Have you ever encountered a project where the estimated cost
differed from the actual cost to build? Thought so.
There are a multitude of reasons why this can occur, and many are
out of the control of the best quantity surveyors and smoothest
Despite this, there is much to learn from reviewing actual
costs. That's why backcosting is one of the tools we use to
improve the accuracy of our estimation. Backcosting is
collection of the actual cost to build a specific project and
analysis of these results against the project's estimates or
tenders. Such analysis of construction costs contributes to
the ongoing quality of the rates we use for estimates and
continuously enhances estimation precision.
Backcosting can also be used to highlight market trends.
For example, at Kwanto one of the ways we analyse cost is by gross
floor area (GFA) for different project types. These 'ball
park' figures can provide insights into fluctuations in the
market. Jim Gordon, in our office, recently presented a GFA
analysis to the team. The analysis was based on the
backcosting data collected from projects that Kwanto provided
services during 2017. This snapshot showed that the average
GFA cost for a new, residential, single-dwelling build was
$3,941/m² and a residential, single-dwelling re-clad was
$2,090/m². These results indicate that the days of $2,000 -
$2,500/m² are long gone and using that range may not be reliable.
Our analysis also highlights that a number of factors may
contribute to rate increases including market activity (demand
outstripping supply), costs related to the changes in health and
safety, subcontractor driven market extending durations of projects
and changes imposed by consenting authorities.
The elevated 'per square metre rate' may also be a result of our
residential sample being architecturally designed, 'top end'
builds. A more diverse sample of residential builds may bring
costs back somewhat and our hunch is that the default cost per
square metre is likely to sit closer to $3,200/m², roughly 1.5
times what it used to be. So, there is more work to do to
back this up and our backcosting analysis will continue to help us
make sense of market trends and inform our estimates.