Improving Mid-Term, Intermediate, and Long-Range Cost Forecasting for State Transportation Agencies (2020) / Chapter Skim
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26 3 Case Study Methodology 3.1 Introduction Case studies are in-depth investigations of subjects, groups, or phenomena on their respective reallife contexts, providing researchers with a better view of the problem at hand and facilitating the detection of issues that could have passed unnoticed with other research instruments. The unique perspective of the research problem provided by a case study allows researchers to better fill intended and unintended knowledge gaps.
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27 was intended for the assessment and comparison of different cost forecasting methods. After completion of the three case studies, the team proceeded to synthesize all results and observations into the outputs listed above in Section 3.2.
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28 The original format of the collected data was not ideal for data analysis and processing, especially to handle the large amounts of data used in this study. Part of the data cleaning efforts undertaken by the research team aimed to reformat the data into a tidy format while merging the data from all projects into a single dataset.
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29 listed in the solicitation documents; or 3) to inflate prices for early activities to reduce financial costs (the cost of borrowing money)
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30 Table 3.2 Existing Construction Cost Indexes Index Components Applicability Updating Frequency Highway Construction Federal Highway Administration: National Highway Construction Cost Index (NHCCI) Bid data from highway construction contracts executed by STAs National Quarterly Minnesota Department of Transportation: Construction Composite Cost Index (CCI)
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31 individually represented by its closest matching MCCI index. After selecting the most relevant group of MCCI indexes for the scope of work under consideration, they are mathematically combined into a single scope-based CCI, which is then used to generate annual inflation rates.
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32 five-level arrangement with the 96 cost indexes developed with CDOT's 40 representative pay items. The lowest level is the Pay Item Level, which contains one cost index for each of the selected 40 pay items.
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33 in Section 1.4.1, the degree at which the matching principle is met would affect the ability of the cost index to meet the proportionality principle. Perfect proportionality could only be achieved after ensuing perfect matching.
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34 Figure 3.4 MnDOT Unit Price Model for Common Excavation 2008-2012 Traditional cost indexing approaches have a limited capacity to consider the economies of scale principle. For example, a traditional indexing approach could indicate a reduction in the price of excavation if the unit price paid last year for 10,000 cubic yards of common excavation is compared against the price paid today for 200,000 cubic yards.
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35 weighted average of the grouped items at the lower level. Weights for this calculation are proportional to the dollar amounts spent on the items under consideration during each indexing period.
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36 Table 3.4 Number of Cost Indexes per Level per Case Study Agency Agency MnDOT CDOT DelDOT Agency Level 1 1 1 Division Level 12 5 7 Sub-Division Level 2 21 22 14 Sub-Division Level 1 28 28 21 Pay Item Level 61 40 37 Total No. of Cost Indexes 123 96 80 As moving from the Pay Item Level to the Agency Level, the number of digits used to identify the MCCI indexes is reduced, meaning that now the index represents a broader scope of work.
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37 specific CCI. It should be noted that, at this point of the process, the relative relevance of each item is more important than predicting the actual prices to be submitted by the successful contractor at eh letting date.
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38 developed for MnDOT (see Section 3.6.4)
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39 The process to develop program-specific indexes for programs that involve various types of work (such as LRTPs) has a few additional steps, but it is still a simple four-step process: 1.
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40 prices submitted by both successful and unsuccessful contractors. The following section provides more information about all the MCCI versions developed for each of the three case study agencies.
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41 Table 3.8 CDOT - Multilevel Construction Cost Index Classification Geographic Classification Description Statewide Multilevel Construction Cost Indexes Statewide MCCI with Awarded Unit Prices Statewide MCCI with Average Unit Prices per Project Statewide MCCI with Median of Unit Prices per Project Statewide MCCI with All Unit Prices Regional Multilevel Construction Cost Indexes Region Description Northwest Northwest MCCI with Awarded Unit Prices Northwest MCCI with Average Unit Prices per Project Northwest MCCI with Median of Unit Prices per Project Northwest MCCI with All Unit Prices Northeast Northeast MCCI with Awarded Unit Prices Northeast MCCI with Average Unit Prices per Project Northeast MCCI with Median of Unit Prices per Project Northeast MCCI with All Unit Prices Southwest Southwest MCCI with Awarded Unit Prices Southwest MCCI with Average Unit Prices per Project Southwest MCCI with Median of Unit Prices per Project Southwest MCCI with All Unit Prices Southeast Southeast MCCI with Awarded Unit Prices Southeast MCCI with Average Unit Prices per Project Southeast MCCI with Median of Unit Prices per Project Southeast MCCI with All Unit Prices Table 3.9 DelDOT - Multilevel Construction Cost Index Classification Geographic Classification Description Statewide Multilevel Construction Cost Indexes Statewide MCCI with Awarded Unit Prices Statewide MCCI with Average Unit Prices per Project Statewide MCCI with Median of Unit Prices per Project Statewide MCCI with All Unit Prices Regional Multilevel Construction Cost Indexes Region Description North North MCCI with Awarded Unit Prices North MCCI with Average Unit Prices per Project North MCCI with Median of Unit Prices per Project North MCCI with All Unit Prices Central Central MCCI with Awarded Unit Prices Central MCCI with Average Unit Prices per Project Central MCCI with Median of Unit Prices per Project Central MCCI with All Unit Prices South South MCCI with Awarded Unit Prices South MCCI with Average Unit Prices per Project South MCCI with Median of Unit Prices per Project South MCCI with All Unit Prices The evaluation of the different MCCI versions outlined in Tables 3.7 to 3.9 was intended to determine if different geographic conditions could result in different inflationary trends in the construction industry, as well as to determine what index input would more effectively represent the local construction market. Different geographic conditions bring different challenges and
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42 requirements at the program and project level. Therefore, different prices could be obtained for the same type of work or commodity in different locations.
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43 Figure 3.8 CDOT Geographic Regions Figure 3.9 DelDOT Geographic Regions The geographic classification of indexes is just an additional partition to the available data in an attempt to analyze price volatility at the regional level. Thus, DelDOT's "Statewide MCCI with Awarded Unit Prices" was developed with historical data from all available projects across the state and using only unit prices submitted by the awarded contractors.
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44 The regional classification done for each agency was intended to produce regions large enough to provide a constant stream of bid data, but at the same time, not too large to keep them relevant geographic-wise. The regional classification also tried to meet the apparent criteria followed by the selected agencies for the designation of their operational districts/regions.
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45 by MCCIs by matching index updating frequencies with in- and out-of-season months. Figure 3.10 clearly illustrates a seasonal pattern in MnDOT's contracting activities with the vast majority of the annual construction program awarded during the first six months of every calendar year.
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