Outturn Costs in Civil Engineering: Not ideal for early design scheme evaluation - Civil Bites

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Outturn Cost, Cost Management

Outturn Costs in Civil Engineering: Not ideal for early design scheme evaluation

January 26, 2024 Civil Bites 1 Comment

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.
Cost Planning; Three-Point Estimation
Cost Planning

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.

Conclusion:

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.

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