Developing a Model to Estimate Cost of Construction Projects based on Target Costing Approach

Abstract

The targeted value design methodology is the most common expression of Target Costing (TC) in the construction industry (design, construction, and delivery stages). It is recognized as an effective tool for reducing costs and managing overruns. However, the application of target value design in construction projects is highly dependent on the experience of the estimator. The main objective of this study is to identify the estimating cost, the limitations, and the key development areas of traditional Target Cost and solve the cost-focused estimating of traditional Target Cost (TC). A questionnaire-based interview survey was conducted to study the relation between target cost application and the financial failure rates in the engineering industry companies in Kuwait. Accordingly, most common factors affecting target cost have been ranked using standardized mathematical modeling of decision tree theory. A simple mathematical model has been developed using the MATLAB application. The model considering different operating expenses categories and graphically represents all operating costs. The model optimizes the results of (design, construction, and delivery stages) of cost and shows the target cost distribution and the direct cost distribution to differentiate between them.