1、IntroductionMeeting financial objectives is a primary evaluation criterion in assessing the success of a construction project . Relentless market pressures challenge construction companies to reduce construction costs and to increase value created by the capital improvement process. Numerous cost co
2、mponents account for the total cost of a particular project, including but not limited to design fees, permit expenses, financing charges, land acquisition, and construction costs. These project costs are commonly categorized as either direct or indirect for contracting, accounting, taxation, and ot
3、her purposes. Literature reports that the percentage of total cost that is indirect ranges from less than 10% to as much as 40% or more: “ranges 20% to 40%” , “generally 10%” , and “roughly 21%” . Therefore, the construction industry should and can do an improved job of estimating, controlling, and
4、managing indirect construction costs (IDCC).This paper reports the findings of a recently completed project funded by the Construction Industry Institute that explores best or innovative practices currently used for handling IDCC in order to offer mutual and shared benefit to owners and contractors
5、engaged in capital improvement projects. The objectives of this paper are to (1)define IDCC to show how costs can be categorized and their prioritization; (2)identify leading and innovative industry practices for estimating, controlling, and managing IDCC; and (3)establish a correlation among the le
6、vel of effort given to estimating, controlling, and managing IDCC (that is, IDCC practices) and key metrics of project outcome. These objectives were achieved by (1)performing an extensive literature review of IDCC;conducting interviews and surveys of industry professionals and projects;(3)statistic
7、ally analyzing the survey and interview results. The balance of the paper reports the aforementioned methodology and concludes with a recap of major findings, study limitations, and recommendations for future research.Literature ReviewThe literature review on the topic of IDCC resulted in numerous d
8、efinitions for indirect costs, yet only a single definition was identified specifically for indirectconstructioncosts. An “indirect construction cost can be defined as a cost that can be identified with a construction project but not a specific unit of production. Review of literature also revealed
9、that terms such as general conditions, general requirements, and project overhead are often used interchangeably with IDCC. Yet, the literature suggests that there is not a universally accepted categorization framework for the construction industry to partition construction costs into direct and ind
10、irect categories. similarly concluded that many interpretations are used by companies for defining indirect costs. Collaborative owners and contractors would benefit from using a common definition to proactively discuss IDCC. Further, a shared framework of IDCC enables robust organization of interna
11、l project data and for external benchmarking with industry peers.Operational Definition for IDCCNumerous factors affect defining and partitioning costs into direct and indirect groupings. As such, it is unlikely that an industry-wide acceptance of a single definition or approach will be adopted. How
12、ever, an operational definition for IDCC would provide a tool for industry practitioners to further understand IDCC components and thereby increase trust among contracting parties.The scope of this research is limited to the investigation of industry practices for estimating, controlling, and managi
13、ng indirectcosts, rather than all indirect costs associated with capital projects.Fig.1illustrates a matrix model for the categorization of project coststhe shaded box labeledIndirect Construction Costsis the focus of this paper.The operational definition for IDCC is comprised of three parts: a lexi
14、cal definition, a categorization framework, and an aggregate chart of accounts. The following lexical definition is given for IDCC.Indirect construction costs (IDCC) are project expenses incurred by the primary construction company in providing supportive functions and shared general resources which
15、 are (1)typical for proper execution of field construction operations, (2)not accurately or feasibly identifiable with a single direct cost object, e.g.,a discrete construction activity, and (3)not incorporated into a component of the final physical improvements delivered to the owner. With few exce
16、ptions, IDCC are only incurred during the course of construction and only at the project location. In most cases, project costs are clearly attributed to and expensed to a single construction project and typically not a common expense shared across numerous separate construction projects.IDCC Priori
17、tizationThrough the deliberation of subject matter experts, it was deemed prudent to focus on the identification and ranking of a few key IDCC categories believed to most significantly affect project outcomes. Therefore, 56 subject matter experts were asked to select the four “most important,” the o
18、ne “most challenging,” and the one “most wasteful” IDCC categories, based on their own experience. These industry professionals collectively have 987years of experience with an average experience of 18years. Of the 56 experts, 62.5% represent industrial construction, 12.5% primarily work in manufact
19、uring construction, and 25% are from the general building sector.A Pareto chart (Fig.2) depicts that field supervision, major construction equipment, project management, and scaffolding were selected as the four most important IDCC categories.Fig. 2.Pareto plot of relative importance of IDCC categor
20、ies3shows that scaffolding, field supervision, and project management were the IDCC categories selected as the most challenging. This suggests that improvement in these areas may fill a performance gap in current IDCC practices and reduce frustration for many industry practitioners.Based on the resu
21、lts from these prioritization rankings and deliberation by the industry experts, this study focuses on the following four key IDCC categories: major construction equipment, construction, management and supervisory personnel, scaffolding, and temporary provisions. The temporary provisions category in
22、cludes temporary field facilities, temporary roads and parking, temporary offices and services, and temporary enclosures. These subcategories were grouped together because the practices for estimating, controlling, and managing these costs are common, according to the reporting subject matter expert
23、s.Checklists, Process Flowcharts, and Toolsdata-collection interviews with the 56 subject matter experts was conducted to obtain explicit descriptions of effective practices used in industry to estimate, control, and manage IDCC. Information collected through the data-collection interviews provided
24、the necessary data to rigorously document those leading industry practices for estimating, controlling, and managing IDCC such that risks, schedules, and costs are properly optimized for both contractors and owners. This collection of empirical findings was aggregated into an industry-targeted guide
25、book,Playbook of leading industry practices for estimating, controlling, and managing indirect construction costs. In total, this research assembled, created, and published 12 empirical checklists , nine detailed process flowcharts, and 20 practical tools for estimating, controlling, and managing ID
26、CC.This research is beneficial for owners, contractors, and construction managers who want to improve their practices for estimating, controlling, and managing IDCC. It is not intended to offer specific solutions for any particular project type, contractual arrangement, or project location. Instead,
27、 it offers examples of proven industry practices and recommends representative tools that can improve capital project performance. The research findings include practices for four key IDCC categories and are consistently organized into the following four components:1.Explanation of the IDCC category, which includes a brief overview of the category, including definition and relevant issues.2.Considerations checklists, which enable det
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