The Accuracy Of Quantity Surveyors

In view of the fact that the profession was being introduced in the country, Quantity Surveyors are construction professionals which being patronized under the Institution of Surveyors, Malaysia and its Board of Quantity Surveyor Malaysia. Advices are given by Quantity Surveyors on aspects of financial and contractual administration (ISM, 2004).

ISM (2004) define, the Quantity Surveyor as the experts of capable in cost and management of construction projects and also need to price the Bills of Quantities, negotiating and agreeing schedule of rates. According to Andrew Doyle and Will Hughes (1997), the Quantity Surveying profession is constantly scrutinised, with regular demands for higher accuracy estimating.

Besides, Mohammad Barzandeh (2009) defines estimating as the process of calculated guessing by looking into the future costs of a construction project before start work. It happens before construction has started. The Quantity Surveyor is responsible for these estimates which serve to make sure that construction project will have a successful financial outcome. Phuwadol Samphaongoen (2009) states construction cost estimating as a cumbersome process. An accurate estimate takes a long time for the Estimator to complete it. Contractor’s Estimator has to prepare cost estimates quite often for new projects. According to Skitmore, et al (1990), the aim of construction price estimating is to provide an estimate of the market price for the construction contracts.

In the other hand, Holm et al (2005) defines cost estimating as the process of analysing a specific scope of work which predicting the cost of performing the work. Cost estimating also involves collecting, analysing and summarising all available data related to a construction project. Hira N. Ahuja & Walter J. Campbell (1998) define a simple definition of an estimate which is “a prediction of probable cost”. According to Mohammad Barzandeh (2009), estimating is one of the most important functions for a successful construction project. These Estimates also influence the decisions made for budgeting and assist in Clients’ decisions for selection of the Contractor.

1.2 Problem Statement

Cost overrun is a very common phenomenon as most of the construction projects in Malaysia facing this problem. Cost overrun occurs when the final cost or expenditure of the construction project beyond the original estimation cost. Cost overrun occurs in both developing and developed countries. (A.S. Ali & S.N. Kamaruzzaman, 2010)

Besides, Kai Zhu (2005) emphasises, cost estimation and planning is a very important and fundamental aspect in the construction process, it facilitates effective and efficient control of the construction projects. Despite their importance, often in practice because of time constraints, its requirements are not usually fulfilled which in the long run affect a projects quality, duration and budget.

According to Kai Zhu (2005), one of the factors that cause cost overrun in Malaysia construction industry which is the inaccuracy of cost estimation prepared by Quantity Surveyors, the possible consequence of cost overrun is abandon of construction project due to underestimate. On the other hand, overestimated cost could result loss of opportunities by the Client and loss of contract award by the Contractor, both the Client and the Contractor could incur significant losses due to underestimated cost.

In addition, Stephen D. Schuette et al (1994) emphasises that inaccurate construction project estimates might have a detrimental effect on all parties involved. Many additional factors which might affect the future events of construction project such as labour productivity, material availability, financial markets, weather, constructability issues, equipment availability, contract types, ethics, quality issues, control system, management ability and others.

1.3 Objectives

Objectives:

To identify the factors that affecting the accuracy of estimation by Quantity Surveyor during pre-tender and tender stage.

To identify the impact of inaccuracy in estimation to the Client and/or the Contractor.

To make recommendation for minimise the inaccuracy of estimation during pre-tender and tender stage.

1.4 Rationale of study

Keith Potts (2011) states, the estimating process is very important, as it enables construction companies to determine their direct costs and provides a bottom line cost below which it would not be economical for them to carry out the construction work. Leng (2005) also states, cost estimation is one of the most important activities of the entire project duration. An over-estimate could lead to tender not being accepted by the Client and losing potential work. An under-estimate could lead to Contractor losing money.

According to Hira N. Ahuja & Walter J. Campbell (1998), cost estimate play the major role in the decision-making process which leads from concept to completion of a construction project. Cost estimating has become very important under economic conditions with high inflations and fiscal constraints.

As mentioned by Keith Potts (2011), the basic challenges faced by the Contractor’s Estimator is to estimate the costs of constructing a project schedule for the specific construction activities and after that build the construction project within the estimated cost and schedule. Contractor to build a construction project profitably, the cost estimating and cost control skills are very essential for the Contractor.

Kai Zhu (2005) recommends that the factors which affect the accuracy of estimation should be identifying in order to increase the accuracy of estimation. Besides, accurate cost estimation minimise the risk of cost overrun, provides confidence on construction project outcomes to the management and contributes to the strategic management of the organization. According to Zaitoun Shadeed Al-Khaldi (1990), there are many factors that affect the accuracy of construction cost estimating and it should be taken into account in the early stage of an estimate. Some of the factors can increase costs and the possibility of contractual disputes between the various parties involved.

1.5 Research Methodologies

As stated by Richard Fellows & Anite Liu (2008), there are two major approaches being employed for data collection, which are primary data and secondary data. Primary sources allow the researcher to obtain as close as possible to what actually happened during a historical event or time period. A secondary source is a work which interprets or analyses an historical event or phenomenon. It is generally at least one step removed from the event and is normally based on primary sources.

According to Richard Fellows & Anite Liu (2008), primary sources can be categorise into qualitative, quantitative or a mixed method research. In qualitative approaches seek to obtain insight and to understand people’s perception. Quantitative approaches tend to relate to positivism and seek to obtain factual data, to study relationship between facts and how such facts and relationships accord with theories and the searching from any research executed previously. Interview will be conducted in order to derive primary data. Besides, Quantitative approach such as questionnaires will be employed and conduct through postal delivery and e-mail.

According to Denscombe (2007), secondary data provide the researcher theoretical background and knowledge. Secondary data will be collected by literature review method, which include reading journal, articles, published electronic, thesis or dissertation done by other students, news and books. For this project dissertation, majority of the secondary data is collected through books, articles and journals.

