PRESENTATION

3. CONTENTS OF THE PRESENTETION

4. 1. Introduction
Background of the study
The construction industry is one of the major
development contributor’s in developing countries.
Now days, Ethiopian construction industry is
growing with unexpected rate. As it is the most
important means for the development of the country,
it takes large amount of government’s annual budget.
Construction projects are planned to be completed
within the predetermined time, budget, and resource
at the planning stage unfortunately many projects
end with extended time and cost overruns.

5. Problem of statement
 The economy in the country has undergone rapid growth and
construction industry constitutes an important element of our
country economy.
 Even though, building construction getting more difficult to complete
within estimated cost (budget ).
 Recent experience has shown that greater number of construction
projects are being under estimated, the construction price exceeds
the estimated cost,
 Therefore, this study is conducted to identifying Factors affecting
accuracy cost Estimation in Building Construction projects in Nekemte
town
Objective
General Objective: is determining Factors affecting the accuracy cost
Estimation in Building Construction projects in Nekemte Town.
The specific objectives of the study are:
• To identify Factors affecting cost estimation in building construction
projects;
• Ranking factors affecting accuracy of cost estimation and identifying
top factors.

6. Significance of the Study
Some of the benefits that this research offers include:
 Provide possible improvement of construction cost
estimation system and its benefits to Clients, consulting
firms and constructor to show them factors to be
considered in cost estimation.
 Clients will benefited tremendously from unnecessary
risk; by avoiding or reducing the risk.
 Contractors can use these knowledge to forecast
and control project cost ,
study enables the researchers(us) to have B.Sc degree
and to have knowledge on Cost Estimation.
The study may also initiate other researchers to
conduct further study in this area.

7. Scope and limitation of the Study
• This thesis mainly focused on building construction
project in Nekemte Town, and aimed to identify the
factors affecting accuracy of cost estimation.
Organization of the Study
• The study is divided into five chapters.
• Chapter one is the introduction of the study and it
comprised the background of cost estimation.
• Chapter two presents related literature, The research
methodology is presented in chapter three while
discussion and analysis was organized in chapter four.
• Chapter five, covers all about conclusion and
recommendation based on findings of the study.

8. 2. literature review
• The success of every research work depends greatly on the
already existing data or information about the research topic.
• Based on that fact, this research work depend on the number
of literatures/studies that is related to this topics.
• As a generally this chapter covers some topics including some
definition, purpose of cost estimation, types of cost
estimation, components of construction cost , some factors
affecting cost estimation and etc.
Cost and price;
Cost as defined by (Dysert L.R, 2003) as the total amount of all
the resources required performing the activity. However the
price is the total amount paid for that activity. (Price = Cost +
Profit).
Cost estimation: is the basis for project management,
business planning, budget preparation and schedule control
(Marjuki, 2006).

9. Purpose of Cost Estimate
As (Marjuki, 2006) outlined the purpose of cost
estimate include the following points:
– Used as basis for planning and controlling the project
cost by defining the scope of work .
– Provides the financial input required to prepare a cash
flow.
– Can be used to assess the impact of changes and
support re-planning.
– Provides an assessment of capital cost for a specified
piece of project.
– Projects can be easier to manage and control when
resources are better matched to real needs.

10. Cont…
Accuracy of Cost Estimate
‘Accuracy’ is the condition or quality of being true, correct, or exactness.
As Liu and Zhu (2007), the estimate accuracy depends on the following:
 Quality and amount of information available for preparing the
estimate;
 Time allocated to prepare the estimate;
 Proficiency of the estimator and the estimating team
 Types of Construction Cost Estimates
 Project management for Construction (2013) categorized construction
estimates into three types according to their functions.
 Design estimate
 Bid estimate
 Control estimate
 Otherwise, some researcher’s such as (Abdal-Hadi, 2010) categories
building construction cost estimate into two main types,
o Conceptual estimates
o Detailed estimates

11. Components of Construction costs
According to (Tadesse
yemane, 2006), total
construction cost has
the following
components.
Direct construction
cost
– Direct material cost
– Direct labor cost
– Direct equipment cost and
– Subcontractors costs
Indirect construction
cost
– Overhead cost
• Head office over head cost
• Site over head cost
– Markup
• Risk allowance
• Profit and income tax

12. Factors Affecting Accuracy of cost Estimate
As generally there are different factors which is
compiled from different literatures. Were totally
around 40 factors are collected.
 these factors can be categorize into 6 groups were
the similar factors are grouped under one main
group:
Client related factors,
Consultants and design related factors,
Contract and tendering related factors,
Project characteristics related factors,
Cost estimating related factors, and
External factors and market condition.

