Discovery of Internal and External Factors Causing Military Construction Cost Premiums

Abstract

Each year, the United States invests $30 billion in federal construction. Military construction (MILCON) represents 40% ($12 billion) of that capital investment. This study confirmed the existence of MILCON cost premiums compared with private sector construction through an analysis of existing research. This study also evaluated two nearly identical projects and used expert interviews and surveys to determine which factors influence the cost premiums. The projects represented a rare opportunity to compare projects that had the same end requirement: method of execution and acquisition, design/build and firm-fixed price; and location but differed by government construction agent. In addition to identifying the 28 factors that moderately or largely influence cost premiums, five overarching cost-premium themes emerged: failing to balance risk, additional public-sector requirements, stifling or not applying innovation, selection of construction specifications, and parameterization of the execution process. Additionally, once complete, two nearly identical projects differed by over a year of construction time and $7 million in spite of the contract requirement similarities. Research frequently cites federal laws and policies as the primary cost-premium driver; however, this research demonstrated that internal construction agent policies also cause increased cost premiums. Mitigating the causes of internal cost premiums could improve public-sector construction cost performance.