Estimating Location-Adjustment Factors for Conceptual Cost Estimating Based on Nighttime Light Satellite Imagery

Abstract

A fundamental process in construction cost estimation is the appropriate adjustment of costs to reflect project location. Unfortunately, location adjustment factors are not available for all locations. To overcome this lack of data, cost estimators in the United States often use adjustment factors from adjacent locations, referred to as the nearest neighbor (NN) method. However, these adjacent locations may not have similar economic conditions, which limit the accuracy of the NN method. This research proposes a new method of using nighttime light satellite imagery (NLSI) to estimate location adjustment factors where they do not exist. The NLSI method for estimating location adjustment factors was evaluated against an established cost index database, and results show that NLSI can be used to effectively estimate location adjustment factors. When compared with NN and other alternative proximity-based location adjustment methods, the proposed NLSI method leads to a 25–40% reduction of the median absolute error. This work contributes to the body of knowledge by introducing a more accurate method for estimating location adjustment factors which can improve cost estimates for construction projects where location adjustment factors do not currently exist.