13. Cont……
1. Client related factors
– Client requirements and
expectations on quality
– Experience of procuring
construction
– Financial conditions of the
client
– Communication and
coordination with consultants
– Client experience in
construction projects
– Clear scope definition for the
client
2. Consultants and design related
factors
– Communications with suppliers
– Communications with client
– Designer's experience level
– The experience and skill level of
the consultant
– Clear and detail drawings and
specifications
– Communications and
coordination between designers
– Volume of consultant's
workload during estimation
3. Contract and tendering related
factors,
– Tender selection method
– Method of procurement
– Type of contract
– Level of competitors in the
tendering
– Number of competitors in the
market

14. Cont…..
4.Project characteristics related
factors,
– Project size
– Site conditions
– Type of project
– Type of structure
– Project complexity
– Location of project
– Construction techniques
requirements
5. Cost estimating related factors,
– Estimator's experience
– Estimating method used
– Time allowed for preparing the
cost estimate
– Procedure for updating cost
information
– Completeness of cost information
– Availability of data base on similar
project(Historical cost data)
– Accuracy and reliability of cost
information
6. External factors and market
condition
– Material price changes
– Material shortage
– Labor costs, availability and
productivity
– Equipment costs, availability and
productivity
– Inflation
– Currency exchange fluctuation
– Weather conditions
– Impact of government regulation
requirements (policy)

15. 3. RESEARCH METHODOLOGY
Introduction
Research is a process for collecting, analyzing and interpreting
information to provide solutions to problem. So this chapter
gives overview of the procedures or process used for carrying
out the research.
• Study area: this study is conducted on Nekemte town. Where
located in Oromia region, found at distance 331km from
Finfine(A.A) to the west direction.
• Research types: survey research was Used. survey research
enables to describe the nature of existing conditions.
• Population and participant :population of our research is
building construction project in Nekemte town and selected
participant are those professionals in building construction
project such as, client, consultant, contractors, project
managers, site engineers.

16. Cont…..
• Source of data: secondary and primary data is used in this
research.
• Data collection method: questionnaire survey is used for data
collection. The questionnaire is printed and distributed to the
respondents as required forms. The questionnaire contains two
parts, were section one covers about personal information of the
respondents and section two covers all about factors affecting
accuracy of cost estimation.
• Data analysis method: mean score method(MS) of data analysis is
used. Mean score for each factors can be calculated through the
following equation
Where:
MS – Mean Score
F – Frequency of responses for each score
S – Scores given to each variable (from 1 to 5).
N – Total number of responses concerning each variable.

17. 4. DATA ANALYSIS AND DISCUSSIONS
• This chapter covers all about data analysis and discussion, based on
questionnaire response returned from respondents,
• The purpose of data analysis is to obtain usable and useful information.
Questionnaires distribution and collection Analysis
The questionnaires were designed to know the factors affecting
accuracy of cost estimation in building construction project.
Respondents Distributed
in No
Invalid in
No
Returned in No Returned in %
Contractor 8 2 5 70%
Consultant 1 - 1 100%
Client 1 - 1 100%
Project manager 4 - 3 75%
Site engineer 4 - 4 100%
Total 18 2 14 77.78%

18. General Information of Respondents
Category of respondents
from analysis made 35.71% of
respondents are contractors,
7.14% of them are consultant,
7.14% are client,
21.42% are project managers and 28.57%
of respondents are site engineers. Also its
indicated in pie chart blow
35.71%
7.14%
7.14%
21.42%
28.57%
contrctors
consultants
client
project
managers
site engineers
Experience of respondents
42% of the respondents have experience
between 6-10years,
30% of the respondents have experience
for less than six years (0-5years) and
28% have worked in the construction
industry for more than 10years. Also its
shown in pi chart below.
42%
30%
28%
0-5 years
6-10 years
More than 10
years