Chapter 2: Literature Review

2.1 Factors affecting the accuracy of estimating

According to Hira N. Ahuja & Walter J. Campbell (1998), accuracy in estimating relies on freedom of avoidable mistakes. Estimates errors may also be attributed to technical errors in calculations or simply to careless “blunders”. Some ordinary blunders are misplacing a decimal point, failing to include the total of every estimate sheet in the final summary, errors in transferring figures from one sheet to another, simple multiplication or addition mistakes and misreading a number because of unclear handwriting. Any one of these types of errors can lead a significant effect on the accuracy of an estimate.

2.1.1 Construction items

2.1.1.1 Complexity of project

Michael kitchens (1996) emphasises that the construction industry has become increasingly complex through the years as a result of improvement and advance in technology, natural evolution and litigation. H. van Meerveld, et al (2009) states that the level of complexity of a construction project is a function of three features which include organisational complexity, resource complexity and/or technical complexity. Cost estimation might influence by organisational complexity, resource complexity and/or technical complexity.

As mentioned by Michael kitchens (1996), organisational complexity is the number of people, departments and organisations that are involved. Organisational complexity might lead to a loss of information due to communication becomes more difficult when more people are involved. The information that is lost can sometimes be necessary for acquiring an estimate. Organisational complexity can also indicate that Estimators work simultaneously on the same project. In this case, Estimators have to put more effort into coordinating this simultaneous work.

According to H. van Meerveld et al. (2009), resource complexity is the volume of resources involved constantly assessed through the budget of the construction project. Resource complexity means that the overall amount of work needed to estimate increases which also increase the chance of making mistakes or errors.

H. van Meerveld et al. (2009) note that technical complexity is the level of innovation involved in the product or the construction project process or novelty of interfaces between different parts of that process or product. Technical complexity means that Estimators will have to make manual adjustment to acquire a more accurate estimate on the particular construction project. In projects that are more complex are subject to a higher chance for the change of design. The Estimator has to re-estimate the complete project or parts of it depending on the sort of design changes.

H. van Meerveld et al. (2009) state that in general there are two issues influence the estimating activities on more complex projects, which include a higher demand for coordination and structure to prepare an estimating for the construction project. Besides, if complexity increases estimating will need more effort to acquire an estimate and the probability of making mistakes increases.

However, according to A. Ashworth et al., the complexity of modern construction industry and the variety of processes used have limited the availability of reliable feedback of information. In practice, the Estimator will have to use his own standard outputs and couple these with an expectation of future performance.

2.1.1.2 Labour productivity

As stated by Donald F. McDonald et al (2004), on construction projects there are numerous circumstances and events that may cause productivity to decline which the Estimator might not anticipated when estimating the construction cost. Estimating labours and equipments costs requires more knowledge of construction techniques and experienced judgment as compare with estimating material cost. As estimating labours and equipment cost has the greatest uncertainty is in predicting the productivity of the labours and equipment that used on the construction project.

According to Aiyetan Ayodeji Olatunji (2010), construction productivity is influenced by many factors which including material, equipment, tools, construction methods, management skills in terms of adequacy and accurate application. Donald F. McDonald et al (2004) mention that as a result of poor project management may be caused by the failure to properly schedule and coordinate the work and the Estimator might not expected that event of the poor project management.

According to Donald F. McDonald et al (2004), work that is not scheduled properly which might lead to shortage of critical construction equipment or labours and incorrect mix of labour crews may result in decreased productivity of the labour because the labour may not able to work as efficiently as they could. Improperly planned and implemented project initiation procedures might also lead to lost labour productivity.

Donald F. McDonald et al (2004) also states that if material, tools or construction equipment are not available to particular labour at the right location and timing, the productivity of the particular labour probably suffer as they may be unable to proceed in a consistent manner. Productivity of the labour might suffer if the wrong tools or improperly sized equipment is provided. In addition, poor site layout design can affect the productivity.

In addition, Lee Holm et al. (2005) emphasise that estimating should be vary depend on site conditions, labour size, labour experience and equipment selected for the particular construction project. As lost productivity of labours are not tracked normally or cannot be discerned separately and contemporaneously.

2.1.1.3 Insufficient time

David G. Carmichael (2002) emphasises that construction projects involving design time of months or years which request the Contractors to digest the tender documents and submit the tender within a relative short period. The planning, estimating, developing a work method, studies and others are prepared within a short period or an insufficient time is allowed. The Contractors is required an appropriate tender period to develop thorough the tender.

David G. Carmichael (2002) states that as insufficient time is given to the Contractor for estimating and pricing the tender in rushing process, the Contactor might miss out any prior consideration. Binnington Copeland & Associates (2012) also state that as the failure to allow the Estimator adequate time to carefully consider and pricing for risks which might result in excessively high tender prices where substantial contingency is allowed by the Estimator to cover unexpected situation, as the Estimator had not enough time to deal with it. Besides, according to David G. Carmichael (2002), this presents a challenge to the Estimator who has to prepare and complete several estimates and tenders in a relative short period of time.

Tang Wai Kuen, Raymond (2005) emphasises that insufficient time for cost estimating is the prior factors which cause inaccurate cost estimating incur, as construction programmes are very tight and designs are frequently changed. The performance of cost management adversely affects the Estimator to estimates as insufficient time is provided.

2.1.1.4 Inadequate information

According to Aiyetan Ayodeji Olatunji (2010), majority of the Contractors’ Estimator facing problem when tendering for a construction project which the information provided is insufficient. Under this circumstance, the Estimator must make his or her own estimation and assumption on it, if inaccurate estimation has been made, it may lead the Contactor overestimate or underestimate. Overestimate might cause the Contractor unable to award the construction project, underestimate might cause the Contractor unable to gain profit from the particular project or more worst still abandon of work due to insufficient financial to run the construction project.

2.1.1.5 Lack of availability of equipment

There are two major circumstances which faced by the Estimator when estimating or pricing the tender. Firstly, the Estimator might require estimating the fluctuation of the price of equipment for relative long of period as the construction period normally last for few years. Secondly, during tendering stage the Estimator might require deciding whether own the equipment or hire the equipment from specialist company if the project require certain equipment which the Contractor does not own the equipment (Zaitoun Shadeed Al-Khaldi, 1990).

