Building development cost drivers in the New Zealand construction industry : a multilevel analysis of the causal relationships : a thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy (PhD) in Construction, School of Engineering & Advanced Technology, Massey University, Albany, New Zealand
Building development cost is influenced by a raft of complex factors which range from project characteristics to the operating environment and external dynamics. It is not yet clearly understood how these factors interact with each other and individually to influence building cost. This gap in knowledge has resulted in inaccuracies in estimates, improper cost management and control, and poor project cost performance.
This study aims to bridge the knowledge gap by developing and validating a multilevel model of the key drivers of building development cost (BDC) and their causal relationships. Based on literature insights and feedback from a survey of industry practitioners, some hypotheses were put forward in regards to the causal relationships between the BDC and the following key drivers as latent constructs: project component costs factor, project characteristics factor, project stakeholders’ influences factor, property market and construction industry factor, statutory and regulatory factor, national and global dynamics, and socio-economic factor. Observed indicators of the model's latent constructs were identified and measured using a mixed methods research design.
Results showed that property market and construction industry factor was the most significant predictor of building development cost in New Zealand, while project component cost factor has the least impact. The model’s fit to the empirical dataset, and its predictive reliability, was validated using structural equation modelling. Results of an additional model validation test by a panel of experts further confirmed its efficacy. Overall, the results suggest that sole reliance on the immediate project component costs without due consideration of the wider and more influencing effects of the external factors could result in inaccurate estimates of building development cost. Key recommendations included addressing the priority observed indicators of the most significant latent variables in cost studies and analysis.
Keywords: Building development cost, cost drivers, cost modelling, cost prediction