Construction cost estimation and safety quantification in

SARF/IRF 2014 | 2-4 September, South Africa

Construction cost estimation

and safety quantification in

international development

Uven Chong

Arizona State University

Millennium Challenge Corporation

1


• Project Purpose: Evaluate the Millennium

Challenge Corporation’s (MCC) approach to road construction by:

1. Improving Cost Estimation

2. Quantifying Safety Impacts

Purpose

2

Purpose Context Cost

Background

Cost

Methods Cost Results

Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Millennium Challenge Corporation

o Constrained by a 5-year development timeline.

o High-performing, low-income countries.

o Road construction is a large part of MCC: 1/3.

o $2.5 billion in road construction since 2004.

o 1,200 km roads under contract.

o 14 countries across 4 continents.

Context

3


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


0

100

200

300

400

500

600

Ho

nd

ura

s

Ca

pe

Ver

de

Nic

ara

gua

Va

nu

atu

Geo

rgia

Gh

an

a

El S

alv

ad

or

Ma

li

Mo

zam

biq

ue

Mo

ngo

lia

Ta

nza

nia

Bu

rkin

a F

aso

Sen

ega

l

Ph

ilip

pin

es

Len

gth

at

Sig

nin

g (

km

)

CompactSigningDate 2005 2006 2007 2008 2010

2009

14 compacts63 contracts

4


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Literature Review

o Focused primarily on developed countries.

Availability of resources.

Currency fluctuations.

o Lack of methodological consistency.

Initial cost estimates.

Database standardization.

Cost Estimation Background

5


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Standardized Milestones and Database

Cost Estimation Methods

6

Compact

(Country)

Project Name

Activity Name

Sub-Activity

Task (Contract)

Project

Identification

Sector Name DAC Code

Sector

Identification

Phase

Identification

Funding

Authorization

Engineers’ Estimate

Contract

Award

Final

Cost

Cost Values

Cost $ Road TraitsLengthLanes

AADTMaterial

IRI

New/Rehab

Date


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Road Unit Costs (World Bank vs. MCC)

Cost Estimation Results

7

0

2

4

6

8

10

12

14

0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25

Fre

qu

ency

$M / km / lane

MCC Summary:

n = 29Countries = 13Mean = $459,533

Median = $371,401Min = $95,427Max = $2,228,754

WB Summary:

n = 93Countries = 40Mean = $433,000

Median = $479,500Min = $71,000Max = $916,000

Source:

Archondo-Callao 2000


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Cost Changes (World Bank)


8

0.0

0.5

1.0

1.5

2.0

2.5

Eng. Estimate Contract Award Final Cost

Mean

Min

Max

Source:

Alexeeva et al. 2008 and Alexeeva et al. 2011


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Economies of Scale (MCC)


9

y = 3.20x-0.58

R² = 0.51

0

1

2

3

0 50 100 150 200

Fin

al C

ost

($M

/ k

m /

lan

e)

Road Length Constructed (km)

n = 26countries = 9


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• International development institutions must adopt a

standardized metric to evaluate cost overruns.

• MCC road unit costs and cost variability are slightly better

than equivalent studies in international development

literature but not as good as developed country contexts.

• There is some evidence of underbidding in literature (Iimi

2013) that suggests incentives must be better aligned.

• Economies of scale could lower costs but at the expense of

disadvantaging smaller and local firms (Iimi et al. 2012).

Cost Estimation Discussion

10


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Global Context

Road Safety Background

11


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion

Source: WHO 2013, World

Bank Database

Increased Motorization Lack of Road Safety

Consideration

Road Traffic Injuries and

Mortalities+ =

In low and middle income

countries:

• Motor vehicles per capita

increased 32% between

2004-2008.

• Road sector fuel

consumption per capita

increased 45% between

2000-2010.

• Paved roads increased 60%

between 2004-2009.

Only 7% of the global

population live in areas with

adequate road traffic laws

as judged by the WHO road

traffic risk factors

In low and middle income

countries:

• 1.13 million deaths occur

from road traffic.

• Road traffic deaths are

the 9th leading global

cause of death.

• Road traffic deaths are

estimated to be 1.9

million by 2020.