According to Zaitoun Shadeed Al-Khaldi (1990), the Estimator has to evaluate and select one particular piece of equipment, it is essential to determine its hourly cost very accurately. Some factors have to be considered during this stage, which are number of hours used per day, month and year, severity of job conditions, the way the equipment has been maintained and the demand for equipment owned by the Contractor when it is sold. In addition, the price of the equipment might be increase due to inflation or many mega projects are run concurrently which might cause the unavailability of the equipment.

2.1.1.6 Incomplete drawing and detail design

Lee Holm et al. (2005) emphasise that the accuracy of estimate also will depend upon the completeness of the contract documents provided and others. In addition, the factors of incomplete drawing and detail design as the factors which cause inaccuracy of estimation in construction project. During tendering, the Contractor’s Estimator is carrying out the estimating work due to drawing is unclear and none very detail shown in the drawing. The Estimator has to make his or her own assumption for estimating and pricing the tender. This factor will increase the chance of inaccuracy estimation for the particular construction project.

2.1.1.7 Computerised estimating software

The actual use of the computer for estimating is varied within the construction industry. Some companies use the computer for all construction projects with a high degree of sophistication and some other companies do not use the computer at all. (Stephen D. Schuette & Roger W. Liska, 1994)

Phuwadol Samphaongoen (2009) defines detailed cost estimating as a cumbersome process that involves a lot of data and calculations, improvement in technology that could assist the estimating process of construction cost; it could reduce the Estimators’ work load. Computers are considered to be effective tools for assisting Estimators during the pre-tendering and tendering stage. Computers provide many benefits to the Estimator, which including reducing estimation errors, the time required and others.

Stephen D. Schuette & Roger W. Liska (1994) state that the early uses of computers by the construction companies were limited to accounting functions only. The improvement in micro-computering have increased knowledge of computer capabilities construction managers have begun to use computers in everyday construction operations to make quick and accurate decisions.

Phuwadol Samphaongoen (2009) states estimating technologies which include spreadsheets, builds soft, microsoft excel, cost estimating software, digitizing tablets, on-screen digitizing systems and the yet to be matured 3-D CAD parametric estimating software and others. During the detailed cost estimating process various software packages are available to assist the Estimator. The capabilities of software packages vary greatly, as some of the software is include labour, equipment and material cost databases, after the database is set up which could facilitates the estimating process.

According to Phuwadol Samphaongoen (2009), a spreadsheet is a computer application which simulates a paper worksheet. It arrange for the user with cells that are compiled into rows and columns. Each of the cells can contain either text, numerical values or formula, it can be defined in cells to obtain calculated value from the related cells. Complicated mathematical calculations can be automated with a change or alter of a single cell with the use of formula in the spreadsheet. Estimator uses the worksheets to accelerate the estimating process. A template can be set up by the Estimator with saved formula in the spreadsheet. Quantity take-off calculations can perform within a spreadsheet by the Estimator. Although a spreadsheet requires a lot of input from the Estimator, it could remove the cumbersome and error prone manual calculations during the quantity take-off and pricing.

As stated by Mofti Bin Marjuki (2006), Global Estimating is an estimating program which has been tailored for commercial use in the construction industry. Bills of Quantities or detailed Estimates and Cost Plans can be produce through this program. Designed primarily for use by commercial building Contractors and professional Quantity Surveyors it includes features which allow it to be used in other industries where estimating is required. The grouping columns in this program are very powerful as it can be re-sorted or analysed the entered information. For example, the estimate can be summarised to produce totals by area, block, stage, cost centre, accounting group, or any user defined set of codes.

Mofti Bin Marjuki (2006) mentioned Microsoft excel can be used for contains or store industry standard cost data in the CSI format for all cost categories covering general construction. Unit prices include material and labor including labor hours. This software provide easily modify and add cost data to suit local conditions and business. Besides that, Microsoft excel instantly creates user-modifiable, onscreen or printed estimate reports including price quotation. In addition, this software can save time, improve accuracy and achieve greater success.

Phuwadol Samphaongoen (2009) notes that a digitizing tablet is a computer input device which uses a stylus and a tracking surface to capture the drawing on to the computer system. The drawing traced on the tracking surface transfers point coordinates to a computer; it can be used for many different purposes which including construction cost estimating. Digitizing tablets’ purpose in construction cost estimating is to digitize the paper-based blueprints provided by Estimator or the designer.

For example, the Estimator can get the length, perimeter and area out of the drawing by the scale provided in the blueprints. These parameters are available when using the digitizing tablet through software package. After the paper blueprints have been digitized and the quantities for all work items have been determined, the Estimator might those quantities to estimate the prices of items, but quantity takeoff using the digitizing tablets may cause errors from unstable hand during tracing the drawing. Digitizing require a large number of blueprints which is very time-consuming process to the Estimator. (Phuwadol Samphaongoen, 2009)

Phuwadol Samphaongoen (2009) mentioned that 3-D computer aided drawing (CAD) models allow estimators visualize what is going to be built in the 3-D environment. The ability to digitally extract and transfer data can speed up and facilities the cost estimating process. A building model allow the user seen in many different views which include details of elements, dimensions can be extracted and transferred to the estimating software.

In the other hand, Stephen D. Schuette & Roger W. Liska, (1994) state that the duties of the Estimator might change if the Estimator’s company implements the use of the computer in the estimating process. Before computerisation estimating process the Estimator spent the greatest amount of time determining the quantities of materials and performing math calculations. Computers accomplish these tasks rapidly and accurately permit the Estimator to give more attention and concentration to alternative construction methods, material supplier negotiations, predicting the productivity of labours, developing accurate cost information and bidding strategies.

Everything that comes out of the computer, the Estimator should not accept it blindly or rely totally on the computerised system as the computer cannot make judgment. The result of the computerised estimate software should always review by Estimator to avoid errors and mistakes; as computerised estimate software is not immune to technical faults which are likely not to be detected easily and early as recommend by Stephen D. Schuette & Roger W. Liska (1994).

