Paper Session III-C - 250 Aerospace Cost Indexes and Escalation

It is a tool to measure the cost increases of construction labor and materials. A good cost index can also be used to adjust previous bids and cost estimates to the present time and project their future costs one to ten years, based on past cost increases and experience. An example, the cost of the North/South Shuttle Landing Facility, built in 1974, can be indexed or escalated to 1996. The cost of a new East/West runway could be projected to 1999 to allow for more orbital landing at KSC and more timely shuttle launches. Another example: the cost of the world’s largest building, the VAB, could also be indexed, escalated, and projected to the future. This is a management overview of the unique Aerospace Construction and Ground Support Equipment (GSE) cost escalation since 1974, with cost comparison and analysis of labor and materials costs. This report will show eleven purposes and seven reasons why it is important and a summary of eight reasons how it helped to improve KSC cost estimating accuracy—some surprising and some unanticipated. This graphic presentation will show charts of annual and monthly cost escalation, including twenty-five labor skill rates and fringes, crew rates, and twenty-six material prices, sample aerospace price book index and low and high unit prices for faster conceptual estimating, the real aerospace cost increases since 1974 and one of the largest cost items in estimating, a graphic chart of payroll tax rates, which includes Workman’s Compensation, and a list of seven new exciting estimating tools to improve cost estimating speed and accuracy. It also includes a list of fifty-five of the larger and more accurate estimates since 1974, totaling over $200,000,000, within 6% of low bid estimates. This report discusses the cost index for “Long Term Escalation, “ “Short Comings and Analysis.” This report is the twenty-second technical paper published in a one-of-a-kind series on aerospace construction and government cost estimating that started in 1968 with “Construction Bidding Cost of LC-39’’—the world’s largest building—and includes “Estimating and Bidding for the Space Station Processing Facility,” completed June 23, 1994. Some other papers are: “Aerospace Construction Cost Estimating,” 1992,” “Government Bid Estimate Compared to Contractors’ Estimate,” 1989, and “Government Conceptual Estimating for Aerospace,” 1986, which explains the purpose, use and importance of the system summaries for conceptual estimates and “33 Aerospace Spin-Offs for Construction Cost Estimating,” 1996. These 22 reports should be helpful in understanding some of the complexities of aerospace construction and government estimating. This report is about one of the most basic of over twenty-four aerospace estimating tools being developed at KSC to prove the benefit of the KSC team work efforts. Also included are special prices for aerospace commodities, such as, LH2, GN2, LH2, and HFC 134A costs and a more timely report of fiber optic cable costs. This monthly cost index may well be the only aerospace construction cost index in the world