Pareto Principle in Scoping-Phase Cost Estimating: A Multiobjective Optimization Approach for Selecting and Applying Optimal Major Work Items
Publication: Journal of Construction Engineering and Management
Volume 148, Issue 8
Abstract
Cost estimation is critical to a typical transportation project’s development process. Specifically, project owners use cost estimates during the scoping phase to set project budgets for funding approval and cost management. Because of the lack of detailed design, state transportation agency (STA) estimators often rely on the Pareto principle, also known as the rule, in early cost estimating by estimating only high-impact work items and roughly calculating the costs of remaining items using a fixed percentage. However, it is a heuristic rule of thumb that does not apply to every scenario. Moreover, STAs’ guidance is minimal, and few studies have investigated the validity of this common practice. This study proposes two novel models that utilize well-established multiobjective optimization methods to automatically determine optimal major work items and necessary related information to apply the items to STAs’ scoping-phase estimating of new projects. A case study was conducted using an STA’s actual historical bid tabulation data for two project work types. The first model’s output shows that 10% and 20% of the work items can respectively contribute up to 92% and 97% of total project cost, and the cost contribution ratios vary with not only project work types but also projects under the same type, with coefficients of variance minimized simultaneously and calculated by the model. Because of the variance, mean or median measures can represent the center of cost percentages for estimating new projects’ total cost from major items’ costs. The second model’s results reveal that using the median is preferred because of lower expected errors. Also, using an optimal 10% item set and the median of its cost contribution ratios in past projects to estimate future projects results in the approach’s expected average error of 8.5%, which is acceptable in the scoping phase.
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Data Availability Statement
The data used during the study were provided by a third party. Direct requests for these materials may be made to the provider as indicated in the Acknowledgments. Some models or codes that support the findings of this study are available from the corresponding author upon reasonable request.
Acknowledgments
The authors would like to acknowledge that the Iowa Department of Transportation provided the bid tabulation data for this study.
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© 2022 American Society of Civil Engineers.
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Received: Oct 15, 2021
Accepted: Apr 25, 2022
Published online: Jun 15, 2022
Published in print: Aug 1, 2022
Discussion open until: Nov 15, 2022
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