Forecasting the Unit Price of Water and Wastewater Pipelines Capital Works and Estimating Contractors Markup
Journal of Cost Analysis and Parametrics
Municipalities and water utilities need to make realistic estimates for the replacement of their aged water and wastewater pipelines. The two main objectives of this article are to present a method to forecast the unit price of water and wastewater pipelines capital works by investigating inﬂation in their construction price, and to quantify the markup that contractors add to bid a project price. The Geometric Brownian Motion model with drift is used for investigation. Results show that the inﬂation in water and wastewater pipelines reference projects were 6.41% and 5.52% per annum, respectively. These values compare to the inﬂation in the Standard & Poor’s/Toronto Stock Exchange (S&P/TSX) Composite Index of 6.93% per annum. In contrast, inﬂation in Canada’s Consumer Price Index (CPI), and Engineering News-Record’s Construction Cost Index (ENR’s CCI) for Toronto are estimated to be 2.53% and 2.85% per annum, respectively. The spread in the inﬂation rate between the reference price indices and that of either ENR’s CCI or CPI is a measure of the market price of catchall ﬁnancial premium (deﬁned as markup) that contractors add to project cost to account for proﬁt, risk, and market conditions. This spread is estimated to be 3.56% and 2.67% per annum for water and wastewater pipeline capital works, respectively.
Dr. Rizwan Younis is Technical Director and Research Associate at the Centre for Advancement of Trenchless Technologies, Department of Civil and Environmental Engineering, University of Waterloo, Waterloo, Ontario, Canada. His research interests include asset management of buried urban infrastructure, condition assessment of water and wastewater pipelines, infrastructure ﬁnance, and trenchless construction for rehabilitation and replacement of pipelines.
Dr. Rashid Rehan is an Assistant Professor at the National Institute of Urban Infrastructure Planning, University of Engineering and Technology, Peshawar, Pakistan. He received his Ph.D. from the University of Waterloo, Ontario, Canada. His research interests include condition assessment of water and wastewater infrastructure assets, deterioration modeling, infrastructure asset management, utility ﬁnancing, and service delivery.
Dr. Andre J. A. Unger is an Associate Professor at the University of Waterloo, Canada and a professional engineer in the Province of Ontario. His research interest include: water infrastructure ﬁnance; project risk and uncertainty; computational hydrology; and, water resources management.
Dr. Soonyoung Yu is a quantitative hydrogeologist at the Research Institute of Social Criticality, Pusan National University, Busan, Korea. Her research interests include: hydrogeological and ﬁnancial risk at Brownﬁeld redevelopment sites; risk exposure from geo-hazards; and, groundwater and surface water ﬂow and contaminant transport systems.
Dr. Mark A. Knight is Executive Director at the Centre for Advancement of Trenchless Technologies and Associate Professor at the Department of Civil and Environmental Engineering, University of Waterloo, Waterloo, Ontario, Canada. His expertise include trenchless renovation and replacement of pipelines, geotechnical investigations, condition assessment of buried pipelines, and asset management of buried infrastructure. Mark and his team have developed industry leading software and online tools for the trenchless industry that include: Pressure pipe calculator for PE and PVC water pipelines (PPIPACE), Horizontal Directional Drilling programs (BOREAID and PPI-BOREAID, and Cured-In-Place Pipe design calculator (CIPPCALC).