Construction Cost Forecasting

Construction Cost Forecasting

If it is assumed that the future changes in cost will be similar to the past changes, the indices can be used
to predict future construction costs. By using these past indices, future indices can be forecast and, in
turn, used to predict future costs. Several approaches are available for developing the future index. Only
one will be presented here.
The simplest method is to examine the change in the last several historical cost indices and use an
average value for the annual change in the future. This averaging process can be accomplished by
determining the difference between historical indices each year and finding the average change by dividing
by the number of years.

Detailed Estimates

Estimates classified as detailed estimates are prepared after the scope and definition of a project are
essentially complete. To prepare a detailed estimate requires considerable effort in gathering information
and systematically forecasting costs. These estimates are usually prepared for bid purposes or definitive
budgeting. Because of the information available and the effort expended, detailed estimates are usually
fairly accurate projections of the costs of construction. A much higher level of confidence in the accuracy
of the estimate is gained through this increased effort and knowledge. These types of estimates are used
for decision making and commitment.