While outturn costs seem like a straightforward indicator, they suffer from several limitations when used for benchmarking early-stage designs:
1. Outturn Costs = Incompleteness of Information:
- Limited Design Development: Early design schemes lack detailed specifications and quantities for accurate cost estimation. Outturn costs from completed projects, with their finalised designs and known quantities, are not directly comparable.
- Incomplete Risk Register: Materialized risks during construction may not be reflected in the initial design stage, making it difficult to account for their impact on outturn costs.
2. Outturn Costs Project-Specific Context:
- Unique Project Characteristics: Every project has its own unique site conditions, material availability, procurement strategies, and contractual arrangements. These cannot be easily standardised for a fair comparison with another project’s outturn cost.
- Materialized Risks: Unexpected events (ground conditions, weather, material price fluctuations) during construction can significantly impact costs but can’t be attributed to the initial design scheme.
3. Contractual Considerations:
- Contractual and Dispute Agreements: Disputes or contractual changes during construction can affect the final cost, but these are not inherent to the initial design and can skew the comparison.
- Accounting Differences: Different contract types and accounting practices can lead to inconsistencies in how costs are recorded and categorised, making direct comparisons unreliable.
4. Optimism Bias:
- Early Stage Estimates: Cost estimates at the early design stage are often prone to optimism bias, underestimating potential risks and challenges. Outturn costs make them poor benchmarks for comparing a completed project’s final cost.
Alternative Benchmarking Practices for Early Design Schemes:
- Parametric Estimates: Utilise historical data from similar projects with adjustments for relevant variables like size, complexity, and location.
- Unit Cost Estimating: Apply unit costs of individual elements (e.g., concrete per cubic meter) based on experience and market data.
- Top-Down Estimating: Consider overall project budget constraints and allocate costs to different components based on experience and industry standards.
While outturn costs provide valuable insights, they are not suitable for directly benchmarking early design schemes. Utilising a combination of approaches, including parametric estimates, unit costs, top-down estimating, and adjustments for project-specific context and potential risks, provides a more reliable and informative basis for early-stage appraisal of civil engineering projects.