JCBM (2018) 2(2). 42-50 Exploring the Components of Cost on Construction Projects A. Windapo1, A. Moghayedi2, D. Oliphant3 and A. Adediran4 1,2,3,4 Department of Construction Economics and Management, University of Cape Town, South Africa Received 3 April 2018; received in revised form 26 June 2018, 12 July 2018; accepted 21 July 2018 https://doi.org/10.15641/jcbm.2.2.2018.573 Abstract This study examines the components of construction projects and whether there are construction resources that are key project constituents. The rationale for the study stems from the unexplained assumptions regarding the primary components responsible for increases in construction costs in South Africa, due to the lack of a national building cost database. The study adopts a qualitative research approach that employs case studies of six new and six refurbished projects, to obtain the necessary data to answer the research questions. The study found that the primary cost constituents of construction projects were materials and sub-contracted work, accounting for 63.69% and 74.6% of the value of renovation and new construction work respectively. On the average, the major materials by value used in construction projects were identified as reinforcement, cement and filling, while electrical installation was the primary sub-contracted item by value. Based on these findings, the study concluded that future levels of construction costs could be predicted, when levels of specialist subcontractor costs and building material costs are known. To improve cost performance of project, the study recommends that the subcontractor and material inputs into construction projects should be carefully managed, both on projects and in the construction industry. The study contributes to the literature on resource planning and control in construction. Keywords: Cement, Construction cost, Electrical installation, Reinforcement, Specialist subcontractor. 1. Introduction Most construction contracts are awarded on competitive basis and this obliges tenderers to prepare bids based on accurate prediction (Ng, Cheung, Skitmore, Lam & Wong, 2004). Construction clients often demand early and accurate cost advice, because this assists in determining budget, predicting tender price and managing design (Lowe, Emsley, & Harding, 2006). However, increases in construction costs also affect the following: building contract price (Ashuri & Lu, 2010), contractors’ profit margins (in the absence of any provision in the contract) (Chappel, Cowlin, & Dunn, 2010), and they create major financial stress and difficulties within the project lifespan. There are also effects such as the inability of developers to deliver affordable housing, high tender valuation, a decrease in tender competition and poor construction industry performance. This becomes more difficult on infrastructure projects, such as the Medupi power station in South Africa, which may experience project challenges persisting for many years. 1 Corresponding Author. Tel: +27216502049 Email address: Abimbola.windapo@uct.ac.za The South African construction industry, like the other sectors of the economy, has been facing several challenges over the past few years (since 2012). With 1.431 million people employed in the construction industry (Stats SA, 2018) it plays a crucial role as a major driver of economic growth and development; thus, the need arises for a proper understanding of the main project components by value, to provide more accurate knowledge of cost indicators and inflators in the construction industry. Furthermore, due to the effect that cost increases in construction have on project performance and on construction industry stakeholders, a study is essential to identify the components responsible for the increases in the cost of construction work in South Africa. This is because so far, only unexplained assumptions have described how cost components are related to key project constituents. This paper therefore presents a review of literature on the cost of delivering infrastructure projects, and descriptions of construction cost components, in medium to large construction University of Cape Town Journal of Construction Business and Management http://journals.uct.ac.za/index.php/jcbm https://doi.org/10.15641/jcbm.2.2.2018.573 A. Windapo et al./ Journal of Construction Business and Management (2018) 2(2). 