19. Cont…....
Number of projects performed in last
five years
32% of the respondents have worked
on between 6 -10 construction
projects,
24% have worked > ten construction
projects and
44% have worked on between 1-5
construction projects.
44%
32%
24%
1-5 project
6-10 project
Morethan 10
project
Average Duration of Projects
12% of projects dur. are 1 year.
34% of projects dur. 12-18
months,
32% of project dur. b/n 18-
24months and 24% of projects
completed b/n 24-36 months
0%
5%
10%
15%
20%
25%
30%
35%
less
than 12
months
12-18
months
18- 24
months
24-36
months
12%
34%
32%
24%

20. Ranking of factors under their groups
1.Factors related to clients
A factor related to client contains six factors
• Financial conditions of the client was 1st ranked factor with 4.43 and also its ranked
to 4th position which indicates as its more important factors
• Client experience in construction projects” gets the 2nd rank with MS value of 4.14
and 8th ranked factors. Clear scope definition for the client” is the 3rd ranked factors
with MS value of 4.07 and 9th ranked factors . For all is indicated in the following
table.
Factors MS RANK
Financial conditions of the client 4.43 1st
Client experience in construction projects 4.14 2nd
Clear scope definition for the client 4.07 3rd
Client requirements and expectations on quality 4.00 4th

21. Cont…...
2.Factors related to consultants and design
• Seven factors are identified under the group. Were experience and
skill level of the consultant, and Designer's experience level are the 1st
& 2nd ranked factors with their MS value 4.57 and 4.50 respectively,
and also 2nd &3rd ranked from overall ranking, which indicates that as
it is very important factor that must be considered in cost estimation.
Factors MS RANK
The experience and skill level of the consultant 4.57 1
Designer's experience level 4.50 2
Communications with suppliers 4.36 3
Communications with client 3.93 4

22. Cont…..
3. Contract and tendering related factors
• Under this group five factors are identified. Where
those factors are listed and ranked in the table
below.
Factors MS RANK
Number of competitors in the market 3.79 1st
Tender selection method (open, selected, negotiation, etc.) 3.64 2nd
Method of procurement (design bid build, design and build, etc) 3.64 2nd
Level of competitors in the tendering 3.43 3rd
Type of contract 2.86 4th

23. Cont…
4.Project characteristics related factors,
• Seven factors in this group is identified. Those factors are
analyzed in the table below base on their mean score value.
From this groups location of the project is the 1st ranked
factors with 4.07 mean score value and it is ninth ranked to
ninth position which it indicates as very important factors in
cost estimation.
Factors MS RANK
Location of project 4.07 1ST
Type of project (residential, commercial, industrial,….etc) 3.86 2ND
Construction techniques requirements 3.79 3rd
Project complexity 3.71 4th
Site conditions (topography, access, etc) 3.57 5th

24. Cont….
5.Cost estimating related factors
• The below show that seven factors affecting accuracy of cost
estimation related with cost estimating . From this group
experience of estimators and availability of data base on similar
project are the 1st and 2nd ranked factors. were Accuracy and
reliability of cost information, Time allowed for preparing the cost
estimate, and Estimating method used are 3rd , 4th and 5th ranked
respectively.
Factors MS RANK
Estimator's experience 4.71 1st
Availability of data base on similar project (Historical cost data) 4.50 2nd
Accuracy and reliability of cost information 4.29 3rd

25. Cont…
6. External factors and market condition
• Under this group eight factor affecting cost estimation are
indicated. From this ‘weather condition’ is the first ranked
factor with 5.57 mean score value and 2nd ranked from over
all ranking that means it is very important factors that
needs to be considered while cost estimation.
Factors MS RANK
Weather conditions 4.57 1
Equipment availability, productivity and cost 4.43 2
Labor availability, productivity and cost 4.43 2

