Cost modeling for capital construction projects is a critical aspect of the funding approval process. Traditional conceptual cost-modeling efforts have been undependable because they lack connection to the specific program, quality, site and locality characteristics of the project owner’s expectations. Underestimating construction costs will jeopardize project success; overestimating costs will put project approval at risk. Either diminishes the effectiveness of the project owner’s business planning. This paper describes a process for evaluating the completed financial performance of multiple projects on the basis of a building’s program, quality factors, and site and locality characteristics. These same factors can be used as a cost-modeling tool that dramatically increases the dependability of the outcome. The tool allows for real-time cost modeling and evaluation of multiple project considerations or solutions. The output of the cost model provides an achievable yet challenging starting point for an effective integrated target value design effort, with individual component target costs defined in addition to overall project target cost. The process is illustrated with a case study and compared to other approaches to conceptual estimating. The paper concludes with suggestions for future research.
Capital planning, conceptual estimating, cost modeling, target costing, target value design