ISSUE-The required standards for the currency and accuracy of construction cost data used for IGEs have not been met for years, and there is appears to be no plan to address this major failing.
An independent Government estimate of construction costs shall be prepared and furnished to the contracting officer at the earliest practicable time for each proposed contract and for each contract modification anticipated to exceed the simplified acquisition threshold. The contracting officer may require an estimate when the cost of required work is not anticipated to exceed the simplified acquisition threshold. The estimate shall be prepared in as much detail as though the Government were competing for award.
FAR 36.203 Government estimate of construction costs.
Construction cost-estimating processes should establish verifiable, current, and actionable detailed project costs. This is a fundamental requirement to providing cost visibility and transparency and associated efficient use of financial resources.
Currently, many organizations use a one or more of the following, all of which are generally incapable of meeting current regulatory requirements;
- Historical construction costs
- Third-party cost databases based upon “national averages”
- Area cost factors or location factors or economic indices
- Parametric cost modeling
Historical construction costs simply reflect the results of past practices, good or bad. As the AECOO sector has well documented history of rampant economic and environment waste due, further dependencies upon past outcomes clearly represents a problematic practice at best (AECOO – architecture, engineering, construction, owner, operator)
“National average” cost databases, many of which provide granular detail with respect to labor, material, and equipment costs, by there very design do not adequately consider local market variances. The later are significant due to multiple issues, including but not limited to… highly variable workers compensations rates at the trades level, site access, material availability, etc.
Areas cost factors of various types and/or economic indices represent an attempt to localize cost data at a granular or higher level (i.e. building type), and/or temporize cost data. The fundamental math issues of attempting to adjust the numerous tasks, labor needs, equipment and material requirements, etc., to derive an verifiable and representative cost for a repair, renovation, or new build projects at a particular location and current time period are readily apparent. The proof lies in the fact that actually construction costs rarely meeting budgeted costs for ANY government construction project.
Parametric cost modeling, the process of estimating construction costs via mathematical applications to building systems or structures, provide little in the way of verifiable or actionable information.
FUTURE-Processes, information sources, support services, and tools are readily available to provide government department and agencies with current, verifiable, and actionable cost data. Locally researched detailed unit price cost data provides the granularity to drive defensible and transparent cost estimates at any level. Furthermore these tools and processes significantly improve the detail and accuracy of the initial project scope scope of work… a primary cause of failed repair, renovation, and new construction projects.
The barrier to measurable improvement is not the availability of solutions, but the lack of continuity of competent leadership with respect to facilities capital planning and management, and the component of cost construction cost estimating. This problem was recognized decades ago, and is document in books, research studies, and GAO reports, yet there is no current corrective plan.
Additional Reading/Reference Information –
2019, Substantial Efforts Needed to Achieve Greater Progress on High-Risk Areas, GAO-19-157SP
2016, Indefinite Delivery/Indefinite Quantity project selection framework using stochastic techniques, Jorge Andres Rueda Benavides
2008, Military Construction Pricing Inequities
2000, Letter, Federal Facilities Council’s Report on the Role of Facility Design Reviews in Facilities Construction
“After GSA rebaselines a project, costs may differ from the project estimates approved by Congress…. Congress lacks information about GSA’s performance: such as whether final costs are consistently above, below or meeting estimated costs. Reporting such information could benefit Congress’ ability to carry out its oversight role and improve transparency about the full costs of major federal construction projects.” – According to the report, GSA rebaselined 25 of the 36 projects GAO reviewed from fiscal years 2014 to 2018, to account for things like safety concerns or new tenant needs.