42-50 43 projects. The research methodology used in the study is articulated, and the results of the study and the conclusions derived from the study are also presented. 1.1 Overview of the delivery cost of construction projects A comparison of the construction cost per square metre between South Africa, Brazil, Russia, India and China (BRICS), the G8 and some African Union (AU) countries, shows that South Africa has relatively lower construction costs than most other countries, at only $741/sq.m (Compass International Consultants Inc, 2016). Labour productivity is also lower in South Africa: it takes an average South African worker 1 450 hour to complete a task, compared with 1 000 hours by a labourer in the USA. The USA has the highest productivity constant globally. On the basis of the comparatively low labour cost ($25.50/hour) and lower labour productivity in South Africa, this country continues to have lower construction costs when compared to other BRICS and AU countries (Angola, Egypt, Ghana, Kenya, Morocco and Nigeria) (Compass International Consultants Inc., 2016). Despite this advantage, construction cost in South Africa increased by 26% between 2010 and 2015 (Bureau of Economic Research, 2016). Exploring the construction components driving the increase would enable stakeholders to plan and put measures in place to address future cost increases. 1.2 Construction cost components The components of construction costs consist of the resource factors (labour, materials, plant and subcontractors); project factors (profit margin, overhead costs, supervision/management, finance, transportation and exchange rates); and the cost of legislative requirements (professional fees, transaction costs and permits). Resource factors are the inputs used in the production process to produce an output – this is the final product-building or infrastructure in construction. According to Odediran and Windapo (2014), Skitmore, Runeson and Chang (2006), Lowe, Emsley, and Harding (2006), Sawhney, Walsh and Brown IV (2004), Eastham (1986) and Snyman (2007), resource factors contributing to the cost of construction work comprise of labour, materials, equipment and subcontractors. Regarding project factors, earlier studies by Skitmore, Runeson and Chang (2006) identified overhead costs as a significant contributor to final construction cost. Olatunji (2010), Ng, Cheung, Skitmore, Lam and Wong (2000), Eastham (1986) and Snyman (2007) identified transportation costs, interest rates, fuel price and energy costs as significant contributors to construction costs. Meanwhile, previous studies by Sawhney, Walsh and Brown IV (2004), Akintoye (2000) and Eastham (1986) found that stakeholder requirements such as professional fees (for design and supervision), contract documentation/transaction costs, and legal and financial requirements were significant contributors to construction costs. 2. Research Methodology A multi-case study approach was used to achieve the purpose of this study. Because the study employed a longitudinal approach, only construction cost components that were seasonal/ time based and changed consistently over time, such as labour, materials, equipment, subcontractors and project preliminaries were considered. Other cost strategies such as mark-ups/profits were not included. Only direct construction costs were considered. In this study, construction cost refers to the total value of works executed by medium to large sized general building and civil engineering contracting firm. The details of projects and their cost estimates are presented in Table 1. The selection criteria for projects are: they were designed and planned for construction within the last five years that is 2012 to 2017; they were representative of public sector projects; they were of a size and tender price typical of works undertaken by medium- to -large sized general building and civil engineering contractors. Table 1: Description of Case Studies No Renovation project Tender Price (million ZAR) GFA (m2) Tender submission date R1 Admin Building 7,380 1 900m2 2012 R2 School Building 45,134 5 336 m2 2016 R3 Hospital 130,304 2 400 m2 2015 R4 Road (concrete) 98,825 (+Upgrade) 7.98Km long & 9.8m wide 2013 R5 Court Unknown 13 060m2 2015 R6 Community Clinic 45 1 950 m2 2016 No New project Tender Price (million ZAR) GFA (m2) Tender submission date N1 School Building 10,373 2 771 m2 2015 N2 Hospital 171,786 3 691 m2 2015 N3 Road (concrete) 98,825 (+Upgrade) 2.17km long & 9,8m wide 2013 N4 Administration Building 56,386 1 194 m2 2015 N5 Municipal waste water treatment plant 180,923 11 300 m2 2015 N6 Community Clinic 45,506 1 549 m2 2015 44 A. Windapo et al./ Journal of Construction Business and Management (2018) 2(2). 