Postal Service:

Estimating the Cost of Construction Projects

GGD-90-28BR: Published: Dec 19, 1989. Publicly Released: Dec 19, 1989.

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Pursuant to a congressional request, GAO reviewed the U.S. Postal Service's (USPS) development of cost estimates for new facility construction projects, focusing on: (1) projects that the USPS Board of Governors delayed or otherwise questioned during review; and (2) how actual project costs compared with the approved cost estimates for a sample of 220 completed postal facilities.

GAO found that: (1) USPS estimated total project costs by combining the costs of the selected site with estimates for construction costs; (2) USPS used construction cost indexes and a database of average-price bids for constructing similar facilities, and incorporated various contingency factors ranging from 5 percent to 10 percent, to estimate construction costs; (3) the USPS Board of Governors delayed or otherwise questioned 10 of the 47 projects it reviewed between fiscal years 1984 through 1988, raising questions about such aspects as site, size, and costs; (4) the USPS Board of Governors did not question USPS methods for estimating project costs; and (5) actual costs of completed projects averaged 7 percent less than the estimated costs, although there were some extreme deviations.

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