Besides, Stephen D. Schuette & Roger W. Liska (1994) state that computerised estimate software could also be susceptible to technical limitations such as inability to work under certain conditions, inability to work well with other tools and limited to technical support. It might trigger severe consequences on estimating processes due to the Estimators lack of knowledge on those computerised estimate software.

The manifestations of tool based error are which included: software construction, faults from programme performance frameworks, errors from a secondary source, end-users’ inappropriate use, inability to interact perfectly with other applications and others (Oluwole Allfred Olatunji, 2010).

In addition, Oluwole Allfred Olatunji (2010) mentions that computerised estimate software could obsolesce of standards due to evolution of information technology in the estimating industry, especially description libraries and databases used for automatic estimating. Estimators or applications must be updated frequently when built into a programme as reference standards for reviewed, otherwise that the program possibility miss-apply the standards.

2.1.1.8 Experience or qualification of Quantity Surveyor Estimator

According to Skitmore et al. (1990), ‘expert’ Quantity Surveyors in the UK provided evidence of significant differences in estimating accuracy between the individual surveyors involved. Lee Holm et al. (2005) emphasise that the accuracy of estimate also will depend upon the completeness of the experience of the Estimator and others. As stated by Hira N. Ahuja & Walter J. Campbell (1998), the Estimator’s knowledge can provide a measure of insight and accuracy that is unobtainable from any other information sources.

According to Skitmore et al. (1990), construction contract price estimating practice is, with very few exceptions, heavily dependent on the skill of the Estimator. This skill is associated with the other factors affecting the quality of Estimator which are the nature of the target, information, technique and feedback and the personal attributes of the forecaster himself combining to provide the general term of “expertise”.

Besides that, Mudd (1984, p.1-2) has described that Contactor’s Estimator should associated with certain qualities. These include: good basic numerate and literate education, reasonable time spent on site, interpret drawings, ability to communicate, facility to make accurate mathematical calculations, application of logic and common sense, patience, able to cope with a vast volume of paper, a working knowledge of all the major trades, close relationship with those peoples who are responsible for construction, a knack of picking up useful information, flexibility and others.

2.1.1.9 New/innovative techniques or materials

The implemention of Industrialised Building System (IBS) is still not widespread in the industry despite the government has encouraged the implementation of IBS towards reducing percentage of foreign works and improving quality, productivity, safety and competitiveness through IBS construction method. IBS is a construction process that utilises techniques, products, components or building system which involved prefabricated components and on-site installation (CIDB 200).

Salihudin Hassim, Mohd Saleh Jaafar and Saiful Azri Abu Hasan Sazalli (2009) emphasise that since the first project of IBS in year 1964 till today, IBS in Malaysia is not well accepted by the construction parties because of failure to adequately deal with risk in the IBS projects. The failure to keep in cost estimate in IBS project is still common in Malaysia and it is one of the reasons that limit the development of IBS in Malaysia construction industry.

2.1.1.10 Availability of historical price data

Martin Brook (2008) states that estimating method used for cost planning and estimating which relies on historical cost data during early stages, whereas current price apply by analytical estimating approach to resource for a well-developed design. According to Hira N. Ahuja & Walter J. Campbell (1998), most established companies make it a policy to keep records of actual costs incurred on their various construction projects.

As mentioned by Hira N. Ahuja & Walter J. Campbell (1998), the estimator can determine if his estimated costs were accurate or otherwise through comparing records of estimated costs. If the estimating is not accurate, whether the discrepancy was due to Estimator own lack of expertise or rather or incur some unforeseen cost-incurring conditions. In addition, these cost records serve another function, which is providing reliable cost data for preparing future estimates.

Tang Wai Kuen, Raymond (2005) mentions that there are several historical databases available that provide current values for estimating costs of the several units of work for a project. The example of historical price data such as databases are collect from records of actual project costs or company’s own past experience and on-going price quotations from suppliers and are published annually in the form of books, CDs and computer-based extranets.

Stephen D. Schuette & Roger W. Liska (1994) suggested that it is important that accurate database information be received to develop the estimating information data bank. In the other hand, according to Tang Wai Kuen, Raymond (2005), applying published data or software database pricing without first adjusting for the particular aspects of the project it might cause underestimate or overestimate. As every project in construction is unique as every project with a distinct set of local factors, for examples; size of project, level of competition, flexibility of specifications, work site, working hour restrictions and others.

As stated by Tang Wai Kuen, Raymond (2005), review each line item by the professional Estimator is required when the estimating system attached to a price database, such review for the Estimator to make sure it is applicable. Inaccurate estimates can be caused by the Estimator applying these database prices blindly. Historical can be constitute a major cause of inaccurate cost estimate, if the Estimator store incorrect or inaccurate data as price database, in future the Estimator prepare cost estimation relies on inaccurate or incorrect database cause occurrence of inaccurate estimate.

On the other hand, Hira N. Ahuja & Walter J. Campbell (1998) emphasis, estimating publications have increase greatly, these guides are invaluable to Estimators who do not have access to actual job records. Published data are useful during all stages of estimate development. Although it is certainly not recommended that published data alone be used for an entire estimate, but it is undoubtedly useful in filling in the gaps in cost information where no other source is unavailable.

2.1.2 Financial factors

Aiyetan Ayodeji Olatunji (2010) states that the performance of construction projects negatively affects by financial risk, financial risks might include high inflation and increased construction of the project. These factors affect particular projects where materials and goods are required for construction have to be imported from foreign country. The exchange rate changes on a daily basis are high so that the interest rate subject to change, it increases the percentage or chances of inaccuracy estimation occur. As mentioned by Laeeq Hassan (2010), financial risk associated with construction projects which include paucity of funds, delay in payment and others. All construction parties or companies involves in construction projects subject to financial risk.

