INDEPENDENCE A “Best Practice" for Public Procurement of Construction Cost Estimating and Cost Management Services
T
he problem of cost predictability was introduced by Public Works and Government Services Canada (PWGSC) at the joint Government of Canada/Canadian Construction Association (CCA) meeting in April 2003, where the department identified a need to improve the accuracy of its pre-tender construction estimates (Class A estimate) which were increasingly resulting in variances of greater than 30% from the bids received.1 The Joint Federal Government/Industry Cost Predictability Taskforce (November 2012) stated: “It is highly problematic for any one individual or agency, no matter how qualified or “in tune” with local conditions and market influences, to arrive at a consistent and accurate prebid estimate for construction services.”1 A recent study of 258 major roads, tunnels, bridges, urban transit, and interurban rail projects in 20 countries on five continents concluded that 90% of megaprojects experienced a cost overrun with an average cost increase of 28%.2
A 2006 study of cost overruns on Canadian transportation projects conducted by Joseph Berechman and Qing Wu examined 163 routine highway, bridge, and tunnel projects on Vancouver Island, and found that eight out of ten had cost overruns. The average cost overrun was 5.5 percent, while a considerable share of the projects had far larger cost increases.3 Given the financial risks associated with capital projects, many government procurement agencies engage with cost consulting firms to provide them with Project Cost Estimates. Typically, these firms will be consulting Quantity Surveying firms, with professional staff carrying the designation Professional Quantity Surveyor.4 The Canadian Association of Consulting Quantity Surveyors (CACQS/ ACCEC)5 conducted an RFP Audit in 2017, and again in 2019, looking at RFPs (asking for project cost estimates) from the Government of Canada, the provinces, municipalities, as well as college, hospital, and school boards. The audits specifically looked at to
24 | CONSTRUCTION ECONOMIST | www.ciqs.org | Winter 2021
whom who the cost consultant would be reporting: the owner (government ministry, agency or Board of Directors) or the design consultant (typically architects or engineers). In 2017, the audit (of 110 randomly selected RFPs) revealed that 18% of the RFPs asked the cost consultant to report directly to the owner, whereas the other 82% of RFPs had the cost consultant reporting to the architect or engineer (as part of their team). In 2019, our second audit of 130 RFPs revealed that 35% of the RFPs asked the cost consultant to report directly to the owner, and 65% of the RFPs asked the cost consultant to report to the design consultant. A further breakdown of the 2019 RFP audit results showed that one agency, Infrastructure Ontario, had the cost consultant reporting directly to the owner in 88% of their RFPs, whereas for all of the other agencies, only 31% of their RFPs asked the cost consultant to report directly to the owner.
To return to Table of Contents CLICK HERE
