Characteristic items

a new approach to pricing and controlling construction projects

Malcolm Horner, Rashad Zakieh

    Research output: Contribution to journalArticle

    16 Citations (Scopus)

    Abstract

    Recent research has demonstrated the feasibility of identifying within any category of project, a small number of cost-significant work packages whose value represents a consistently high proportion of the total bill value. Using the allied principle of quantity-significance, it proved possible to build simple models which could predict both the cost and the duration of a project. In the course of that work, a surprisingly linear relationship between value and quantity was noted. This paper reports the background to and consequences of that finding. Quantity-significant work packages are formed by aggregating those items within a trade for which a linear regression of value against quantity yields a correlation coefficient greater than 0.99 and an intercept insignificantly different from zero. The price of packages formed in this way can be determined simply by applying to all the items within the package the rate associated with the largest quantity, the so-called ‘characteristic item’. Application of the concepts of quantity-significance and characteristic items is expected to lead to simpler estimating and more effective control procedures,because there isno longer any need to allocate cost and resources to each individualitem contributing to a work package.
    Original languageEnglish
    Pages (from-to)241-252
    Number of pages12
    JournalConstruction Management and Economics
    Volume14
    Issue number3
    DOIs
    Publication statusPublished - 1996

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    Costs
    Linear regression
    Construction project
    Pricing
    Proportion
    Relationship value
    Resources
    Correlation coefficient

    Cite this

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    Characteristic items : a new approach to pricing and controlling construction projects. / Horner, Malcolm; Zakieh, Rashad.

    In: Construction Management and Economics, Vol. 14, No. 3, 1996, p. 241-252.

    Research output: Contribution to journalArticle

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    T2 - a new approach to pricing and controlling construction projects

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    AU - Zakieh, Rashad

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    AB - Recent research has demonstrated the feasibility of identifying within any category of project, a small number of cost-significant work packages whose value represents a consistently high proportion of the total bill value. Using the allied principle of quantity-significance, it proved possible to build simple models which could predict both the cost and the duration of a project. In the course of that work, a surprisingly linear relationship between value and quantity was noted. This paper reports the background to and consequences of that finding. Quantity-significant work packages are formed by aggregating those items within a trade for which a linear regression of value against quantity yields a correlation coefficient greater than 0.99 and an intercept insignificantly different from zero. The price of packages formed in this way can be determined simply by applying to all the items within the package the rate associated with the largest quantity, the so-called ‘characteristic item’. Application of the concepts of quantity-significance and characteristic items is expected to lead to simpler estimating and more effective control procedures,because there isno longer any need to allocate cost and resources to each individualitem contributing to a work package.

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