Construction Cost Data

1. www.4BT.US
2017 Copyright Four BT, LLC
CONSTRUCTION COST DATA
2017 & Beyond
OpenCOSTTM
Construction Cost Methodology
THE OPENCOSTTM
APPROACH INCORPORATES
SIGNIFICANT IMPROVEMENTS INTO THE
COLLECTION, VALIDATION, USE, & MAINTENANCE
OF DETAILED LINE ITEM UNIT PRICE
CONSTRUCTION COST DATA.

2. 1
Table of Contents
Introduction ....................................................................................................................................2
Detailed Construction Cost Data..................................................................................................3
Traditional Construction Cost Methods ......................................................................................4
Size of Typical Construction Cost Estimates & Unit Price Cost Books...................................5
The OpenCostTM
Approach ...........................................................................................................6
Summary.........................................................................................................................................8
Appendix.......................................................................................................................................11
The Construction Cost Estimating Problem ...............................................................................11
Line Item Estimating Details.......................................................................................................11
Choice of work Method ...........................................................................................................12
Output of crew.........................................................................................................................12
Cost of labor............................................................................................................................13
Cost of Material.......................................................................................................................13
Addition for overheads and profit............................................................................................13
Cost Estimator Skill Requirements for Detailed Unit Price Line Item Estimating.......................14
Location ......................................................................................................................................15
Variability of Estimates ...............................................................................................................16
Accurate Estimate – An Oxymoron ............................................................................................17
Historical Data.............................................................................................................................20

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Objective, Defensible, Locally Researched
Construction Cost Data
2017 & BEYOND
Introduction
Defensible and standardized detailed renovation, repair, and construction data is a
fundamental component of any successful project and key to efficient life-cycle
management of the built environment.
That said locally researched current and actionable detailed line item construction
cost information, using common terms and definitions, standard data architectures, all of
which are arguably necessities, is very difficult, if not nearly impossible to source.
Traditionally AECOO1 practitioners have generally relied exclusively upon “national
average” commercial construction cost data, historical cost data, internally generated
cost data, and/or subcontractor quotes.
This paper discusses the advantages of using the OpenCost MethodTM of collecting,
using, sharing, and maintaining, detailed construction cost, as well as the
disadvantages of traditional methods.
OpenCost TM detailed line item construction costs are produced from a combination
of experience and recorded cost data of similar work previously performed in the local
1
AECOO- Architecture, Engineering, Construction, Operations/Operators Owner(s)A

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area. OpenCost leverages and requires that proper feedback procedures are adopted
by all construction project participates and stakeholders. Information is continuously
improved/refined over time to reflect accurate costs for performing commercial
renovation, repair, maintenance, sustainability, and new construction activities.
It is the lack of adoption of consistent processes, data architecture, and collaboration
that are ultimately responsible for mistakes, confusion, change orders, and low
productivity common to the AECOO sector.
Detailed Construction Cost Data
The tasks of reviewing, collecting, publishing, using, and maintaining detailed line
item construction cost information require decades of experience, significant
investment, and is are ongoing. It is especially important to recognized and about for
the significant variations in construction cost data due to location, specification, labor
pools, and other factors.
Decades of experience as construction cost consultants, detailed line item
estimators, project managers, and/or construction cost researchers have enabled the
development of the OpenCost Methodology and a unique perspective for meeting the
varied cost data requirements of real property owners, A&Es, construction contractors,
cooperatives, and oversight groups.2
2
Our team has worked with and/or for organizations including The R.S. Means
Company, LLC, U.S. Cost, LLC, 4Clicks Solutions, LLC, The JOC Group, Center for Job
Order Contracting Excellence, ASU ACE, ASU PBRSG, VFA, Inc., as well as hundreds
of major real property owners and thousands of construction contractors.

