The relationship between the performance of the economy and the costing of building projects : a case study of school buildings in Egypt

Abstract

Cost estimating and cost modelling for building projects have attracted the attention of many scholars. Previous research has laid emphasis on the product physical variables and did not explicitly include the economic variables. This study aims at investigating the impact of the performance of the economy on the cost of building projects by explicitly considering the relevant economic indicators in the cost estimating process. The unique attributes of the National Project for Building Schools in Egypt that is running since 1992, provided the opportunity to focus the light on the economic variables due to the standard design applied to thousands of school buildings. The study started by reviewing the current practice in cost estimating for building projects in Egypt seeking to identify the influential cost factors and to further investigate the level of awareness of the impact of the economic changes on the cost of buildings as perceived by the experts. In addition, the study aimed at developing an explanatory cost model illustrating the relationship between the relevant economic indicators and the cost of school buildings in order to quantify the impact of the economic changes on the costing of buildings. This research adopted a mixed methodology in a triangulation approach that was conducted in two stages. A set of 18 interviews with experts from the industry was followed by a survey covering a sample of 400 schools. The results indicated that the quantity surveyor’s method is the prevailing cost estimating technique in Egypt. Practitioners in general, showed a blurred understanding of the fundamentals of economic and did not explicitly consider the economic indicators in the cost estimates for building projects. The cost modelling of the survey data adopted a multiple regression technique and factor analysis. Two sets of Cost Models including 6 economic indicators as independent variables, besides other product variables, were developed. The results indicated that the economic indicators were significant cost variables. Hence, the impact of the economic changes on the cost estimates of buildings can be quantified. The produced models indicated that the cost of school buildings, expressed in real terms, tend to increase during periods of economic recession. The produced model is useful to cost estimators working for government clients as well as contractors, given the rising application of standard design in various sectors within the construction industry in Egypt. Further work is required to gauge this impact across various sectors of the construction industr