Application of Cost-Flow Forecasting Models

Abstract

Cost-flow models are formulated for forecasting the cumulative cost-flow in housing and public buildings, as a function of total cost and construction period. This permits to estimate the cost increment for any interval even before any schedule is available. Detailed cost-flows are compiled for all individual projects, and brought to a common denominator by relating cost to time in percentage. The prediction curves are obtained by polynomial regression. Considering the dynamic characters of a company's financial plan, and the need for permanent updating, the deviations obtained by this procedure between the predicted and actual cost of the individual project are insignificant for practical use. These deviations also tend to balance out in compiling the company's overall picture that management is concerned with. The implementation of such models for all major categories of projects engaged in by a construction company can thus greatly simplify one of tha most time and cost consuming steps in establishing and updating a financial plan.

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