Returns to Scale in Buildings Construction Costs: Indonesian Cases

AbstractThis paper examines returns to scale in building constructions in Indonesia based on large sample sizes of different project types (i.e., hotel or apartment, hospital, office, campus, and plant). The analysis demonstrates that costs tended to vary with sizes at a constant rate, as shown by cost capacity factors close to unity, with the exception of campus cases that supported decreasing returns to scale. This finding affirms those of previous studies that non-constant returns to scale in cost-size relationships appear to weakly exist for building constructions. At the very least, it also implies that a simple unit-cost approach remains a reliable method for early cost estimates. This paper also identifies some potential issues associated with constant returns-to-scale applications