42-50 The relevant priced Bills of Quantities of the 12 representative public-sector projects were obtained. Thereafter a model of the cost components for each case study was developed. This model was used to identify direct/indirect cost components: labour, materials, equipment, subcontractors and project preliminaries, and their share of the project cost envelope. The research team made use of standard estimating protocol, which included developing constants from first principles. The COMPASS Estimating Handbook (2016) was used as a reference and CCS CANDY Estimating Software (used by construction companies in South Africa) was used to develop cost models for the project. 2.1 Specification of cost variables The project costs were obtained consistently for all the projects in the study, based on the following assumptions: • Unit rates for resources were priced at industry accepted charge-out rates. • A daily shift was specified at 8.5 working hours. • Concrete was generally priced as mixed on-site. • Concrete for roads would be mixed at a batch plant and pumped into position on site. • Scaffolding requirements were priced in preliminaries. • Carting away of discarded or surplus material was priced in preliminaries. • Where no specification was provided, wall height was assumed to be 3m. • Trades priced directly were considered to be the least specialized, namely earthworks, concrete, formwork, reinforcement, masonry, carpentry and joinery, ironmongery, plastering, tiling, plumbing, glazing, roadworks and painting. • Inefficiencies such as delays in production were not allowed for. • Only the cost of materials and on-site costs were considered in terms of the installation of materials; all costs required to deliver materials to the site were ignored, as these would skew the cost of the material. • Production rates were specified as constant through the day. • Labour costs did not include standing time. • Building method was a constant and changes were based on the specification of the bill item. 2.2 Main resources priced The main resources priced were: • Material: cement, sand, bricks, sawn timber, fill material for earthworks and roads, diesel, reinforcement, structural steel; glazing, bitumen, tar and copper piping. • Labour skill level: general labourer, artisan, and operator for plant. • Plant: excavator, digger loader, road paver, and earth- filling compactor. • Preliminaries: all indirect costs associated with construction, provided for by a lump-sum value. The factors that would cause resources to be priced in the preliminaries were that the resource would be used across all trades managed by the main contractor, and that it would be required for a long period of time on the project. Therefore, the following items were priced as preliminaries: health and safety requirements, management costs on and off-site, general scaffolding, general miscellaneous resources, commissioning requirements, head office and site overheads, costs to deliver resources to site, contractual requirements attracting a cost, and provisional sum. • Subcontracted work: specialist installation including subcontractor overheads and management fees, delivery costs to bring resources to site and all commissioning requirements of specialist installations. These specialist installations were: – ceilings and partitions, drainage, electrical installation and reticulation, humidification, air-conditioning and ventilation, landscaping, fire detection and protection, data and IT installation, telecoms, core drilling, access control, heat pumps, gas and gas conduits, roller shutter doors, piling and signage. 