed to be well covered for shade purposes and against water evaporation from the pools. Then, the remaining surface on the outside, all around the apartment was designed to be used as a garden area for the owner starting half a meter from the exterior walls of the apartment.

The 3D plan had to follow certain advice from the architect. First, it’s the present of the stairs linking the ground floor with the three basements. Then, the physical look of both the exterior and interior walls enhanced by finishing with each floor being 3.08 m tall. The rectangular columns and beams were to be adopted all through. As for the walls, the OVE framing walls are what the architect proposed (Kang, 2018, pp.1-12). This was all for the purpose of a fancy physical look of the apartment. The interior walls had to adopt a fine finishing form with a choosy color painting form for the families with kids to aid in their fine mental development.

The choice of the materials of construction was given the all thought, with it kick-starting the process of time and cost estimation. The proposal of using blocks for all exterior walls and bricks for the interior and partitioning walls was significant. This was also going to allow for outer decorations as well as proper internal wall finishing adding more costs and time. The point was all set for the cost of materials and the labor to be undergone, taking all the costs of the project.

Preliminary Cost Estimations

Estimations are all the basic parts of construction to discover the budget to adopt with it either being correct or sometimes erratic. Being a construction consultant, the experience inside has always been a great tool. The adoption of an expert judgment method in setting both the time and cost estimations has been a fast and successful one, compared to other methods like comparative and parametric model estimating methods (Chirra, 2019, p.226). First, the point has been on the emphasis of the design shape to be constructed. Many designs have been conceived with different variations and the expert method has been successful. With the outer walls of this apartment set to all be of block type, the cost of the block was crucial. At that particular episode, however, the conditions all favored this type of wall system due to the considerable costs of the blocks. Then, the value of an already-mixed concrete C30, availability, and accessibility of both coarse and fine aggregates, and the cost of cement was lower than the factual moment of construction.

The knowledge of the shape of the floor plan and the surface area is the beginning of applying the expert estimating method. Delivery of the floor plan to the construction consultant helps compare the plans studied before with the present one. The total surface area of 80 m2 project had to be realized. The first information to set the estimations of both time and cost was the number of materials to be used. This was estimable from the look of the surface area of the floors. Then, this knowledge translates to the total costs of materials and labor as a whole. With the years being different, however, a fluctuation percentage had been set in the region of an additional 0.5% to the current costs.

The Australian Construction Bureau has some estimated costs based on surface areas on construction (Uğur, 2018, pp.1476-1483). $3000 costs per square meter have been the standing costs including the materials and the labor totals. Thus, a total of $4.8M in the form of costs was anticipated to be incurred carrying both the material and labor costs. However, it didn’t include the cost for finishing which was to take $200/m2. Thus, the construction consultant estimated the total costs to be $6M all in effect with the period of 2015 and a 0.5% price fluctuation depended on the period of 1.7 years of the construction period. With the assumptions of the price fluctuation in the form of costs of materials and labor being put in place, however, the problem arose with the significant increase in the costs of this project for the initial stages. It is this which brought a big talk in the efficiency of the method the construction consultant used to set the estimates. Thus the need for clarification on the different factors which had contributed to this erratic and frightening result to the employers and owners of this residential construction project.

Factors Challenging Early-Stage Construction Cost Estimate

The project owner voiced their high concern in the significant change in the cost of construction. The higher rise however had been caused by factors beyond either the construction consultant’s or the contractor’s control. These factors were:

  1. Design complexity

The architect gave a piece of nice advice on the plan to be adopted by the project owners. With both the 2D and 3D well designed, there were no queries to be raised at the start of the project. Also, as a construction consultant, the plan was agreeable as per the standards of construction. Thus, giving it a go-ahead was never in any doubt as at that particular time, everything seemed to be perfect with the plan. The first cost allocation hence matched well with the plan and the expectations of the conception process.

