“I have just been assigned a new project located overseas. Management has informed me that they expect me to come up with a Class 5 level cost on this new project for a management meeting in just a few days as they have completed a similar project in our home country. However, as my cost data is only relevant to my current location. How do I estimate the cost of a similar project in another country in such a short time?”
If this situation sounds familiar, do not worry as we at Aarasab NL use ‘Location Factors’ to project our project estimate (USGC based) to almost any part of the world. This is how, based in the Netherlands, Aarasab NL has been able to successfully complete project estimates around the world.
So … what are these magic factors?
Basically, the concept is not new and AACEI (Association for Advancement of Cost Engineering International) has even produced a Recommended Practice (#28R-03) to discuss this further.
Aarasab NL’s location factors were built up using published location data that is area specific and identify differences in construction materials, craft labour hourly rates, productivity differentials, equipment usage or the lack thereof, engineering quality / costs, taxes, freight costs as well as import duties.
What we do not include are future price escalation, land costs as well as currency conversions. These factors are then benchmarked regularly against Aarasab NL’s library of completed projects for accuracy and ‘tweaking’. All estimates produced by Aarasab NL is based on US Dollars and can be converted to any currency as required by the client.
It should be noted that these factors are only used in early phase estimates at the conceptual stage and are primarily developed to assist owners to identify go/no-go projects at an early stage. This is critical for the efficient management of capital funding which is limited in supply.
Though only used for early phase estimates, it does provide a surprisingly good cost within its range of accuracy. Under the usage of an experienced practitioner, it is well capable of providing owners with a good indication of where to apply their capital funds for maximum shareholder benefit.
If you would like to know more about how these factors are developed, accuracy range, applicability please do let us know on our Contact Us page.