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11:00   General Paper Session W55 - Economics of the built environment/ Whole life cost-benefit-modelling Chair: Richard Fellows 11:00 15 mins AN EVALUATION OF CONSTRUCTION SPEED PERFORMANCE FOR BUILDING CONSTRUCTION PROJECTS IN UK AND GERMANY Onur Dursun, Christian Stoy Abstract: It is aimed to design a study that facilitates a fair comparison of construction speed performance for residential and office developments in UK and Germany. The definitions of the populations are restricted hence there is a necessity to construct a common basis for two different data sets. Subsequent to data base filtering, random sampling was performed via computer algorithm and 200 observations from each location were retained in the samples. Available quantitative variables were utilized to create factors and the response variable. 2 sample t-test was designed to test the group differences between two samples resulted in no substantial variation exists between population means. Limitations applied to 2 sample t-test forms a motivation for further investigation and in this context a factorial study is designed. This enables to observe the effect of not only the location factor but also the hypothesized factors that may influence the mean response. The analysis yielded that project location causes a significant variation in the mean response when factors regarding facility, standard and height are taken into account. Consistent with the complexities involve in construction projects, it is concluded that neglecting the effect of construction speed related factors and only taking project location into account would not be an appropriate approach for a post ex facto research where observations can not be controlled. 11:15 15 mins USE OF ARTIFICIAL INTELLIGENCE TO PREDICT THE ACCURACY OF PRE-TENDER BUILDING COST ESTIMATE Ajibade Aibinu, Dharma Dassanayake, Vui Chau Thien Abstract: Pre-tender estimates are susceptible to inaccuracies (biases) because they are often prepared within a limited timeframe, and with limited information about project scope. Inaccurate estimation of project uncertainties is the underlying cause of project cost overruns in construction. Typically, cost engineers and quantity surveyors would add contingency reserve to a pretender estimate in order to account for any unforeseen cost that may arise between the date of the estimate and the projected completion date of the project. The traditional 10% rule of thumb for estimating contingency is subjective - based on experience and expert judgment, and are often inadequate. In the research reported in this paper, we propose that learning algorithms trained to use the known characteristic of completed projects could allow quantitative and objective estimation of the inaccuracies in pretender building cost estimates of new projects. The study assumes that the accuracy in the initial estimate (bias) of a completed project is the difference between the actual project completion costs minus the pre-tender cost forecast expressed as a percentage of the actual project completion costs. A three- layer ANN model of feed- forward type with one output node was constructed and trained to generalise nine characteristics of 100 completed projects and the cost data from those projects. The nine input variables of the model are project size (measured by number of storeys and gross floor area), principal structural material, procurement route, project type, location, sector, estimating method, and estimated sum. Estimate accuracy (bias) was used as the output variable. The prediction power stands at 73% correlation coefficient, 3% of Mean Absolute Error and 0.2% Mean Squared Error. It was found that in more than 73% of the test cases the predicted estimate bias did not differ by more than 8.2% from the expected (Maximum Absolute Error). This means that amount of estimate bias predicted by the ANN are similar to what actually occurred. The trained ANN model can be used as a decision making tool by cost advisors when forecasting building cost at the pretender stage. The model can be queried with the characteristics of a new project in order to quickly predict the error in the estimate of the project. The predicted error represents the additional contingency reserve that must be set aside for the project to cater for cost overruns. The model can also be extended to forecast actual cost of a project when the estimated cost is known. 11:30 15 mins ENDOGENOUS RISK IN UNBALANCED BIDDING Svante Mandell, Johan Nystrom Abstract: Models of unbalanced bidding in unit price contracts (UPC) can be categorised into two types. The first category assists clients in detecting and contractors in optimising skew bidding. More theoretical oriented models of the second type focus on bidding behaviour in order to study market efficiency. These models predict corner solutions, i.e. zero prices, for unit prices of expected overestimated quantities. However, anecdotal evidence indicates a lack of zero prices in the actual contracts. A possible explanation for this discrepancy is risk-aversion of the contractor. However, none of the models of the latter category have incorporated risk as an endogenous variable. A model of such is presented in this paper. 11:45 15 mins COST INFORMATION IN ENERGY BILLS FOR HOUSEHOLDS EFFECTING THE ADOPTION OF ENERGY TECHNIQUES Bram Entrop, Geert Dewulf Abstract: Financial appraisal is an important aspect in adopting techniques that reduce the (fossil) energy use of buildings. When financial appraisal of an energy technique takes place, fixed prices for the form and amount of energy are often used and are multiplied by the estimated amount of energy savings. However, after a certain time period an energy bill for the user of a building only partially shows variable prices depending on the form and amount of energy. Many costs mentioned by a common energy bill are time related or are related to the national political regime. Infrastructural costs depend on the type of connection you have to the grid. These costs form an annual fee. The VAT or additional energy taxes that need to be paid, depends on the political regime and are often expressed in a surcharge in terms of percentage. This paper focus on the differences between marginal and average energy costs and the differences in variable and fixed energy costs. The impact price differences have for the financial appraisal of energy saving techniques for multiple actors is shown by conducting a comparative study on energy bills. It shows that marginal energy costs are significantly lower than average energy costs. 