• Literature Review Design


12


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion

External road

safety initiatives

Multilateral Unilateral

Name Date Primary Members

UN Road Safety

Collaboration

2004-Present UN, WHO, World

Bank

Multilateral

Development

Bank Initiative

2011-Present World Bank, AfDB,

ADB, EBRD, EIB,

IDB, ISDB

Organization Date Program

World Bank2006-Present

Global Road Safety

Facility

2008 HDM-4 Model

International

Finance

Corporation

2012Performance

Standards

2007

Environmental,

Health, and Safety

Guide

Inter-American

Development

Bank

2012Road Safety

Strategy


• Literature Review Findings

o Road safety policy is limited and lacking in

other development organizations.

o Environmental and health standards touch on

road safety but are not quantitatively specific.

o Road safety guidance is limited to design and

construction (post-construction is not detailed).


13


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Scenario Analysis

Road Safety Modeling

14


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion

Baseline vs. Road Construction Scenarios

or

Road Construction vs. Road Safety Intervention Scenarios

A = Indicators (fatalities, injury, property)

V = Value of indicators

i = Number of factors evaluated


• Example: Road Safety Intervention


15




Adding speed bumps or other speed management tools:

1. Average speed is lowered by 15%.

2. Correlate the speed change with indicator change.


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion



Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion



16

-75%

-50%

-25%

0%

25%

50%

-16% -12% -8% -4% 0% 4% 8%

Ch

an

ge

in

Cra

sh R

ate

Change in Mean Speed

Fatal

Property Damage Only

Injury

Source:

US FHWA 2014



o An accident rate of 200 per year on a selected road segment.

o Calculate ΔAi:

Mean speed decreases by 15%.

Correlated to 15% decrease in property damage accidents.

Accidents decrease to 30 per year (ΔAi = 0.15 * 200).

Assume that the average property cost per accident is $3,073 (RMI 2014).

Δ Cost Saved = $3,073 * 30 = $92,190 per year.


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Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Data Challenges

o Incomplete accident rate data.

o Controversial valuation data.

o Application across geographic regions.


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Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


Road Safety Discussion

19

• Road safety is a health epidemic that is disproportionately

suffered by low and middle income countries.

• Road construction is important to economic growth.

• Development institutions are inconsistent in their

application of road safety policies.

• A quantitative model that compares intervention scenarios

can provide deliberate clarity to address safety.

• Data collection and maintenance is vital to the accuracy of

scenario-based analysis.

Purpose Context

Cost

Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


General Conclusions

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• Roads are an integral factor in economic development.

• To fully achieve roads benefits, investment and safety

costs must be accurately tracked.

• Tracking is hindered by incomplete and inconsistent data.

• Our analysis revealed a norm of cost escalation, the

existence of underbidding, and economies of scale.

• Data analysis can identify trade-offs and inform policy.


Background

Cost


Cost

Discussion

Safety

Background

Safety

Modeling

Safety

Discussion


• Alexeeva, V., Padam, G., & Queiroz, C. (2008). Monitoring Road Works Contracts and Unit Costs for Enhanced

Governance in Sub-Saharan Africa. Washington DC: World Bank.

• Alexeeva, V., Queiroz, C., & & Ishihara, S. (2011). Monitoring Road Works Contracts and Unit Costs for Enhanced

Governance in Europe and Central Asia. Washington DC: World Bank.

• Archondo-Callao, R. (2000). Roads Works Costs per Km. Retrieved from

http://www.worldbank.org/transport/roads/c&m_docs/kmcosts.pdf

• Harris, G.T.; Olukoga, I.A. (2005) A cost benefit analysis of an enhanced seat belt enforcement program in South

Africa, Injury Prevention, 11, 102-105.

• Iimi, A. (2013) Testing Low-Balling Strategy in Rural Road Procurement, Review of Industrial Organization, 43, 243-

261.

• Iimi, A.; Benamghar, R. (2012) Optimizing the Size of Public Road Contracts, Policy Research Working Paper, World

Bank Paper 6028.

• Kumaraswamy, M.M. (1998) Industry development through creative project packaging and integrated management,

Engineering, Construction, and Architectural Management, 5, 228-237.

• RMI (2014) Costs of Auto Crashes & Statistics [online] http://www.rmiia.org/auto/traffic_safety/Cost_of_crashes.asp

• US FHWA (2014) Crash Modification Factors Clearinghouse [online]: http://www.cmfclearinghouse.org/

• World Bank (2014) Data [online] http://data.worldbank.org/

• World Health Organization (2013) Global Health Observatory [online] http://www.who.int/gho/road_safety/en/

References

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http://www.worldbank.org/transport/roads/c&m_docs/kmcosts.pdf

http://www.rmiia.org/auto/traffic_safety/Cost_of_crashes.asp

http://www.cmfclearinghouse.org/

http://data.worldbank.org/

http://www.who.int/gho/road_safety/en/

Construction cost estimation and safety quantification in

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