Cost Escalation Factors

Construction projects have a long history of cost escalation (General Accounting Office 2003). The potential factors that lead to project cost escalation have been identified through a large number of studies and research projects as described in the literature. The possible factors driving cost escalation of project cost can be divided by project development phases: planning and execution. As defined in this research, planning involves all project development phases prior to bidding including long-range planning, programming, advanced planning/preliminary design, and final design. Execution entails contract bidding, award, project construction, and closeout. The factors that may affect the estimate in each development phase are by nature internal and external. Factors that may contribute to cost escalation. These factors are numbered for reference only and do not suggest a level of influence. It has been constructed to provide an over arching summary of the factors that have been identified from many sources and a better understanding of how project estimates are effected. It is important to note that one of the factors points to problems with estimation of labor and material cost, but most of the factors point to “forces” that impact project scope and timing.