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Traditional Construction Cost Methods
The Bills of Quantity (BOQ) or Bill of Materials (BOM), and/or detailed line item
methods provide the lowest level, and/or most granular construction costs. The
opposite end of the spectrum would be Order of Magnitude and Square Foot Costs.
Construction components, tasks, quantities, and costs are fully considered and outlined
in terms of associated materials, equipment, and labor items. Tasks are generally
organized in a consistent manner by trade, associated with a construction3 project.
Quantities are express as “each”, “square feet”, “square yards”, “cubic yards”, “hours”,
and related local standards of measure. The sources of the information generally
include historical cost data, estimator experience, and independent third parties (cost
consultants, public “reference” information, and subcontractors).
A unit price includes material, labor and equipment for each component and/or
construction task/activity at a granular level. A total project is therefore represented by
multiple line items. Based upon the source and type of information, there significantly
differences in levels of sophistication, detail and quality occur.
It is generally recognized that detailed line item construction task definition and
associated costing methods provide the most beneficial and defensible form of
information. That said, there are multiple related issues/concerns that must be
3
The term “construction” is being used generically to describe any type of construction, including
renovation, repair, maintenance, sustainability, and/or new construction projects, unless specifically otherwise
stated.

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considered in order to properly leverage and benefit from this highly refined level of
construction costing. These include, but may not be limited to the following;
 Expertise in line item construction cost research
 Applicability of specifications to the local area
 Appropriate levels of granular and quantity of line items
 Cost to adequately research data
Unit price line item cost data collection is expensive in terms of resources required to
develop and maintain current and defensible information. It is generally cost prohibitive
for any single real property owner, AE firm, or construction contractor to maintain a cost
research staff capable of generating an actionable 30,000 to 60,000 commercial
construction line item database.
Size of Typical Construction Cost Estimates & Unit Price Cost Books
While the typical number of line items for a construction cost estimate can vary
from less than one hundred to tens of thousands, it’s not usual to generally see one
thousand (1000) line items for somewhat complex instances.
Commercial construction cost databases of 60,000 line items or less, however,
are generally more than adequate to cover 90% or more of commercial projects
normally encountered. While some vendors boast hundreds of thousands of line items,
databases of this size can actually be counterproductive. They can create confusion,
delay initial implementation, contribute to errors, and even lower productivity.

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The OpenCostTM Approach
The OpenCostTM Approach incorporates several critical improvements relative to
the collection, validation, use, and maintenance of detailed line item unit price cost data.
The OpenCost MethodologyTM involves, supports, and requires a collaborative
and ongoing cost estimation process. The estimator (owner/contractor/A&E, etc.)
leverages an OpenCost locally researched and fully detailed line item cost database.
Based upon their experience and a site visit with all other participants and stakeholders,
a construction cost estimate is prepared by appropriate parties. A collaborative and
potentially iterative process then occurs between the owner and contractor(s) at a
detailed line item basis. The standardized terms and data formats contribute to parties’
ability to generate final, mutually approved cost estimates.
Once the estimate is mutually approved, the construction team uses the estimate
for scheduling and monitoring/maintaining construction progress and costs within the
limits of the estimate, the associated construction delivery method, contract, and
detailed written operations or execution manual.
The OpenCost approach focuses upon locally researched labor, material, and
equipment costs, independent of
error prone locations factors and/or
indexes. The latter practice
introduces gross cost errors by not
recognizing significant local
variations. Additionally, the
OpenCost approach leverages
CONTINUOUS FEEDBACK AND IMPROVEMENT
REGARDING ACTUAL AND RESEARCHED COSTS
AMONG ALL PARTIES AND VIA COMMONLY
UNDERSTOOD TERMS AND DATA FORMATS IS A
FUNDAMENTAL CORNERSTONE OF CONSISTENTLY
BETTER CONSTRUCTION OUTCOMES.

