EFFECTS OF COST VARIABILITY BETWEEN PRELIMINARY COST ESTIMATES AND TENDER PRICES ON BUILDING PROJECTS IN DAR ES SALAAM - TANZANIA

Abstract

A preliminary cost estimate (PCE) is a critical document that assists a client to understand financial commitment and make the decision to embark on a construction project before moving on to the design and tendering stages. However, there has been cost variation between PCE and tender prices which is likely to mislead the client’s decision-making. Moreover, there is limited empirical evidence to establish cost variability levels and their influence on the client's decision-making about a building project. Thus, the main goal of this paper is to investigate the effects of cost variability at various levels, between PCE and tender prices based on construction professionals' perceptions. The study used self-administered questionnaires to collect data from quantity surveyors working in firms, institutions, public organizations, and agencies in Dar es Salaam. 300 questionnaires were distributed, with 231 returned (77 percent) and used for analysis. Using descriptive statistics and contingent coefficient the study establishes that both education and experience had limited impact on the accuracy of cost estimate. Likewise, cost variability between 20-30 percent had a more significant impact on projects than other variability levels. This implies that, in order to minimize the negative impacts of cost variability in a project, the cost variability between PCE and tender price should be less than 30 percent.