12:00 15 mins STRATEGIES FOR THE COST-EFFECTIVE TECHNICAL MANAGEMENT OF HOUSING STOCKS Antje Hegewald, Hans-Joachim Bargstadt Abstract: By focusing on the existing residential buildings, the technical management of the housing stock has become the most important duty of the technical departments in German housing companies. As a research field, the existing residential buildings are underestimated so far. There are no scientific studies that use the experience of activities (e.g. repair, maintenance, alternations, additions) on existing residential buildings and their influence factors for the rational, costeffective and systematic selection of future activities. That’s why the objective of the study is to provide strategies for the cost-effective technical management of the housing stock. This research is based on the empirical study of 2939 activities carried out from 2003 to 2007 on a typical housing stock in western Germany. The housing stock includes 2164 dwellings with a total living space of 152.755m2. The apartments are located in 251 multi-family houses of different ages in large cities in western Germany. The housing stock is managed by a strategically attractive housing company, which has adapted her business to changing market conditions through diversification. Using the methods of descriptive statistics, costs and cost key values of the activities are presented in accordance with the management concepts renting, privatization or condominium. The cost key values are calculated separately for the dwelling areas (units) and common areas of the housing stock. The largest costs and cost key values occur when the management concept privatization is applied. In the common areas, the cost key values of the investigated activities are e.g. 8.7 times higher when applying the management concept privatization then renting. The cost key values of the management concept condominium are 15 times less than the cost key values of the management concept renting. When comparing the calculated cost key values with appropriate literature values of other German housing companies, the calculated cost key values are well above the benchmark. Overall, the studied housing company is investing twice as much in its housing stock as the comparison companies on average. The high level of investment is mainly due to the management concept privatization. This raises the question of which activities must be carried out on the existing housing stock and which not? With the implementation of the activities the duties of the technical management of the housing stock will be met. The duties of the technical management are divided into the maintenance and adaptation requirements. Cost reduction potentials have those activities that go beyond the responsibilities of technical management. In compliance with the obligations of the technical management, based on the causes of the activities, strategic recommendations are derived to reduce costs. The benefits of the strategic recommendations will be evaluated with the identification of potential cost savings. The cost reduction potentials are different for dwelling and common areas of the studied housing stock. The investigation shows the cost reduction focus on the common areas. 40 % of the cost in the common areas of housing stock can be saved from a technical point of view. Looking for management concepts, in the management concepts renting and privatization arise similar costs savings of 40 % while in the management concept condominium reveals no cost savings. The identified potential cost reductions are the final opportunity to derive a concept for the rational selection of activities on the housing stock. The general omission of the not technically necessary activities is deemed critical for the long-term user-oriented operation. It is proposed that the not technically necessary activities are evaluated by using a multi-criteria decision making model (AHP and cost-effectiveness analysis). With the help of the model, the activities with the best cost-benefit ratios are proposed for implementation. 12:15 15 mins A REAL OPTIONS APPROACH TO EVALUATE INVESTMENT IN SOLAR READY BUILDINGS Baabak Ashuri, Hamed Kashani, Jian Lu Abstract: Sustainable building technologies such as Photovoltaics (PV) have promising features for energy saving and greenhouse gas (GHG) emissions reduction in the building sector. Nevertheless, adopting these technologies generally requires substantial initial investments. Moreover, the market for these technologies is often very vibrant from the technological and economic standpoints. Therefore, investors typically find it more attractive to delay investment on the PV panels. Nevertheless, they can prepare “Solar Ready Buildings” that can easily adopt PV panels later in future at the optimal time; when their prices are lower, energy price are higher, or stricter environmental regulations are in place. The conventional valuation methods such as Net Present Value (NPV) are unable to identify the optimal timing for investing in the PV panels. Hence, in order to avoid over- and under-investment, the decision makers should be equipped with proper financial valuation models that help them identify the optimal investment timing. We apply Real Options Theory from finance/decision science to create an investment valuation framework for finding the optimal time for investing in PV technologies. Our proposed investment analysis model uses experience curve concept to model the changes in price and efficiency of the PV technologies over time. It also has an energy price modeling component that characterizes the uncertainty about future retail price of energy as a stochastic process. Finally, the model incorporates the information concerning specific policy and regulatory instruments that may affect the investment value. Using our mode, investors’ financial risk profiles of investment (i.e. Cumulative Distribution Function of the Investment Value) in the “fixed” Solar Building and “flexible” Solar Ready Buildings will be developed. This will determine the Financial Value (if any) of investing in the Solar ready building and identify the optimal time for installing the PV panels. 12:30 15 mins BUILDING RENEWAL ON SOCIAL HOUSING – CASE STUDY ON THE RUBEM BERTA SETTLEMENT, PORTO ALEGRE, BRASIL Fernanda Flach, Josiane Reschke Pires, Marco Aurelio Stumpf Gonzalez, Andrea Parisi Kern Abstract: This study proposes a method and presents proposals to re-qualify a social housing complex, with diversification and expansion of units. The construction of large social housing condominiums can be criticized from several points of view. These projects has limited financial resources and there is a gap among the project and user’ requirements, generating a low quality product, which have an accelerated degradation and generate more maintenance’ waste in life cycle. Building renewal is a form of recycling and has influence in social, economic and environmental issues. The aim of this paper is to propose a design methodology for the renovation, which be sustainable and oriented on value creation. It consider environmental and economic feasibility based on embodied energy in materials and hedonic price models, respectively. We conducted design simulation, focusing on a typical housing complex, located in the Rubem Berta settlement, in Porto Alegre, Brazil, and verify a potential for value adding. This work contributes to the discussion of alternatives to social housing deficit in Brazil.