3. Results Tables 2 and 3 show a summary of the portion of the construction cost components obtained from the cases examined. Table 2: Construction Cost Distributed According to Constituent Resources for Renovation projects (Q1: 2016 Prices) Projects Resource Component Share (%) Labour Material Plant Preliminary Subcontractor Total R1. Admin building 5.19 9.23 0.37 15.61 69.60 100 R2. Renovation of school building 19.70 52.18 10.53 7.46 10.13 100 R3. Renovation of hospital 28.82 12.95 2.76 14.01 41.47 100 R4. Rehabilitation of municipal road (concrete) 7.08 54.26 16.90 21.75 0.00 100 R5. Refurbishment of family and regional Court 34.30 42.87 5.19 3.87 13.76 100 R6. Renovation of community clinic 13.89 31.00 3.01 7.44 44.66 100 Average share 18.16 33.75 6.46 11.69 29.94 100 Table 3: Construction Cost Distributed According to Constituent Resources for New projects (Q1: 2016 Prices) Projects Resource component share (%) Labour Material Plant Preliminary Subcontractor Total A. Windapo et al./ Journal of Construction Business and Management (2018) 2(2). 42-50 45 N1. New primary school 23.83 49.81 3.77 6.24 16.35 100 N2. New hospital 8.89 24.98 1.14 10.16 54.86 100 N3. New road (concrete) 5.70 56.76 14.22 15.23 8.09 100 N4. New admin building 11.17 25.22 2.39 11.18 50.05 100 N5. Waste management facility 7.77 30.62 3.75 4.21 53.65 100 N6. Community clinic (new) 17.81 35.68 1.16 3.83 41.52 100 Average Share 12.53 37.18 4.41 8.48 37.42 100 Table 2 and 3 show that while the cost of materials had the highest proportion on the average (33.75%) in large renovation projects, in newly built project, the value of specialist subcontractor work was the highest (37.42%). The two resource components of building materials and specialist subcontractors account for a total of 63.69% and 74.6% of the total cost of renovation and new construction work respectively. It can be inferred from these findings that building material and sub-contracting are the most heavily weighted construction components in the cost of both new and renovation projects. The study therefore further explored the two components, building materials and sub-contracting, to determine the constituent elements of these resource factors. The study sought to know the value of the key building materials used on the renovation and new building projects. Data related to this enquiry is presented in Figures 1 and 2, and Tables 4 and 5. Figure 1: Value of Building Materials Used in Renovation Projects, Sorted by Type Table 4: Distribution of the Value of Building Materials Used in Renovation Projects Sorted by Type Materials R 1 R 2 R 3 R 4 R 5 R 6 Average utilization Reinforcement 18.84% 0.00% 11.29% 16.94% 73.26% 6.28% 21.10% G2, G7 and other fillings 3.36% 0.00% 9.99% 5.09% 2.37% 91.89% 18.78% Cement 18.05% 17.00% 20.58% 22.21% 9.21% 0.00% 14.51% All bricks (NFX, NFP, NFPE) 5.59% 41.18% 13.70% 12.03% 6.21% 0.00% 13.12% Shutterboard 22.40% 0.00% 9.87% 15.58% 0.00% 0.00% 7.98% Crushed stone 12.78% 0.00% 11.35% 10.68% 4.04% 0.00% 6.47% Sawn timber 0.20% 25.88% 6.21% 0.15% 0.52% 0.00% 5.49% Sand 4.72% 3.69% 4.12% 7.97% 1.76% 0.00% 3.71% Copper piping 6.62% 5.68% 3.42% 5.38% 0.50% 0.00% 3.60% Glazing 5.37% 6.58% 0.25% 1.90% 2.14% 0.00% 2.71% Structural steel 1.06% 0.00% 7.89% 2.06% 0.00% 0.00% 1.83% Tar 0.68% 0.00% 0.91% 0.00% 0.00% 0.84% 0.41% R 1 R 2 R 3 R 4 R 5 R 6 46 A. Windapo et al./ Journal of Construction Business and Management (2018) 2(2). 42-50 Bitumen 0.32% 0.00% 0.43% 0.00% 0.00% 0.99% 0.29% Precast concrete 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Masonry blocks 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Table 4 and Figure 1 show that on the average and across the six renovation projects examined, reinforcement, filling, cement and bricks are used more, by value, while masonry blocks and precast concrete items are not used at all. Figure 2: Value of Building Materials Used in New Projects, Sorted by Type Table 5: Distribution of the Value of Building Materials Used in New Projects Sorted by Type Materials N1 N2 N3 N4 N5 N6 Average utilization Reinforcement 25.96% 26.74% 17.93% 14.45% 12.57% 1.22% 16.48% Cement 19.42% 18.22% 23.60% 2.53% 19.41% 11.26% 15.74% G2, G7 and other fillings 0.00% 2.48% 2.88% 13.57% 12.06% 53.01% 14.00% Crushed stone 12.58% 12.60% 11.53% 12.61% 9.13% 9.51% 