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- Time referenced cost estimate – If the cost of construction of facilities is known at a certain time, the present cost can be estimated by multiplying it with the cost index, with reference to that time. Generally government finance department publishes cost index based on depreciation, etc. But this cost index is very crude. Construction department keeps the cost index based on the items and method of construction used.
There are some limitations of such method. During the time, technology changes; productivity of various equipment may change; degree of competition may be different. One should be aware of all these factors while using the cost index to estimate the constructed facilities.
- Cost capacity factor – This factor refers to the change in cost of built-up facilities with the change in size of the project of similar type. If C1 and C2 be the cost of facilities to be built and old facilities. Let their size be Q1 and Q2 . We can calculate the cost of the new facility as
Where x is called the capacity factor. Many organizations publish the value of capacity factor. It is reasonable to consider cost capacity factor between 0.6 to 0.8.
The capacity factor method and time reference method can be combined.
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