Summary:
Accurate cost estimation plays a pivotal role in effective budget planning for highway construction projects, ensuring
that resources are allocated appropriately and projects are completed within financial constraints. Traditional cost
estimation methods, commonly used by transportation agencies like the Michigan Department of Transportation
(MDOT), often rely on historical data, which can fail to account for dynamic market conditions and inflation. This report
explores advanced cost estimation approaches by developing contract- and item-level cost indices, integrating economic
factor-based index predictive models, and applying index-based methods to cost estimation and budget planning. The
report begins by identifying the key factors influencing construction pricing, including economic indicators, market
factors, and project-specific variables. New cost indices are developed to track price trends for specific contracts and
pay items, allowing for more accurate adjustments to historical prices. Next, the report introduces economic factor-based
predictive models to forecast the Michigan Highway Construction Cost Index (MHCCI). These models incorporate
economic trends, such as inflation and market dynamics, to predict future index fluctuations more effectively than
traditional methods. Furthermore, the report details how these indices and the newly developed MHCCI tool can be
integrated into budget planning and cost estimation processes. This index-based approach provides a more precise
framework for estimating construction costs and improving budget planning. The report also includes a comparison of
state and regional cost indices to highlight geographic variations in MHCCI and construction pricing, offering insights
into how regional factors affect construction costs. In conclusion, the findings and recommendations in this report
provide MDOT with innovative tools for cost estimation and budget planning, aiming at more accurate cost forecasting
and better resource allocation.
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