11.33% Shutterboard 16.01% 23.49% 11.97% 1.35% 7.87% 1.43% 10.35% All bricks (NFX, NFP, NFPE) 10.26% 7.66% 17.51% 0.14% 21.65% 0.00% 9.54% Sand 4.59% 4.10% 5.99% 19.03% 4.28% 3.61% 6.94% Structural steel 0.00% 0.73% 3.74% 31.24% 3.29% 0.00% 6.50% Copper piping 6.84% 0.79% 3.84% 0.18% 4.14% 0.00% 2.63% Precast concrete 0.00% 0.00% 0.00% 0.00% 0.55% 12.62% 2.20% Glazing 4.02% 2.71% 0.50% 0.66% 4.52% 0.00% 2.07% Tar 0.02% 0.12% 0.00% 1.52% 0.00% 4.10% 0.96% Bitumen 0.01% 0.08% 0.00% 0.93% 0.00% 3.24% 0.71% Masonry blocks 0.00% 0.00% 0.00% 1.78% 0.00% 0.00% 0.30% Sawn timber 0.28% 0.28% 0.51% 0.00% 0.52% 0.00% 0.27% N1 N2 N3 N4 N5 N6 A. Windapo et al./ Journal of Construction Business and Management (2018) 2(2). 42-50 47 Table 5 and Figure 2 show that on the average and across the six new projects examined, reinforcement, cement, filling, crushed stone and shutterboards account for 67.9% of the building material component, while masonry blocks and sawn timber are used much less. The study also sought to know the key specialist subcontractors by value that were engaged on the renovation and new building projects. Data related to this enquiry is presented in Figures 3 and 4, and Tables 6 and 7. Figure 3: Value of Specialist Work in Renovation Projects, Sorted by Type Table 6: Distribution of the value of Specialist Work Used in Renovation Projects Sorted by Type Specialist Subcontractor R 1 R 2 R 3 R 4 R 5 R 6 Average utilization Electrical installation 36.07% 42.70% 50.27% 0 0.00% 32.45% 40.37% Ceilings and partitions 10.76% 23.60% 15.23% 0 11.85% 7.48% 17.23% Mechanical 53.17% 0.00% 0.00% 0 0.00% 2.07% 13.81% HVAC 0.00% 0.00% 14.01% 0 0.00% 33.12% 11.78% Drainage 0.00% 22.92% 1.72% 0 15.91% 4.34% 11.22% Fire protection 0.00% 0.00% 2.81% 0 24.50% 0.88% 7.05% Landscaping 0.00% 10.79% 1.63% 0 10.77% 0.68% 5.97% Gas and gas conducting 0.00% 0.00% 3.63% 0 0.00% 11.89% 3.88% Roller shutter blinds 0.00% 0.00% 0.00% 0 14.01% 0.00% 3.50% Core drilling 0.00% 0.00% 0.05% 0 12.19% 0.00% 3.06% Signage 0.00% 0.00% 0.00% 0 10.77% 0.00% 2.69% Telecommunications 0.00% 0.00% 0.00% 0 0.00% 4.48% 1.12% Access control 0.00% 0.00% 4.35% 0 0.00% 0.00% 1.09% Lifts and hoisting 0.00% 0.00% 2.28% 0 0.00% 0.00% 0.57% Fire detection 0.00% 0.00% 1.63% 0 0.00% 0.00% 0.41% Heat pumps 0.00% 0.00% 0.00% 0 0.00% 1.38% 0.35% It Installation 0.00% 0.00% 0.00% 0 0.00% 1.22% 0.31% C E IL IN G S A N D P A R IT IO N S D R A IN A G E E L E C T R IC A L I N S T A L L A T IO N H V A C L A N D S C A P IN G F IR E D E T E C T IO N F IR E P R O T E C T IO N P U B L IC A D D R E S S S Y S T E M T E L E V IS IO N N E T W O R K A C C E S S C O N T R O L C O R E D R IL L IN G L IF T S A N D H O IS T IN G A U T O C L A V E S G A S A N D G A S C O N D U IT IN G L A U N D R Y E Q U IP M E N T IR R IG A T IO N S IG N A G E R O L L E R S H U T T E R B L IN D S T E L E C O M M IU N IC A T IO N S I T I N S T A L L A T IO N M e c h a n ic a l H E A T P U M P S R 1 R 2 R 3 R 4 R 5 R 6 48 A. Windapo et al./ Journal of Construction Business and Management (2018) 2(2). 42-50 Public address system 0.00% 0.00% 0.84% 0 0.00% 0.00% 0.21% Laundry equipment 0.00% 0.00% 0.66% 0 0.00% 0.00% 0.16% Irrigation 0.00% 0.00% 0.54% 0 0.00% 0.00% 0.14% Television network 0.00% 0.00% 0.19% 0 0.00% 0.00% 0.05% Autoclaves 0.00% 0.00% 0.15% 0 0.00% 0.00% 0.04% Table 6 and Figure 3 reveal that on the average and across the six renovation projects examined, the value of electrical installation, ceilings / partitions and mechanical / HVAC systems is higher, while the value of CCTV installation is much lower. Figure 4: Value of Specialist Work in New Projects, Sorted by Type Table 1: Distribution of the Value of Specialist Work Used in New Projects Sorted by Type Specialist subcontractor N1 N2 N3 N4 N5 N6 Average utilization Electrical installation 73.14% 22.97% 0.00% 30.92% 17.88% 40.96% 38.74% Drainage 0.00% 3.35% 99.47% 9.95% 6.40% 12.12% 30.34% HVAC 0.00% 22.02% 0.00% 25.11% 57.86% 0.00% 19.97% Ceilings and partitions 25.29% 4.84% 0.00% 3.23% 0.96% 7.02% 9.53% Mechanical 0.00% 0.00% 0.00% 0.00% 0.00% 25.48% 6.37% Cath lab 0.00% 15.00% 0.00% 0.00% 0.00% 0.00% 3.75% Gas and gas conducting 0.00% 11.59% 0.00% 0.00% 0.00% 0.00% 2.90% Landscaping 0.00% 0.17% 0.53% 2.34% 5.65% 3.05% 2.35% Fencing 0.00% 