Characteristic items: a new approach to pricing and controlling construction projects

Recent research has demonstrated the feasibility of identifying within any category of project, a small number of cost-significant work packages whose value represents a consistently high proportion of the total bill value. Using the allied principle of quantity-significance, it proved possible to build simple models which could predict both the cost and the duration of a project. In the course of that work, a surprisingly linear relationship between value and quantity was noted. This paper reports the background to and consequences of that finding. Quantity-significant work packages are formed by aggregating those items within a trade for which a linear regression of value against quantity yields a correlation coefficient greater than 0.99 and an intercept insignificantly different from zero. The price of packages formed in this way can be determined simply by applying to all the items within the package the rate associated with the largest quantity, the so-called 'characteristic item'. Application of die concepts of quantity-significance and characteristic items is expected to lead to simpler estimating and more effective control procedures, because there is no longer any need to allocate cost and resources to each individual item contributing to a work package.