Developing and Validating a Highway Construction Project Cost Estimation Tool by Cheryl Kyte, Michael Perfater, Stephen Haynes and Harry Lee, Virginia Transportation Research Council, 530 Edgemont Road, Charlottesville, VA 22903; (434) 293-1900 (Virginia Department of Transportation, 1401 E. Broad Street, Richmond, VA 23219; ) (December 2004)
This study produced a robust scoping process and an inclusive, consistent, documented, and tested cost estimation system.
Support from upper management is critical.
Inaccurate estimation of the costs of construction projects has obvious and serious budgetary implications for transportation agencies. When project costs are underestimated, insufficient funds are budgeted for the actual cost of the project. When bills come due, agencies scramble to cover them and often have to delay or cancel other road projects. Conversely, substantial overestimation can lead to missed opportunities to fund needed projects. Over the past several years, this problem of keeping transportation programs in line with available funding grew in scale in the case of the Virginia Department of Transportation (VDOT)
The problems associated with underestimating transportation project costs are not unique to VDOT. Many other state departments of transportation (DOTs) face similar problems. The issue has far-ranging implications. In fact, the National Cooperative Highway Research Program has begun a study to review the methods employed by various transportation agencies with the ultimate objective of developing a best practices guidebook.3 An American Association of State Highway and Transportation Officials (AASHTO) Task Force on Project Oversight found that other state DOTs were struggling with the same issues. Estimating the cost of highway projects accurately and consistently early in their development has become such
a nationwide challenge less of an impact on VDOT's overall construction expenditures. The researchers speculated that the estimates were skewed upward by a particular option in the worksheet for smaller projects.
A cost estimation tool can be created using the talents of the agency and off-the-shelf software. Under the guidance of a diverse task group, and the assignment of a small study team to develop a way for VDOT to estimate project costs, this study showed that such a product could be delivered using the talents of those in the agency. The work was also based on off-the-shelf software that was familiar to staff: VDOT did not have to buy anything new.
A detailed project scoping process must be in place before a reliable cost estimate can be developed for each construction project. Only the combination of a robust scooping process and a reliable estimation tool will lead to accurate project cost estimates. These two elements are mutually dependent.
The performance of any cost estimation tool must be monitored and evaluated over time. Adjustments must be made when testing shows they are warranted. VDOT's tool remains a work in progress that will undergo continuous scrutiny and needed adjusting over time. Relationships and factors such as inflation must be scrutinized as times change. Formulae may need to be adjusted as policies or programs change or as more data become available.
The responsibility for maintaining and adjusting a cost estimation tool needs to rest with one particular unit or section in the agency. In VDOT's case, that responsibility