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industry standard terms and definitions, expressed in plain English, with minimal use of
confusing acronyms or abbreviations. Lastly, all data is organized by the Construction
Specifications Institute MasterFormat.
The OpenCost Approach provides the following features, benefits, and core
defensible elements:
 Consistent and localized labor cost by trade
 Crews reviewed and updated
 Appropriate materials and line items
 Line items are reviewed for clarity and reasonableness to assure use basic
building materials common to area
 Quantities and line items reflect approximate quantities according to a trade
break down
 Use of licensed CSI MasterFormat
 Ability for to create customized line items via changes to material, labor, and
equipment, while maintaining core “parent line item”.
 Line item modifiers associated with parent line items to accommodate for
variations in quantities, locations, etc.
 Continuous updating process, with annual major updates.
 Addresses line items used in 90% or more of common renovation, repair, and
minor new construction projects.
 Independent, objective, transparent, and auditable cost research processes
 Costs reflect standard commercial construction specifications for the location

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 Develop for ease-of-use by any experienced line item estimator, not additional
training required
 Available via secure cloud access
 Developed by experienced line item cost engineers, project managers, and life-
cycle cost professionals
 Incorporates input from all users.
 Significantly greater financial transparency
 Subjective values associated with each estimator can be compared against
locally researched, verifiable information (not ballpark national averages, or
factored data)
 Major reductions in errors, omissions, change orders, and legal disputes.
Summary
With appropriate internal capability, support, and training, owners, contractors,
AE’s and oversight groups can successfully leverage objective, independent,
transparent, and actionable detailed line item construction cost data. All projects
should require this type of information to improve early and ongoing communications
and collaboration, productivity, quality, and overall construction outcomes.
When integrated with LEAN collaborative construction delivery methods such as
Integrated Project Delivery (IPD) and Job Order Contracting (JOC), the use of the
OpenCost Approach can consistently deliver over 90% renovation, repair, and
construction projects on-time, on-budget, and to the satisfaction of all participants and

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stakeholders. This level of performance is virtually unattainable using traditional
methods.
It’s long been accepted that Owners need to increase their levels of competency
and leadership. Efficient facilities management can only become a reality under the
direction of competent and experience teams of professionals and the associate use of
appropriate LEAN Construction Delivery Methodology, Life-cycle Asset Management
Strategies, appropriate supporting tools, technology, and information/data. Current,
locally researched, and detailed construction cost data is a requisite element in this
process.
The 4BT OpenCost Methodology specifically leverages the detailed knowledge
of decades of line item cost estimating experience to create actionable OpenCost
commercial construction cost databases support by an open collaborative cloud
platform, and then combines both with LEAN collaborative best management practices.
The result is high data quality and availability.
Traditional methods of seeking bids from construction contractors will generally
result in a variance of +/- 25%. That said, if one looks at individual trades and
associated labor costs, the variation can easily be +/- 50%. The OpenCost
Methodology significantly reduces this variation to +/- 5% through an integration of
locally researched labor, material, and equipment detailed line item costs and attention
to crew composition and productivity.
OpenCost Methodology drives collaboration, information sharing, transparency,
and continuous improvement to mitigate cost variation and enable information
validation.

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The continued use of inexperienced facilities management, project managers,
construction cost estimators, etc., will only add to the problems cause by the use of
erroneous data, and unproductive processes.
On the other hand, assuring the use of common, standardized terms, definitions,
construction task, and costs data measurable improves the chances of greater overall
success.

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Appendix
The Construction Cost Estimating Problem
The process of line item construction cost estimating is relatively complex and
requires decades of experience, including a detail knowledge of actual construction
work in the field. “book learning” in itself will not create a competent construction cost
estimator, nor will it necessarily help non-cost-estimators understand what is truly
involved and what limitations exist when reviewing cost data generated by cost
estimators. Quantitative and qualitative factors are involved in construction cost
estimating. Furthermore, a construction cost estimate is just that, an estimate. It is
virtually impossible to match the exact final as-built construction cost. The key,
however, is to consistent fall within a specific target range, for example +/- 5%. There
is also the element of time to be considered. In most cases, there are relatively fast
turnarounds required for construction cost estimates.
By the nature of the problem, the subjective, experienced based values applied
by experienced estimators vary. Therefore having LOCALLY RESEARCH cost data for
similar construction tasks is invaluable to reducing this inherent margin of error.
Estimates will always “scatter” around a target/actual cost, the key is to limit the
variation. Hitting the exact “as built cost” is, by nature, extremely rare, and largely just a
result of an exercise in statistics.
Line Item Estimating Details
Line item estimating involved the following issues/considerations:

