Date of Award
3-2024
Document Type
Thesis
Degree Name
Master of Science
Department
Department of Systems Engineering and Management
First Advisor
Benjamin R. Knost, PhD
Abstract
Construction escalation is a significant economic phenomenon that plays an important role in the construction industry. It refers to the steady increase in the costs associated with facility and infrastructure projects over time. Accurately capturing escalation is a key component in the development of construction cost estimates, and failure to adequately account for escalation can have far-reaching consequences. This is especially true for Military Construction (MILCON) projects, which account for billions of dollars of defense spending annually. The Department of Defense (DoD) utilizes a unit cost approach to develop rough order of magnitude (ROM) estimates for MILCON projects. The DoD methodology accounts for escalation by using the average of three common construction cost indices and calls the resulting index the Selling Price Index (SPI). The methodology has two inherent assumptions that are explored in this thesis: (1) escalation occurs at the same rate across all facility types, and (2) construction cost escalation is comparable between the civilian sector and the DoD. The results in this paper suggest that both assumptions are invalid, with the second assumption being the most consequential to MILCON cost-estimating practices. An adjustment factor to the SPI is proposed to mitigate the apparent disparity between the civilian sector and MILCON escalation.
AFIT Designator
AFIT-ENV-MS-24-M-157
Recommended Citation
Rieben, Benjamin D., "An Analysis of Military Construction Cost Escalation and How It Is Accounted for in Cost Estimating Practices" (2024). Theses and Dissertations. 7767.
https://scholar.afit.edu/etd/7767
Comments
A 12-month embargo was observed for posting this work on AFIT Scholar.
Distribution Statement A, Approved for Public Release. PA case number on file.