Modeling Cost Escalation in Large Infrastructure Projects
Publication: Journal of Construction Engineering and Management
Volume 132, Issue 8
Abstract
Cost overruns in large infrastructure projects have been commonplace in the past decades. Budgeting for cost escalation is a major issue in the planning phase of these projects. In this paper, we first review various methods of forecasting escalation factor and study the changes in construction costs in the past 25 years by analyzing movements of a cost index. We then introduce a system for modeling the escalation uncertainty in large multiyear construction projects. The system uses a Monte Carlo simulation approach and considers variability of project component durations and the uncertainty of escalation factor during the project lifetime and calculates the distribution for the cost. System application is demonstrated using a numerical example. The system can be used by planners and cost estimators for budgeting the effect of cost escalation in large projects with multiyear schedules.
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Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 132 • Issue 8 • August 2006
Pages: 853 - 860
Copyright
© 2006 ASCE.
History
Received: Sep 6, 2005
Accepted: Dec 28, 2005
Published online: Aug 1, 2006
Published in print: Aug 2006
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