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1. Choice of work method
2. Output of crew (dependent upon crew makeup, experience, productivity…)
3. Cost of labor (generally based upon prevailing wage rate/Davis-Bacon Wage
rates)
4. Cost of material and selection of an appropriate wastage allowance
5. Addition of construction contractor overhead and profit (in Job Order
Contracting, this is handled by the JOC coefficient)
Choice of work Method
There are decision to be made about the size of the crew, types of equipment,
location of equipment, installation method, type of scaffolding/lift, restrictions imposed
by other trades, etc. Restrictions will the other trades. All possibilities must be
considered and selections made.
Output of crew
Crew output is dependent upon past performance, with the assumption that
future performance will be consistent. It is critical that cost estimators, engineers, and
researchers document performance in detail using standard terms and standard data
architectures (i.e. CSI MasterFormat, Uniformat, Omniclass) in order to enable
collaboration/information sharing, and future information reuse. Savvy cost estimators
improve their productivity and consistency by reusing past estimates for common,
repetitive construction tasks. If estimates have been prepare properly, past/historical
estimates can be easily adjusted to meet current economic and site conditions, etc.

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Cost of labor
Labor, on average, account for 60% or more of any construction task. Labor cost
varies base upon project location, availability of skilled labor, trade, contract wage
regulations, union or open shop labor requirements, and general market conditions. It
is therefore CRITICAL that labor costs be researched on a local basis and regularly
updated (annually). The used of national average labor costs and/or the application of
location factor to national average labor costs introduced gross and unacceptable levels
of error. Using prevailing wage rages, not only for each trade, but for varying skill
levels, provides an excellent starting point.
Cost of Material
Like labor, costs, obtaining local material costs is extremely important and not a
simple task. Material costs vary upon location, supply, and other factors (quantity,
quality…). Having a locally research detailed unit price book provides an excellent
reference and validation with respect to material costs (as well as labor). Quantities and
quality of material required are measured from the drawings and specification
documentation. Considerations must be made for the finished as-built quantity as well
as waste.
Addition for overheads and profit
Overhead and profit (O&P) is depend on company policy, market condition, and
applicable federal/state/local laws/regulations. Based upon the program and/or project

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delivery method, O & P and how is it both calculated and represented can be defined in
significant detail.
Cost Estimator Skill Requirements for Detailed Unit Price Line Item Estimating
As noted previously a detailed line item construction cost estimator must have a
diverse range of technical and business skills. Top estimators generally have a decade
of more of experience both in estimating and actual field construction activities.
A total cost estimate consists of numerous line items, organized by specific
MasterFormat sections relating to various trades and specialists subcontractors. The

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process of using the OpenCost Methodology and 4BT OpenJOC Unit Price book for
comparison, for directly building estimates, or using them as a basis for creating fully
“custom” construction estimates increases productivity, transparency, and the ability to
collaborate as well as mitigates errors and omissions.
Location
Location affects the final cost via several factors and there are multiple
considerations that cost estimators must address. Cost clearly are different in different
states, counties, cities, and even within cities. Furthermore there may be access issues
with respect to personnel, equipment, and/or materials.
Location variables can include, but at not limited to…
1. Remoteness
2. Confined sites
3. Labor availability
4. Weather
5. Design considerations (related to location).
6. Vandalism and site security
7. Security
8. Occupied areas
9. Communication
10. Site access
11. Power/water availability
.

