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(CDR-867) Estimating Escalation Experienced During Project Delay - A Case Study

Primary Author: Mr William E Kraus PE FRICS CCE International Aviation Consultants

Audience Focus: Intermediate
Application Type: Experience-Based
Venue: 2012 AACE International Annual Meeting, San Antonio, TX, USA

Abstract: Faced with a proposal for escalation costs when a contractor was delayed in completing the latter phases of a project, estimators needed to benchmark the extent to which construction costs had changed from the original substantial completion date to the anticipated revised substantial completion date. The contractor's proposal, which consisted of a 4 percent increase across-the-board, at first seemed reasonable, even though the proposal also contained remobilization costs that were clearly not. Estimators developed a scheme by which the extent to which costs had escalated was estimated via two different methods - one, by comparing bid costs by the contractor on two individual projects it had bid at the airport in the approximate timeframe of the delay, and a second, by sampling costs from the airports cost database appropriate to the delayed project over the same timeframe. The two different methods yielded similar results and the owner offered a compromise settlement to the contractor. At the time of completion of this paper, the contractor is contemplating the offered settlement.