0.00% 0.00% 0.00% 1.88% 6.31% 2.05% Piling 0.00% 6.66% 0.00% 5.17% 0.00% 0.00% 1.66% Fire detection 0.00% 2.90% 0.00% 0.00% 1.94% 0.68% 1.38% Lifts and hoisting 0.00% 5.25% 0.00% 3.07% 0.00% 0.00% 1.31% Medical gas 0.00% 0.00% 0.00% 0.00% 0.00% 4.39% 1.10% Off-site galvanizing 0.00% 0.00% 0.00% 0.00% 3.89% 0.00% 0.97% C E IL IN G S A N D P A R IT IO N S D R A IN A G E E L E C T R IC A L I N S T A L L A T IO N H V A C L A N D S C A P IN G F IR E D E T E C T IO N F IR E P R O T E C T IO N T E L E V IS IO N N E T W O R K A C C E S S C O N T R O L C O R E D R IL L IN G L IF T S A N D H O IS T IN G G A S A N D G A S C O N D U IT IN G IR R IG A T IO N P IL IN G R O L L E R S H U T T E R B L IN D S R E V O L V IN G D O O R C A T H L A B T E L E C O M M IU N IC A T IO N S I T I N S T A L L A T IO N L IN E N C U R T A IN T R A C K M e c h a n ic a l L A T E R A L S U P P O R T R O L L E R S H U T T E R D O O R S O F F -S IT E G A L V A N IS IN G F E N C IN G M E D IC A L G A S N1 N2 N3 N4 N5 N6 A. Windapo et al./ Journal of Construction Business and Management (2018) 2(2). 42-50 49 Irrigation 0.00% 0.00% 0.00% 0.00% 2.47% 0.00% 0.62% Linen 0.00% 1.59% 0.00% 0.00% 0.00% 0.00% 0.40% Fire protection 1.57% 0.00% 0.00% 7.93% 0.00% 0.00% 0.39% Telecommunications 0.00% 1.06% 0.00% 0.00% 0.00% 0.00% 0.27% It installation 0.00% 1.06% 0.00% 0.00% 0.00% 0.00% 0.27% Roller shutter doors 0.00% 0.00% 0.00% 0.00% 1.06% 0.00% 0.26% Television network 0.00% 0.64% 0.00% 0.00% 0.00% 0.00% 0.16% Revolving door 0.00% 0.36% 0.00% 0.00% 0.00% 0.00% 0.09% Core drilling 0.00% 0.21% 0.00% 0.00% 0.00% 0.00% 0.05% Curtain track 0.00% 0.21% 0.00% 6.46% 0.00% 0.00% 0.05% Access control 0.00% 0.07% 0.00% 0.00% 0.00% 0.00% 0.02% Roller shutter blinds 0.00% 0.03% 0.00% 0.72% 0.00% 0.00% 0.01% Lateral support 0.00% 0.00% 0.00% 5.10% 0.00% 0.00% 0.00% Table 7 and Figure 4 reveal that on the average and across the six new projects examined, electrical installation, drainage and HVAC systems account for a total of 89.05% of the total new building specialist subcontractor component, while the value of CCTV installation is much lower. 4. Discussion of Findings The study examined the components of construction projects and whether there were construction resources that were the key project cost constituents. The study found that the building material and sub-contracting element were the key construction components contributing to the cost of both new and renovation projects. This finding is aligned with those of previous studies by Odediran and Windapo (2014), Skitmore, Runeson and Chang (2006), Lowe, Emsley, and Harding (2006). The study also established that reinforcement is used most by value in both new and renovation projects, followed by cement, filling materials and crushed stones. The latter are used more by value in new projects, while filling materials of cement and bricks are used more by value in renovation projects. Furthermore, the electrical installation is installed most by value of total installation in both new and renovation projects and followed by celling and partition installations. The value of mechanical and HVAC installations is higher in renovation projects, while the drainage, HVAC and celling and partition installations is higher in new projects. This finding is of significance to policy makers and clients in the construction industry because it makes available the average cost of components and enables a consistent comparison of construction projects based on cost. 5. Conclusions The study was able to identify the common components which contribute significantly to construction cost, in medium to large construction projects. The primary objective of any pricing regime should be to ensure that resources are allocated efficiently, and an understanding of the indicators and drivers of cost will aid decision making. This can enhance cost management related to the sector. Based on the analysis of the data collected, it can be inferred that the resource factors with a significant share of construction cost in South Africa, are specialist subcontractors, and materials, while labour cost is observed to be close to the BRICs average cost in absolute terms. The results imply that challenges such as the weak Rand relative to the US