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Variability of Estimates
Construction cost estimate variation occurs due to several factors:
1. Quantity take off.
2. Material Costs.
3. Labor Costs.
4. Labor Productivity
5. Work Methods.
6. Construction equipment costs/availability
7. Indirect Job costs.
8. Subcontractor quotations.
9. Quotations from material suppliers.
10. Unknown site conditions.
11. Locational Factors.
12. Cost associated with the timing (delays, cost escalation)
13. Staging and project start up costs.
14. Overhead
15. Profit
16. Contingency and risk allocation.
17. Errors/Omissions in estimate formulation.
18. Basis of information used to formulate estimate.
19. Market forces.

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20. Information source (subcontractors, historical costs, experience, locally
researched data)
Accurate Estimate – An Oxymoron
Variances between estimates and actual costs not only occur, but that is the
normal occurrence. It is rare that a cost estimate is the same as the actual “as-built”
cost. An estimate is just that. It is a forecast of anticipated future cost. Simply
because an estimate doesn’t equal the actual cost of a project does not mean that the
estimator has made a mistake, unless there are obvious errors. Construction project
participants and stakeholders must understand that an estimate should always be
expected that the actual cost ant that it will vary somewhat from the estimated cost. It is
role and responsibility of the estimator is to is to minimize the variation between the
construction cost estimate and the actual cost and clearly communicate the potential
range of variation based upon the information available at the time the estimate is
created and submitted.

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Construction cost estimates are generally composed of several smaller
estimates, various categories, and/or or tasks. Each of these requires an assessment
by and the judgement of the estimator. As one might expect, error in individual
detailed components are likely to vary more than the overall total of the estimate.
Estimating is actually an assessment of probabilities and risks. In fact, as the estimator
considers various items and quantities, such as cubic quantity of concrete footings,
walls or slabs, each item discovered by the estimator has a cost importance that varies

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in magnitude. Inevitably the Pareto4 effect is seen to occur, that is, a relatively small
proportion of the items account for a very large proportion of the cost
Experience estimators understand that there is no single source for construction
cost data. It is therefore the estimator’s responsibility to appropriate leverage all forms
and types of cost data sources to create the most efficient estimate possible, including:
 Previously recorded data (historical data)
 Estimator’s experience.
 Experience and information of others (locally research cost data, subcontractors,
etc.)
While the final estimate is always somewhat subjective, it is estimator’s
responsibility to clearly define all assumptions, risks, as well as to clearly communicate
a detailed line item construction cost estimate in terms that a participants and
stakeholders and understand, validate, and/or revise cost information.
4
At the end of the 19th
century an Italian economist, Vilfredo Pareto, developed a curve known as “Pareto’s
Law of Distribution.”

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Historical Data
Historical data is useful for tracking recent material, equipment, and labor
construction costs. Regardless of the source the following are key to using historical
data to its maximum benefit:
 Understand the source of the historical data.
 Fully research what the historical data represents
 Note the specific timeline that data represents

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 Understand and properly format the data architecture (i.e. MasterFormat)
to allow for proper use with other information and to allow for updating.
Published “national average” construction cost books, cost information
publication services, trade journals, and data from actual projects are likely sources of
historical cost data.
Do not assume that actual cost feedback form a specific is the best information to
use, even if it were recorded and documented properly. This is may be
counterintuitive, however, statistically a single project may be an outlier and not
representative of the current market situation.
Also do not assume that w national average price book represents your local
costs, even is used in conjunction with localization indexes or detailed cost indices for
material, equipment, and labor.
Locally researched unit price cost data is the best source of data, however, it
must be used with all other sources of information per the above graphic.
Input and negotiations from all participants and stakeholders must be part of the
construction cost estimating process, include information as observed directly in the
form of a job site visit.
The failure to follow a collaborative construction cost estimating process is one of
the primary reasons for low productivity, waste, and legal disputes rampant across the
AECOO sector. Continuous feedback and improvement regarding actual and
researched costs among all parties and via commonly understood terms and data
formats is a fundamental cornerstone of consistently better construction outcomes.