Chia Fah Choy (2011) emphasised that construction sector similar to many other industries as the construction industry is also subjected to the boom and bust cycles of the economy. Malaysian construction sector has experienced four cycles since 1960. The external shocks of the energy crisis of the 1970s, the 1980-1982 global recessions and the 1997-1998 Asian financial crisis have plunged Malaysia construction sector into a more serious contraction spike than the one before. The annual growth of Malaysian construction sector contracted 10.3%, 14.0%, 24% and 1.5% in 1975, 1986, 1998 and 2005 respectively.

As mentioned by Gruneberg. S .L & G. J. Ive, (2000) that construction industry involves long term investment and long term risks, it will be the first to be suspend at the first sign of an economic downturn and the last to be received during an economic upturn leading to long periods of recession for the construction sector whenever a general business cycle is experienced.

2.1.2.1 Fluctuation in money exchange

As emphasised by Ervin, E. (2007) that fluctuations in construction prices make it difficult for cost Estimators to accurately estimate construction project costs. As suggested by Fetene Nega (2008), if the materials or other elements of the construction project are being purchased from foreign countries, the change in foreign exchange rate is particularly relevant to it. Besides, the foreign exchange rates change beyond the expected level; then the cost of the project may increase which automatically leads to cost overrun or underestimate.

2.1.2.2 Inflation

Laeeq Hassan (2010) states that the construction costs can increase due to inflation. If the rate of inflation increases above the predicted level during the construction stage, then the original cost estimate will be exceeded. Obviously that delays of a construction project; it will expose the project to the risk of further inflationary cost increases.

According to Fetene Nega (2008), the effects of inflation can cause loss of profit to contractors and higher cost overrun to project owners due to the nature of the inflation process and the rate of return for work undertaken on construction projects. As recommend by Laeeq Hassan (2010), Contractor’s Estimator must consider the effect of inflation while finalising their rates for tender.

2.1.2.3 Shortage of Construction Materials

Fetene Nega (2008) states that during high development period where the level of construction activity is unusually high in a particular region, shortages of some construction materials maybe happen due to high development period. It may also lead the inflation effect on construction materials.

On the other hand, as stated by Fetene Nega (2008), sometimes construction materials may not be able to supply by the local market to the full demand, hence, a need may arise to import these construction materials from abroad. If this situation or circumstance is not expected in the original cost estimate, delays may occur and/or the prices of these elements may increase which consequentially lead to delay and cost overrun for the construction project.

2.1.3 Construction parties

Flanagan and Norman (1993) mention that there are different player plays in this complex construction industry. These are Clients or Owners or Employer, Project Managers, Architects, Consultant, Contractor, Sub-Contractor, Manufacturers, Suppliers, Local Authorities and others. Furthermore, due to more players are involved in construction industry, the task of project management becomes complex, but among all players only three players are very prior where construction industry depend on Client, Consultant and Contractor.

2.1.3.1Government policy

As stated by Aiyetan Ayodeji Olatunji (2010), the social environment concerns needs for projects or individuals while the political environment is concerned with government policy and the effect of political decisions on construction projects. Norhisham Bakhary et al (2004) mention that around 232,000 units of low cost houses are required to be constructed according to Eight Malaysian Plan (2001-2005) during that period. Due to the urbanization and increment on affordable houses every year, numerous campaigns and efforts in providing adequate shelters has carried out by the government to accommodate the growing population, especially to cater for the low-income group.

According to Nor Azizah Mohammed Rum & Zainal Abidin Akasah (2011), incensement in civil engineering and non-residential property largely supported by the development of construction industry, such as the implementation of development projects under the Ninth Malaysia Plan. The construction industry is estimated to grow around 4.9% in 2010.

According to Norhisham Bakhary et al (2004), the government remains the biggest Client in most of the infrastructure projects. Runeson, G (2000) also states, the government accounts for the majority of infrastructure construction. The Government could use its development programmes as an influential tool in its economic stabilisation policy so as to compensate for cyclical changes in the private sector building activity, stimulating or damping demand and prices. As suggested by Allan Ashworth (1994), since government is still a major Client of the construction industry, it is tempting to suggest that Government uses the industry as an economic regulator. While the industry is damaged by the stop-go nature of its activities, there is only scant proof that government effectively turns the tap on or off in order to regulate economic performance.

2.13.2 Client

According to Allan Ashworth (2007), the client’s fundamental needs can be summarised as follows: satisfaction that the building meets their needs, that it is available for occupation on the specified date for completion, that the final account closely resembles the estimate and that the construction project can be maintained at reasonable cost. One of the client’s prior requirements in respect of any construction project is the assessment of its expected construction cost. The methods employed for controlling the costs will vary, relying on the type of project and the nature of the Client. The methods employed should be reasonably accurate but flexible enough to suit the individual Client’s requirements.

2.1.3.3 Consultant

Nick Butcher & Linda Demmers (2003) define licensed professionals known as cost estimators who prepare cost estimates. Classroom is insufficient to train entirely of an Estimator. The theory and science of estimating is important but it require experience with construction, as well as experience actually quantifying and costing construction work. The less information available about a project, the more experience is required to do a cost estimate.

Omole A.O (1986) emphasis, cost considerations are among the most prior and basic considerations that Consultants must deal with. It is necessary to observe that projects are contained within the Client’s budget and cost forecasts. Cost has the final control over virtually every construction project. Accurate cost analysis and control is one of the essential services that the Client requires from the Consultants.

According to Hira N. Ahuja & Walter J. Campbell (1998), the Consultant basically uses the estimate to recommend and suggest the best alternative on site selection, design of facility, layout considerations, equipment selection and all allied technical matters. The recommendation and suggestion of the best alternative on site selection, design of facility, layout considerations, equipment selection and all allied technical matters suggest by the consultant through estimate.

2.1.3.4 Contractor

As stated by Hira N. Ahuja & Walter J. Campbell (1998), reliable cost estimate alone determine profitability for a Contractor. Cost estimates assist the Contractor either to propose cost plus basis bid or a competitive bid for a stipulated price contract. These estimates are the important criteria in order to survival in a highly competitive industry.