However, there came the contraction process which brought some changes in the budget operations. The way this floor plan and 3D plan were supposed to be handled was misinterpreted. This was all the problem of the head of the project execution who was selected by the contractor of the project. Having realized this misinterpretation late in the course of the construction process, the exterior walls had to be demolished for a new set-up. With this being part of the cost, in both the demolishing process (labor) and the mortar, with some blocks breaking and needing replacement, an added cost was to be incurred.

The added cost caused by the complexity of the design was never catered for during the cost estimation of the early-stages of this construction. This contributed to this significant cost changes of the entire construction process, almost amounting to a 10% increase. The problem is all that it was behold the control of the construction consultant, who never thought the plan would be misinterpreted. Importantly, a project will be an investment to cover for its construction costs.

  1. Restricted site access and working hour limitations from the city council

A purchased land is not personally owned but a possession by the council office. This limits all the activities carried upon this piece of land. It also dictates the time of access into the site and has not been any different during the realization of this 14 story residential apartment. The set duration initially was 1.7 years for the completion of this project and one-time entry as per the Australian Construction Bureau (Meredith, 2017, p. 243). This was all based on the expert estimating method used by the construction consultant.

The outbreak of high levels of theft cases around Milsons Point changed the site area a lot. The Council put some restrictions on the times citizens were supposed to be out of their houses. Having planned that in each day there would be 11 hours of work, starting from 7 am to 6 pm, this was changed. The council set some inevitable rules such that with our entry time maintained at 7 am, every day we were obliged to close at 4 pm. This was a reduction of 2 hours of work daily. It led to an increase in the number of days of work which had all to be accounted for.

Having not accounted for increased days, which led to this project being carried out for a period of 2.5 years, an increase in the cost of labor was incurred. This increase had not been accounted for even in the additional 0.5% of the fluctuations of the construction coast. Thus, a significant increase, estimated at 15%, in the cost for the early-stage of this construction process.

  1. Plant, labor and material shortages and price escalations

The cost of both the material of construction and the labor to be incurred was never going to be the same for the years 2015 and both 2017 and 2018. Starting with the materials of construction, the cost of blocks, bricks, cement, and steel changed drastically as shown below.

            Year/Cost ($)     

Material

2015 2016 2017 2018
Steel (D16/kg) 460 550 720 830
Cement (per Bag) 7 7 7.5 7.75
Blocks/Sq.m2 300 400 400 450
Bricks (per sq.m2) 1 1 1.5 1.5

Table 1: Cost variation on materials of construction from 2015-2018 (Rafiei, 2018, p.04018106).

 

The change in the cost of these materials has been due to different factors based on the booming of the Australian Construction Industry. In 2015, the construction projects weren’t as many as they became widespread in 2017 (Leviäkangas, 2017, pp.33-43). As such, the estimations had been done in comparison with the market costs of these materials in 2015 and also incorporating the expertise experience in comparison with the other years of 2014 and below. With these four components being the principal composition of the materials of construction, the escalations in their prices contributed to the highest increase in the cost estimate.

The escalation of prices in the materials of construction has contributed highly to the increase in the cost of the early-stage of this project construction. A 25% increase in the total cost of this project could be detected. This, however, had not been accounted for, and thus this had to be voiced out to the construction consultant for efficient clarifications.

Conclusion

Construction projects require patience and understanding in every step. These are incorporated in order to assure security, service, durability, and more importantly the economy of construction. For the purpose of setting this in place, different estimations are done based on the cost of materials, labor, and duration of the project conception.

Since the estimations were done during the year (2015) when the project wasn’t started, different changes in the cost of materials changed, as well as rules of construction. With problems arising from the complexity of the floor plans, the change in the daytime working hours, and a remarkable escalation of the costs of materials of construction as the years went by, the cost of the project changed significantly. A 50% increase in the estimated price was recorded. This, with the fright it hit the owners with, can’t be evaded. The higher expectation in the productivity of the project can be the encouraging aspect even when costs of realization contributed by the early-stage of the project change the project costs.

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