dollar will continue to exert pressure on construction cost, through the material cost component. This is because the import of vital equipment and materials will raise cost above specified budget, thereby increasing the overall cost of the project. However, this may be due to the fact that many of the construction components, including materials, labour and equipment are obtained in South Africa. Therefore, the effects of import costs in the construction industry are not felt to the same extent in other industries. The data shows that materials and sub-contracted work are the significant cost drivers responsible for trends in the cost of construction projects in South Africa, and that the future levels of the cost of construction work can be predicted using known levels of material and specialist subcontractors’ costs. Another significant finding is about the use of specialist subcontractors as a resource on both new and renovation projects. It can be inferred from the results obtained that there are benefits to the use of specialist subcontractors in construction project delivery. This is because the subcontractor has knowledge which can be highly utilized across various project types. As a result of this, the specialist subcontractors can examine cost projections in different and favourable ways, not normally used by the main contractor. The subcontractors’ knowledge may make for better coordination and planning and may lower overall costs on projects. Furthermore, it is expected that in the long term, changes in the price of materials will also be a big factor in increasing future costs of construction. For example, it is expected that building materials affected by international trade, such as cement, reinforcement and bitumen, which have abnormal price growth, will affect future levels of construction costs. 6. Recommendations 50 A. Windapo et al./ Journal of Construction Business and Management (2018) 2(2). 42-50 To ensure an effective cost driving mechanism, in addition to designing an appropriate pricing policy to minimize production cost, it is important that sound investment decisions and improved management oversight are implemented to ensure that the cost of labour, plant, fuel and material inputs to production are minimised, thereby streamlining operations. Also, a database for the construction sector in South Africa should be properly developed, to facilitate proper estimation of construction cost, as well as improvement in risk management. However, there are at least two constructing firms that provide contractors with cost data, not in the form of indices, but in Rands and cents. These consulting firms have seen the gap in the market because neither the government, nor the professions, are willing to finance a national cost database such as the Building Cost Information Service (BCIS) in London. The South African government, using the management oriented procurement method, should develop a system that can be used to increase the participation of specialist subcontractors in the construction project delivery process. Materials are also a big cost that needs to be managed effectively by all stakeholders, to ensure that materials are used efficiently on site, so as to reduce waste. It is also important that a Building Industry Price Book be instituted by the cidb/DPW to track the trends in building components and material prices. The results of the study provide significant information for planners, estimators, project and construction managers. These data are useful for resource planning and management of construction projects. Further studies should seek to determine conclusively whether the cost of cement, reinforcement, timber, bitumen and bricks is related to future levels of construction costs in South Africa. Acknowledgement This work is based on research supported by the cidb and DPW of South Africa. The opinions, findings, conclusions and recommendations expressed in the research are those of the authors and should not be attributed to the cidb or DPW. References Akintoye, A. (2000). Analysis of Factors Influencing Project Cost Estimating Practice. Construction Management and Economics, 18(1), 77-89. Ashuri, B., & Lu, J. (2010). 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