Cost Normalization Framework for a Benchmarking System: A Case for Downstream and Chemical Construction Projects

Benchmarking is an important tool to assess the performance of capital projects in the construction industry. Incorporating cost-related metrics into a benchmarking system requires an effective cost normalization process to enable meaningful comparisons among projects that were executed at different locations and times. Projects in the downstream and chemicals sector have unique characteristics compared to other types of construction projects, they require a distinctive cost normalization framework to be developed to benchmark their absolute cost performance. The purpose of this study is to develop such a framework to be used for the case of benchmarking the downstream and chemical projects for their performance assessment. The research team started with a review of existing cost normalization methodologies adopted in benchmarking systems and conducted 7 interviews to identify the current cost normalization practices used by industrial professionals. A panel of 12 experts was then convened and it held 6 review sessions to accomplish the framework development. The cost normalization framework for benchmarking downstream and chemical projects was established as a three-step procedure and it adopts a 4-element cost breakdown structure to accommodate projects submitted by both owners and contractors. It also incorporated 5 published cost indexes that are compatible with downstream and chemical projects and they were embedded into 2 options to complete the normalization process. The framework was then pilot-tested on 4 completed projects to validate its functional practicality and the downstream and chemical use case in the benchmarking system.