2.1.4 Environmental

2.1.4.1 Location of projects

According to Hira N. Ahuja & Walter J. Campbell (1998), it is very rare that a construction project costing at one place will cost the same amount at another place. Standard costing does not reflect the differences within a small area; these differences are the most prior for estimation. Even within a given area particular differences can result of large cost differences for the same structural design.

As recommended by Aiyetan Ayodeji Olatunji (2010), the Estimator should take account of the accessible road to the construction site during estimating or pricing for the tender. The road accessibility to construction sites play an important role, if the accessibility break down vehicles can get stuck in the road it will affect rapidity of delivery of materials, worst still it might cause delay of the project and follow by cost overrun as they as interrelated.

As stated by Neil Sinclair, et al (2002), “Since a construction project’s location affects the final cost”, an Estimator should understand what particular locational factors will be encountered and what considerations should be taken into account when formulating the estimate.” Estimators should be aware, encounter and consider the locational variation during tendering stage, as various locational has various circumstances which include remoteness, confined sites, labour availability, weather, design considerations, vandalism, site security and others.

2.1.4.2 Weather condition

As defined by Lavender (1996), construction is an outdoor industry. The adverse climatic conditions might have detrimental impact on the construction programme and hinder productivity. The problem will be more serious during groundwork and before the building is weather tight. In addition, Olomolaiye, Jayawardane et al. (1998) mentioned, hot and wet climates are far less conducive to mental and physical energy and tropical climate favour muscular activity generating much body heat and discomfort.

Zaitoun Shadeed Al-Khaldi (1990) also states that the output of the labour can be affected by excessive heat, as labour feel uncomfortable with excessive warm. In other hand, as stated by Chia Fah Choy (2011), Malaysia has a typically tropical climate; it is hot and humid throughout the year. Besides, large extent required by construction activities and the activities are undertaken on open sites which are subject to the effects of weather variations.

As showed by Chia Fah Choy (2011), weather impact specifically excessive rainfall, was reported to be one of main factors causing significant delay and cost overruns on construction projects. The impact of rainfall on construction activities can be in the form stoppage of work which is attributed either to the inability of construction labours to carry out work under severe conditions of heavy rain. The Estimator might estimate the weather based on past record but the nowadays weather condition are keep changing it is very difficult for Estimator to rely on past record.

As suggested by Zaitoun Shadeed Al-Khaldi (1990), weather condition has a marked effect upon output of construction project. Under wet weather conditions the output of excavation in particular is reduced and the site conditions becomes soft and heavy, excavating plant tends to become clogged, while internal transport on open sites becomes difficult. In other hand, the output of the labour can be affect by excessive heat, as labour feel uncomfortable with excessive warm.

As recommended by Hira N. Ahuja & Walter J. Campbell (1998), in trying to account for the effects of weather on construction costs, the Estimator must consider both the location of the job and the season during which key phases of the project will be scheduled. Weather forecasting is not yet of sufficiently long range to be of great use to the Estimator. The Estimator might just able to refer to historical weather records to determine the average rainfall and the temperature extremes and averages for the particular locales. From these records the Estimator able to develop a picture of probable weather conditions and make allowances for the effect on construction costs.

2.1.4.3 Site Ground Condition

According to Aiyetan Ayodeji Olatunji (2010), the inherent site conditions of a construction project might affect the speed of delivery, contribute to delay and cause additional cost. This is usually due to a lack of or poor investigation of site ground conditions to obtain data regarding site soil conditions. Site soil conditions refer to the features on a site, whether there are existing structures or not; the condition of the subsoil; the firmness of the earth beneath the surface; underground service ducts and similar features.

Fetene Nega (2008) states that the hi-tech equipment, trial pits or borehole sampling can be used for assess ground conditions. However, the full extent of the actual site condition only can be determined when the excavation is completed. It is sometimes possible that those difficult conditions are overlooked by the initial review or adverse weather changed soil conditions or changes in sub-soil conditions.

As emphasised by Fetene Nega (2008), unexpected sub surface condition could cause great expense as it requires redesigning of project fundamental. In addition, the changes in surface ground conditions can lead to problems for moving machinery and supplies around the site, undertaking excavations and laying foundations. This can also increase costs and add to the construction time required.

2.1.4.4 Soil and land stability

According to Aiyetan Ayodeji Olatunji (2010), in cases where it is discovered that the soil condition is made up of low bearing capacity and a comprehensive soil test was not carried out prior to construction, significant time related problems may arise. In order to remedy the situation a thorough soil condition examination will not only be sanctioned, but the unsuitable soil will be cut and carted away. This corrective process takes time, might adversely affect the delivery time and possibly lead to an increased final cost to complete the project.

Aiyetan Ayodeji Olatunji, (2010) mentions, soil might be contaminated due to the chemical deposits which may cause in weakening the strength of the soil. It is advised that a soil test be carried out to reveal the characteristics of soil condition on site ground. When soil contamination is encountered to reasonable depth on site, the soil must be excavated and removed from the site, refill with suitable material and compact it according to the strength requirement of the soil. This process may affect delivery of the construction project to schedule and incur additional cost

According to Hira N. Ahuja & Walter J. Campbell (1998), soil condition and topography are the main factors of a construction site causing variation in the cost estimate. In contrast to the preceding variable, quality, soil conditions are unusually applicable in preliminary estimates and are beyond the discretion of the project designer. In building construction, foundations can account for from 5 to 20% of the total cost. Generally, excavation costs in rock are in the higher range compared to those in ordinary soil.

Hira N. Ahuja & Walter J. Campbell (1998) state, soil conditions have to be one of the most ordinary causes of cost overruns and construction project problems. Therefore, the Estimator to learn as much as possible about the soil conditions on the site. In addition, Aiyetan Ayodeji Olatunji (2010) states, where hidden or unknown service ducts are discovered on construction site along the path of the proposed structure, the construction programme might affect by it. The removal of the buried service ducts might involve the usage of more resources that have cost and time implications.

2.1.4.5 Social and cultural impacts

Aiyetan Ayodeji Olatunji (2010) mentions that successful delivery construction project might constrain by the socio-cultural issues and unanticipated circumstances; it could affects the smooth flow of construction activities on sites. It includes the impact of natural hazards, adverse local weather conditions and others.

