Improving Mid-Term, Intermediate, and Long-Range Cost Forecasting: Guidebook for State Transportation Agencies (2020) / Chapter Skim
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Pages 37-44
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From page 37... ...
37 Index-Based Cost Forecasting Approaches 4.1 Introduction This chapter provides guidance on quantitative cost forecasting methodologies that can be used to generate effective inflation rates from the suitable cost indexes identified by the protocol explained in Chapter 3. Chapter 2 has already explained the implications associated with the methodologies addressed in this chapter as well as the circumstances under which they would be more appropriate.
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From page 38... ...
38 Improving Mid-Term, Intermediate, and Long-Range Cost Forecasting: Guidebook for State Transportation Agencies where y = forecast index value, x = intended forecasting time horizon, a and b = constants, and e = exponential constant. Figures 4-1 and 4-2 show the simple and compound annual inflation rates obtained from a linear and an exponential regression model, respectively, for the scope-based asphalt paving construction cost index (CCI)
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From page 39... ...
Index-Based Cost Forecasting Approaches 39 risk-based forecasting outputs. This is an iterative process designed to maximize the value of the available data.
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From page 40... ...
40 Improving Mid-Term, Intermediate, and Long-Range Cost Forecasting: Guidebook for State Transportation Agencies 4.3.4 Moving Forecasting Error: Step 4 At the end of Step 3, the STA would have several forecasting error measures for different forecasting periods. With a 20-year data set, the agency would have 39, 38, 37, .
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From page 41... ...
Index-Based Cost Forecasting Approaches 41 errors from Figure 4-3, but this time with its respective confidence intervals. On the basis of this figure, the Colorado DOT could reasonably assume, with a 90% confidence level, that any 15-year asphalt paving cost forecast estimated in this region with a 4% compound inflation rate would offer a forecasting error between +12% and −27%.
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42 Improving Mid-Term, Intermediate, and Long-Range Cost Forecasting: Guidebook for State Transportation Agencies Figure 4-5. Example of MFE output: Risk-based forecasting timeline for forecasting factors.
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From page 43... ...
Index-Based Cost Forecasting Approaches 43 Instead of directly producing risk-based forecasting timelines from the calculated forecasting factors, the Colorado DOT could also use Figure 4-4 to estimate an annual inflation rate for asphalt paving activities in the region under consideration. This inflation rate could be shared with other estimators across the region to facilitate cost forecasts without the need of sharing a spreadsheet with all forecasting factors.
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From page 44... ...
44 Improving Mid-Term, Intermediate, and Long-Range Cost Forecasting: Guidebook for State Transportation Agencies point of reference. In a perfect world, any arbitrary inflation rate (even simple inflation rates)
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