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The construction cost conundrum

The construction cost conundrum
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First Published: Wed, Nov 26 2008. 10 02 PM IST

Updated: Wed, Nov 26 2008. 10 02 PM IST
Uncertain economic times necessitate financial planning for most households. We can estimate the price of a car or the cost of a vacation. When it comes to estimating building construction costs, however, even experienced professionals are hard-pressed to provide accurate assessments.
Bidding benchmarks
Our firm was recently commissioned to design an office for an international aid organization. Once the drawings were complete, they were sent to a cost estimator. His assessment was used as a reference to evaluate bids from three shortlisted building contractors. Bids submitted by all three contractors exceeded the cost estimator’s benchmark by 35-45%. Typically, a cost estimator reviews construction drawings and calculates the required quantities of construction materials such as steel, cement, timber and glass. Multiplying these quantities with benchmark material and labour rates (published periodically by local public works departments) and adding allowances for the contractor’s overheads—contingencies such as tight completion deadlines or difficult site conditions—it is theoretically possible to calculate a composite project cost estimate. However, this is where the problem originates.
Over the past decade, India’s construction industry has undergone a massive transformation. Architects and engineers can now choose from an array of local and imported materials. Air conditioning, electrical and plumbing systems have improved, with international manufacturers entering local markets. High performance glazing and sophisticated cabinetry and hardware are now common. However, these products are not comparable with the specifications and prices typically issued by public works departments.
Lost labour
According to Ranjit Sabikhi, an architect in New Delhi, construction cost is linked to quality. “It is impossible to create a standard labour rate when the quality of workmanship varies so greatly. Thirty years ago, we had traditional craftsmen—masons, carpenters and metal fabricators affiliated with reputable contractors—who could deliver quality for a certain price. Today construction costs are haywire because acceptable standards of construction quality vary so much,” he says. Sabikhi believes that the construction boom of the 1970s in the Gulf encouraged an exodus of skilled craftsmen from India, disrupting the knowledge transfer of craft traditions from one generation to the next. The majority of recent commercial construction activity in India has emphasized speedy project delivery. With no mandatory qualifications for a contractor, practically anybody can enter the building trade. Sabikhi suggests this has undermined any incentive to train and utilize a skilled workforce. “Today, most contractors employ crews of unskilled labour. The few contractors that are capable of delivering high-quality craftsmanship charge a significant premium for their efforts,” he adds.
Questioning calculations
Architects are justified in questioning notional figures provided by the public works departments. “The government-issued manuals propose construction estimation rates that enshrine mediocrity as the Holy Grail,” says Anuraag Chowfla, a partner at New Delhi-based architecture firm Mani Chowfla. “These unrealistic costs are responsible for so much substandard construction.” While discerning clients pay a premium for high-quality architecture, most construction sites convey no such ambition. Construction inspections for ascertaining quality are seldom mandated or enforced, and cost estimates vary with a contractor’s capabilities. Chowfla suggests that because material costs fluctuate depending on economic conditions, only a market-rate construction bid should be deemed satisfactory. In such a case, the many lines drawn by architects might result in a single and credible bottom line.
Pankaj Vir Gupta and Christine Mueller are partners in the firm vir.mueller architects and are currently based in New Delhi.
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First Published: Wed, Nov 26 2008. 10 02 PM IST