The accuracy of pre-tender building price forecasts: an analysis of USA data

One of the most important aspects of the construction procurement process is the management of client (owner) expenditure. For client expenditure management, risk analysis demands good estimates of the range of possible expenditures likely to occur and their probability of occurrence, while risk management is aided by reducing the range of possibilities. This paper describes the analysis of a new and updated data set of the pre-tender estimating performance of a USA consulting organisation. It is shown that, with a coefficient of variation of 7.82%, the organisation continues to be the leading non-contractor in the field. The analysis then continues to seek a means of improving the estimating performance further by the empirical identification of factors influencing forecasting accuracy. The result of this is to show that, after partialling out the effects of confounding variables, year by year changes account for all the systematic errors that could be detected. These changes are then shown to be significantly correlated with the USA annual inflation rate and a regression model is used to examine the possible effects of adjusting for this in the estimation process.