2.1.4.6 Law and regulations

As stated by Aiyetan Ayodeji Olatunji (2010), delay of a project’s delivery time might affect by restrictive work hours on, this factor have a significant consequences when the cumulative effect is looked at. Construction activities could affect by the restrictions, such as lifting of heavy materials to high levels with a crane due to restrict working hours some of the activities have to stop.

Tang Wai Kuen, Raymond (2005) also pointed out that extra cost impose on contractors due to local regulation. Increment in the construction cost due to change in statutory regulations such as pending imposition of construction deposal fee and others, as the Contractor’s Estimator might not be allowed for such cost during tendering.

2.1.5 Method used for estimating

According to Wood (1974) cited by Mofti Bin Marjuki (2006), that estimating is required at all stages of a construction project with varying of availability of information thus several methods are evolved. Estimator is always needed to consider the relationship between available information, project stage, methods of estimating and accuracy. Estimating is the procedure for simulating the future by creation of a picture based on historical information. According to Mofti Bin Marjuki (2006), estimating contrived from publishing press is slightly accurate so estimate should be carried out on information related to the construction industry.

2.1.5.1 Preliminary Estimates

According to Hira N. Ahuja & Walter J. Campbell (1998), Preliminary Estimate is defined as “a cost prediction based solely on size or capacity of a proposed project. The purposes of a preliminary estimate which include as a means of ranking alternatives for investment appraisal, evaluation of economic and/or financial feasibility and as a check on more detailed estimates. Besides that, cost-capacity relationships, base unit price and factored cost analysis are commonly used techniques of producing a Preliminary Estimate.

Mofti Bin Marjuki (2006) suggests that both building owners and designers must agree on an anticipated cost of the project at bid award in the early planning stages. Preliminary Estimates are used in the early planning phases of a proposed project to match an owner’s needs, expressed as written programmatic requirements, with budget constraints in order to establish its overall scope, size and quality expectations. The Work Breakdown Structure is a systems-based format which recommended at this stage, where elements of the building are the method of categorisation.

As recommend by Mofti Bin Marjuki (2006), estimate comparisons at this stage are especially valuable in evaluating the feasibility of strategic alternatives being considered to suit current and projected space requirements. A design contingency is typically included between 10-15% as the design is not fully developed at this stage. Issues which need to be identified at this stage include method of procurement being considered, location market factors, specific site constraints or challenges, proposed phasing plans, start and finish dates.

Hira N. Ahuja & Walter J. Campbell (1998) state, this type of estimate is of greatest benefit to the owner. Budget provisions, project cost summary, details of cash flows, percent profit before and after tax, even analysis, payback period required and others. Besides that, many Contractors use the Preliminary Estimate for projecting their long-term labours, equipments and materials requirement. In addition, Contractors also use it for checking their bids.

2.1.5.2 Intermediate Estimates

As stated by Mofti Bin Marjuki (2006), Intermediate Estimates can be used at various stages of project design development to maintain accountability for initial budget projections, as Intermediate Estimates means of evaluating competing alternative construction assemblies, systems and materials. On large construction projects it is common practice for an owner to employ a construction manager or professional Estimator to continually update project estimates and provide feedback or comment on budget impacts of decisions on major design elements. The risk assessment should be updated and a contingency factor is calculated based on the outcome of the risk analysis. The design contingency can typically be reduced by mitigate the risk and design progresses.

2.1.5.3 Final Estimates

According to Mofti Bin Marjuki (2006), a detailed pre-bid estimate can be prepared when the design is completed, during this stage the design contingency would typically be reduced to zero. Hira N. Ahuja & Walter J. Campbell (1998) mention, this type of estimate is the most thorough, exhaustive and accurate method available of estimating costs of a project. It involves not only a study of what is to be done, but how and for this reason is best prepared by an experienced Contractor for the purpose of submitting a tender or by a person who has control of the construction procedure.

Mofti Bin Marjuki (2006) states, in case there still be risk surrounding the construction project, which would make it prudent to still include a small bidding contingency. If Work Breakdown Structure is organised, it allows for a comparison of the final estimate with the bids received and can aid in negotiating with the lowest bidder. In addition, having the final estimate and bids in the same format facilitates allow for developing cost databases and be used in planning future projects.

2.1.5.4 Unit of accommodation method

As mentioned by Mofti Bin Marjuki (2006), the unit of preliminary estimating consists of choosing a standard unit of accommodation and times with an appropriate cost per unit. This technique is based upon the fact that there is normally a close relationship between the cost of construction project and the number of functional units it accommodates. This method is very useful on those occasions where the Client requires a preliminary estimate based upon little more information than the units of accommodation. Martin Brook (2008) recommends that adjustment of the cost shall take consideration of specific projects, different locations, varying with ground conditions and others.

As Wood (1974) cited by Mofti Bin Marjuki (2006), the unit of accommodation method is counting the number of units which is extremely simple, but considerable experience is necessary in order to select an appropriate rate. Rate can be obtained by the careful analysis of a number of recently completed construction projects with a similar type, size and construction. For examples: selecting a standard unit like seat per cinema, bed per hospital, table per school to obtain the estimate cost of project. Based on the total unit of functional proposed building, the estimate cost of a building can be derived from past project of the same functions.

2.1.5.5 Superficial Method

As mentioned by Mofti Bin Marjuki (2006), Superficial Method is the most common method used for estimating purposes. The estimating method is easy to calculate and the costs are expressed in a way fairly readily understood by an average building. The areas of each of the floors are measured and then multiple with a cost per square meter. According to Martin Brook (2008), a proposed building is measured at each floor level of the project; no deductions are made for internal walls, staircase or lifts zones.

The rules of measurement for the Superficial Method of a building were defined by the Royal Institution of Chartered Surveyor, United Kingdom. The floor areas are calculated from the internal dimensions of the building in order to provide comparability between various schemes. It is suggested to separate the floor areas and apply different unit rates. It is appropriate for projects such as school and housing where storey heights of project are constant. Besides that, Mofti Bin Marjuki (2006) states that factors such as storey height of the project and the plan shape are particularly important when deciding upon the rate to be used for the project.

