| Abstract |
Volatility in material prices, due in part to strong demand, supply chain disruptions, and trade policy shifts, has caused significant increases in construction costs for the past few years. Material price volatility previously seen in asphalt and other petroleum products has now expanded to other materials such as steel, Portland cement, and pozzolans. As a result, provincial/territorial and municipal governments have been struggling to forecast project costs accurately, fund all the infrastructure work, and balance the budget.
The presentation will cover various proven methods and techniques to better manage and forecast construction costs. At the project level, cost and schedule risk analysis (CSRA) helps assess uncertainties in quantities and unit prices, as well as identify and quantify risks with respect to schedule and cost. CSRA has been applied to hundreds of transportation projects in North America in the last two decades. Waterfront Toronto has successfully used it to manage risks on the Port Lands Flood Protection and Enabling Infrastructure Project since 2018.
At the program level, historical bid data are often utilized to build indices that track price fluctuations in asphalt, aggregate, concrete, and other major cost categories over time. In the U.S., the Federal Highway Administration and several state departments of transportation (in Utah, for instance) have developed construction cost indices (CCI). The factors affecting the CCI can be identified and estimated by means of econometric modelling techniques. Sometimes, the analysis is complemented with a survey of construction contractors and materials suppliers to obtain real-time information on contractor capacity, material availability, and skilled workforce wages. In Ontario, cost benchmark processes that consider engineering and design standards have also been developed to inform several municipal infrastructure programs.
Together, these cost management and forecasting solutions have helped infrastructure owners to make budgeting decisions with more confidence and accuracy.
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