A New Approach to Developing Conceptual Cost Estimates for Major Highway Projects

Developing a reliable project cost estimate is a challenge for any State Highway Agency (SHA), especially at the conceptual stage. Conceptual estimating is defined in this paper as the estimate prepared when only 30% of the design is complete. This paper describes a statistical approach to produce a reliable conceptual cost estimate when few project design details have been finalized and many assumptions still form the basis of the estimate. This approach used an analysis similar to the Program Evaluation and Review Technique (PERT), which is commonly used in project scheduling, to assign certainty factors to cost estimates. The approach utilizes a combination of historical bid data for major roadway items whose quantities can be estimated early in the development process and historical percentages for other major components of the project, called allowance and contingency factors. The paper focuses on (1) the methodology developed to analyze the historical bid data, (2) the analysis of 14 corridors with 60 projects whose as-bid construction costs add up to about $757 million, and (3) a cross-validation of the approach used to validate the accuracy of the predictive model. Using a PERT-type technique, construction costs were accurately predicted within ±20% at the conceptual stage. However, approximately 70% of the corridor costs were accurately predicted within ±15% of the actual cost. The proposed methodology provides a structured and consistent estimating approach that can be used by any SHA that needs to develop total project delivery estimates at the conceptual design stage.