26. Overall ranking of factors affecting accuracy of cost estimation
 Estimator's experience,
 experience and skill level of the
consultant,
 Weather conditions,
 Designer's experience level,
 Availability of data base of bids on
similar project (Historical cost
data),
 Equipment (availability,
productivity and cost),
 Financial conditions of the client,
 Labor (availability, productivity and
cost),
 Communications with suppliers,
 Accuracy and reliability of cost
information,
 Time allowed for preparing the
cost estimate,
 Material price changes,
 Client experience in construction
projects,
 Clear scope definition for the
client,
 Location of project,
 Estimating method used, and
 Client requirements and
expectations on quality,
Their mean score and rank are
list in the tables below.
We generalize that from over all ranking those top ten factor are very
important factors were their mean score value is > 4.00. These are:

27. Factors MS RANK
Estimator's experience 4.71 1st
The experience and skill level of the consultant 4.57 2nd
Weather conditions 4.57 2nd
Designer's experience level 4.50 3rd
Availability of data base on similar project (Historical cost data) 4.50 3rd
Equipment availability, productivity and cost 4.43 4th
Financial conditions of the client 4.43 4th
Equipment availability, productivity and cost 4.43 4th
Communications with suppliers 4.36 5th
Accuracy and reliability of cost information 4.29 6th
th

28. Cont….
• Generally some of very important factors are discussed bellow;
 Estimators experience level(1st): it the most important factors which
directly affect the accuracy of cost estimation. To do cost estimation
estimators must have the following knowledge:
– Reading the drawing clearly without any miss understanding
– Have sufficient knowledge of labor operations and productivity
– Have the patience and ability to do careful
– Have enough previous similar work experience
 The experience and skill level of the consultant(2nd):As it is indicated in the
analysis it the most important factors by getting 1st rank in consultant and
design related factors with mean score value 4.57. Also it is ranked to 2nd
position, were this indicates as it is very important factors. So the
consultant must be experienced to increase accuracy of estimation.
 Weather conditions; since building process is highly Weather dependent,
extreme condition can greatly affect building costs. So it must be
considered in detail while predicting project cost.
 Availability of data base on similar project (Historical cost data)
Its ranked to 3rd position in overall ranking with its mean score 4.50, this
indicates as it is very important factors in cost estimating work. So historical
data used must be selected based on its reality.

29. Cont….
Labor and equipment availability, productivity and
cost: availability of skilled and unskilled labor and
machineries is vary from place to place depending on
the condition of the local economy, which can affect
cost accuracy and it needs detail consideration during
estimation.
Location of the project: Environmental factors like
topography and geology of the site will also affect the
estimate.
Accuracy and reliability of cost information:
Information used while cost estimating is must be really
info.
Time allowed for preparing the cost estimate: time for
estimation is very important factor which it can
influence cost estimation

30. 5. CONCLUSION AND RECCOMENDATION
CONCLUSION
This study aimed at identifying factors affecting accuracy of cost
estimate for building construction projects in Nekemte town. This
objective is achieved by identifying 40 possible factors through
different literature.
From this based on our respondents opinion we have identify very
important factors which their mean score value is greater than 4.00
and ranked top ten from over all ranking.
These very important factors are: Estimator's experience, experience
and skill level of the consultant, Weather conditions, Designer's
experience level, Availability of data base on similar project
(Historical cost data), Equipment (availability, productivity and cost),
Financial conditions of the client, Labor (availability, productivity and
cost), Communications with suppliers, Accuracy and reliability of cost
information, Time allowed for preparing the cost estimate, Material
price changes, Client experience in construction projects, Clear scope
definition for the client, Location of project, Estimating method used,
and Client requirements and expectations on quality.

31. RECOMMENDATION
• we recommend that during estimation give more
attention to the most important factors that can affect
the accuracy of cost estimates in order to achieve more
reliable and realistic estimates.
• Estimator must have sufficient skill and past cost
estimating experience in order to do with accurate.
• We recommend that training courses on factors
affecting the accuracy of cost estimates is the best way
to increase the estimators skill.
• More communication among project participants
should be done during the early stages of the project
• Cost estimator must be have enough information about
project characteristics
• Market condition (such as resource availability,
productivity and cost)must be considered in estimation