In the other hand, Martin Brook (2008) recommends that a separate assessment should be made for external works, demolitions, incoming services and drainage and which can be significantly different for similar buildings. Adjustment can be made according to location and inflation, but specification adjustments are much more difficult to estimate, as required subjective judgments made for size, shape, number of storeys, ground condition and standard of finishes. Unesco-Nigeria Technical &Vocational Education (2009) also agreed, this method should take account in changes in plan shape or total height of the building which also have a cost impact.F:ResearchUntitled.png

Figure 2.1 Superficial Method

2.1.5.6 Cube Method

According to Allan Ashworth (2004), the cube method of approximate estimating was employed extensively at the inception of the last century but has since been replacing because of its inherent disadvantages. Unesco-Nigeria Technical &Vocational Education (2009) also state, this method was used extensively between the World War I and World War II. But it is not in common used anymore. Rules of must as defined by Royal Institute of British Architect (RIBA) are external plan area of a building is multiply by a height to get the volume of the building. The height is measured from the top of concrete foundation to half way of the roof if pitched or to 600mm above the roof if flat as showed in Figure 2.2.

Mofti Bin Marjuki (2006) suggests, in case, the roof space was to be occupied then the height on pitched roof building was three-quarters way up the roof. The allowances for flat, pitched roofs and the measurement to foundation depth are all very arbitrary. Additional allowances are required to be made for projections such as porches, chimney stacks and others.

According to Unesco-Nigeria Technical &Vocational Education (2009), this method is useful in estimating the cost of heating and air conditioning. In the other hand, disadvantage of this method is the building cost could relate better in floor area than with volume. Allan Ashworth (2004) mentions, the application of cube rate from previous projects does not operate quite as well as in the superficial area estimating method. It is also now known that building cost correlates better with superficial floor areas than with volumes.

Mofti Bin Marjuki (2006) mentions, the disadvantage of this method is that it does not give any indication to the Client regarding the amount of usable floor area, it takes no account of storey or plan shape and it produces a large cubic quantity that will increase the possibility of further inaccuracy in this estimating method.

Figure 2.2 Cube Method2.1.5.7 Storey Enclosure MethodF:ResearchUntitled1.png

Allan Ashworth (2004) states, Storey Enclosure Method would perform better in terms of accuracy than the other single price methods. The weightings employed are highly subjective and are unlikely to apply equally to every building. Besides, the quantification does not easily relate to the Client’s accommodation requirements and as such embodies the same deficiencies as the cube method. In addition, the limitations of the single-rate approach to estimating were very much apparent, however ingeniously it may be applied. Appropriate rates employing in this method are almost impossible to derive, which is a further disadvantage for practitioners.

2.1.5.8 Approximate Quantities

As suggested by A. Ashworth & R.M. Skitmore that Approximate Quantities method allows the calculation of cost based on the basis of a single variable describing the proposed building project. This method is favoured by both the Quantity Surveyor for pre-contract estimating and the Contractor’s Estimator when bill of quantities are not provided.

According to Mofti Bin Marjuki (2006) and Allan Ashworth (2004), this method provides a detailed and reliable method of approximate estimating but it does involve more time and effort than any of the estimating methods previously described. No particular principles of measurement exist and the composite items result from the experience of each individual in practice. Considerably more information is needed from the designed if this method is to be applied adequately in practice. Therefore this method is suited to a more advanced design stage. Besides, Allan Ashworth (2004) suggests, the Quantity Surveyor shall fully examine the entire document to establish how it has been priced, particularly in respect of the preliminaries items and or any discrepancies in rates.

Besides that, Unesco-Nigeria Technical &Vocational Education (2009) emphasise, a lot of skills are required in selecting an appropriate rate. Rate can be obtained by careful analysis of the number of recently completed project of similar types, size and constructional method. This method is simple and quick to use as the advantages, the disadvantages of this method is lack of precision and required to express cost within a range of prices.

2.1.5.9 Cost Planning

Mofti Bin Marjuki (2006) states that first phase of cost planning can be employed to determine the approximate cost of a construction project. This Cost Planning method analyses the cost of the construction project based on an element basis which often attempting to make use of the cost analyses from other similar construction projects. This method provides cost advice during the design process and offering the Client with better value for money.

Mofti Bin Marjuki (2006) mentions that it also keeps the designer fully informed of all the cost implications to the design in relationship with an approved approximate estimate and likely reasonable tender sum. Full cost planning services would also incorporate with the attributes of life cycle costing. Two alternative forms of cost planning have been developed although in practice a combination of both cost planning forms are sometimes used.

The first form of cost planning is known as Elemental Cost Planning where the project must be designed within an overall framework of a cost limit. It is often referred as ‘designing to a cost’. In practice it is more appropriate or suitable to public sector projects which often incorporate some form cost limit. The alternative form is known as Comparative Cost Planning where alternative designed can be examined within an economic context, this method is referred to as “costing a design” (Mofti Bin Marjuki, 2006).

2.1.5.10 Analytical Estimating

According to A. Ashworth & R.M. Skitmore, Analytical Estimating is traditionally used by Contractors’ Estimators to determine the individual rates for measured work items in a Bill of Quantities. Each individual measured item is analysed separately into its constituent parts of labour, materials and plant. Each part is cost by a detailed analysis using outputs, gang sizes, material quantities and the plant hour required. Particular emphasis of this method is placed upon such project factors as type, size, location, shape and heights as being important factors affecting the Contractor’s costs. Mofti Bin Marjuki (2006) states that alternative analytical methods may calculate cost based on the basis of operations rather than individual bill items.

2.1.5.11 Cost Model

According to Mofti Bin Marjuki (2006), cost models are the latest technique for forecasting the estimate cost of a proposal construction project; although they were first “discovered” during the early 1970, there is only scant evidence of their use in the practice. Besid