Economic of Facility Investments

1) EFFICIENCY OF EVALUATION SYSTEM

1.  The essential element of economic evaluation is project cash flow analysis, which requires quantifying all monetary items and specifying the time of their occurrence.
2.   conceptually depicts the information for an economic evaluation of a capital building construction project. 
3. All expenditures and revenues should be accounted for the analysis in forms of quantity and time within the prediction period.
4.  For multiple alternates (the initial plan and its revisions), quantifying and scheduling of all the items for each alternate is a challenging task. A practical system, for the use by practitioners, should be able to deal with all the quantity and time information in an integrated way based on automated estimating and scheduling.
5.  However, the system should consider the trade-off between automation and flexibility – the efficient use of un-detailed project information supported by the automation, as well as the flexibility, i.e., allowing manual adjustments by users.

  

2) CONSTRUCTION COST ESTIMATING. 

1. Estimating in the Conceptual Phase In the conceptual phase, cost estimate with a reasonable accuracy is required within a limited time period while information is limited .
2. Various estimating methods for the conceptual phase have been proposed: simple square foot method, regression analysis, probabilistic estimating, neural network, case-based reasoning, fuzzy models, etc.
3. Meanwhile there are criticisms on some empirical estimating models, e.g., black box with no explanation of output .
4.  In the conceptual phase, cost estimators commonly use analogy-based estimating methods, i.e., an estimator selects a similar one from past projects and adjusts it based on similarities and differences perceived by the estimator, which depends on his individual experience or perception. 
5. Also, simple square foot or assembly costs methods are preferred by many cost estimators in the conceptual phase.
6.  However, under limited project information in the conceptual phase, lack of historical data frequently could lead to the estimator’s bias, which could result in under budget or over budget.
7.  Combined Cost Estimating Estimators usually desire to have their estimates compared with the actual costs of past similar projects, which makes them feel comfortable. 
8. Also, many professionals in construction desire to have a list of quantities and costs in a form of cost breakdown structure (CBS), in which the real values are present for different work packages even though the CBS has a low level of detail in an early phase. 
9. For instance, a building is decomposed into work elements whereas unit cost of each element can be assessed and the total cost is the sum of the products of the quantities multiplied by their corresponding unit costs. 
10. Considering the points addressed above, the current study proposes a combined estimating method using historical data and assembly costs for the conceptual phase. There are advantages by using both methods simultaneously to determine an estimate in such an early phase. 
11. A historical data-based estimate can be made using similar projects data selected based on their similarity to the current project while the similarity is determined by major project information (design parameters). 
12. At the same time, an assembly cost-based estimate can be prepared by calculating the required quantity and cost of an assembly (a set of material/labor/equipment) for major construction methods selected by estimators for different work packages. 
13. Even if using such un-detailed information, the comparison S13-5 468 of the two estimates can reduce the chances of possible under or over estimate and improve estimators’ confidence.
14.  Data for the Combined Cost Estimating The data for the estimating method described above include historical data for past projects and different types of assembly costs. 
15. The historical data, in which the projects (all single-use buildings) are classified by the type of building, provide unit cost as well as duration information. Different types of building should be considered in cost estimating since the type of building has an important effect on the project cost.
16.  Each project needs to be indexed by major parameters, i.e., site, size of building (square foot and story), building-to-land ratio, floor space index, etc. 
17. These building characteristics are used as the multiple search conditions to find similar projects to estimate the current project.
18.  When a building includes multiple uses, the system calculates a weighted average unit cost per area (M2 ) to estimate the total cost whereas weights are determined based on the areas of different uses. 
19. An assembly represents a specific construction method, which involves a set of materials, labors, and equipments.
20.  Each assembly has its own pre-determined equations (developed by experienced estimators) to estimate the required quantity for a set of materials, labors, and equipments and its composite unit cost. 
21. For instance, if a user selects concrete for the superstructure of a building, the program estimates the quantities of materials (concrete, form, steel, etc.), labors (formwork, reinforcing, and concrete placement, finishing), and equipments (concrete pumps) based on the design parameters, i.e., the perimeter of the building, stories, floor area, height, etc. 

3). DEVELOPMENT OF THE SYSTEM.

1.  Framework of the System The system consists of four analytical steps (project planning, construction costs estimation, projection of incomes and expenditures, and economic evaluation) and database. 
2. The database in the current system includes historical data (cost and duration) for 301 past projects and 131 different types of assembly (equations and composite unit costs).
3. the overall framework of the system, in which project information flows from Project Planning to Economic Evaluation.
4. The system is dynamic in terms of that changes in a previous step are automatically reflected in the next steps.
5. Commonly, project planning and cost estimating are performed using estimating software programs while the others separately using economic evaluation software programs. A detailed description of each analytical step and linkage between the steps is provided below. 
6. Project Planning In the system, users develop a project plan for one or multiple buildings by specifying major project information, which include project name, location, site area, building area, floor area, gross floor area, building-to-land ratio, floor space index, number of stories, average height, areas of different uses, perimeter of building, area of exterior finish, parking area, etc. 

 4) CONCLUSIONS 

1. The current study developed a comprehensive but practical economic evaluation system for capital building construction projects, which can be used in the conceptual phase. 
2. This system has unique aspects: the efficient management of information flow based on the integration of analytical steps; the combined cost estimating method, which enhances the confidence in the final estimate; the automated tabulation and scheduling of cash flow; 4) tradeoff between automation and flexibility; and  the revision features. 
3. Regarding the estimating method, the comparison of the two types of estimates was so favored by practitioners during the case study. 
4. There are improvements to make for future study: the generic Scurve needs to be developed for different types of building and more historical data and assemblies need to be accumulated, which improve the accuracy of the estimates.