Improving cost estimation of construction projects

Construction companies are under increasing cost pressures in delivering construction projects. In 2022, a higher-than-average number became insolvent. While supply issues, labour shortages and increased costs are all factors, licensed insolvency practitioners suggest that sub- optimal cost-estimation and cost-management practices are among the main causes of insolvency. Internationally, defective cost-estimation practices have been ranked as one of the top factors affecting company failures. <br><br>Developing more robust cost-estimation processes across the system could reduce cost blowouts and potentially decrease insolvency risk. <br><br>This project will determine the role that variability in cost estimation plays in building company insolvency. It will identify different cost-estimation processes used at the tender stage and reasons for cost variations and seeks to establish the link between cost estimations leading to cost blowouts and insolvencies. <br><br>Through interviews with professional cost estimators in Aotearoa New Zealand’s three largest cities, the researchers will develop good-practice guidelines to demonstrate accurate cost- estimation processes and potential improvements. <br><br>These guidelines are intended to support practitioners to change their practices to create better cost estimations. They will also assist cost estimators in construction companies to create standardised processes. By taking the guesswork out of cost estimation, this project aims to improve the sustainability of construction companies and create a more resilient system.