International Journal of Automation and Computing 00(0), Mouth 20××, range of pages

An Artificial Intelligence Approach for Estimating Residential

Construction Overhead Costs Using Neural Network
Ahmed Bakr1 Atef Ragab2
1
M.Sc., Faculty of Engineering, Cairo University, Egypt

2
Assistant Professor, Faculty of Engineering, Misr University for Science and Technology, Egypt

Abstract: Applications of artificial intelligence have been adopted by construction industry to enhance accuracy and to
save time. The results of these applications are outstanding and encouraged many researchers to seek more of these
applications. Therefore, the aim of this research is to develop a neural network model to estimate site overhead costs as a
percentage from the direct cost. The developed model used 55 residential projects in Egypt as a training data set, and 6 other
projects were used for testing. The model performs the estimation process based on 6 input factors: class of contracting
company, project direct cost, project duration, project location, contract type, and ownership type of the contracting
company. The best model developed shows an accuracy of 84% and consists of 6 input neurons, 2 hidden layers with 6 and 5
hidden neurons respectively, and 1 output layer.

Keywords: Artificial Intelligence, Neural Networks, Cost Estimation, Construction Overheads, Residential.
1 Introduction
Cost is considered one of the main three challenges that
face building construction companies, where the success of
any project is measured by its ability to complete it within
the allocated budget, according to the planned baseline
schedule, and with the maximum quality [1]. Cost
estimating is an essential element in construction business
as supported by many researches. Carty stated that it is a
key function in order to enable companies acquiring new
contracts and projects at the accurate price so as to survive
in the market [2].
Construction Company overhead is commonly
categorized into 2 branches: Site (Project) overhead costs,
and General (Home) overhead costs [3].
Site overhead costs include costs that cannot be
allocated on a certain work package, but it is essential for
activities to be completed, in other words, it serves the
execution process. General overheads are generally
considered as costs of conducting business, these are costs
that cannot be allocated on a certain project [4].
A study done by Nancy Holland and Dana Hobson
previously identified overhead costs the same as Dagstino
and Feigenbaum did. Also set examples for what may site
overhead costs cover like, site staff, cleaning activities,
temporary services, first aid and safety provisions,
transportation of site operatives, and site accommodation
[4][5].
It is difficult for construction companies to estimate the
optimum percentage for overhead costs, especially through
the unstable environment and construction market that
enable them to acquire a tender and maximize their profit
as well. If the overhead costs are not accurately estimated
prior bid submission, this may lead to a cost overrun and
the attempts to recover this overrun can result in a financial
issue and collapse for the construction company [6].
Most of the building construction companies find no
hassle in estimating the direct cost of a project, the
inaccuracy appears in the estimating of the overhead costs,
causing a clear cost variance between estimated budget and
actual cost either cost over-run or a cost saving. Both cases
can cause a problem for the construction company.
The absence of structured and accurate methods that can
assess site overhead cost for residential projects in Egypt
put construction companies in a risk of inaccurate estimate
of bid package that may affect the profit margin of the
company.
2 Literature Review
The application of artificial neural networks in the
construction management industry goes back to the early
1980s’. It was originally developed to enhance the
managers’ ability to make decisions. These applications are
likes of cost estimation, delay analysis, risk assessment,
prediction of markup, productivity rates.. etc.
In Egypt, Georgy and Barsoum developed an ANN
model for the parametric cost estimate of schools
construction projects. They used statistical and neural
network models for estimating costs; the research finding
was a neural network of a single hidden layer with number
of neurons equal to two thirds the number of neurons in the
input layer would be sufficient [7].
Hosny used the AAN modeling to predict the cost
increase of construction projects in Egypt based on the
analysis of several factors influencing project cost such as
project type, contract type, owner behavior, design
completion [8].
In Turkey, Gunaydin and Dogan designed an Artificial
Neural Network model to predict the cost per meter square
for reinforced concrete structural systems of buildings in an
early phase of the design process. The used data for
developing the network consists of 30 construction projects
varies from four to eight stories residential buildings. The
developed ANN architecture consisted of eight input layer
(one for each input variable). The resulted model had an
accuracy of 93% in estimating the cost per meter square for
reinforced concrete structural residential buildings [9].
In Gaza Strip, Arafa & Alqedra developed an Artificial
Neural Network model to predict construction cost at an
early project phase. The used data base for learning
 International Journal of Automation and Computing 00(0), Month 20XX

consisted of 71 construction project from Gaza Strip. The For Construction and Building Contractors.
resulted ANN model architecture consisted of one hidden Then the process of designing the network is ready and
layer with seven neurons. The established model has the main objective of the research; which is developing a
proven to be relatively successful in predicting construction network for estimating the site overhead percentage.
cost at an early stage, and without the need of detailed After reaching the optimum network structure, it is
information about the project [10]. critical to test and validate the network, 6 projects were set
In Philippines, Lyne and Maximinio developed an AAN aside for the validation process to be performed.
to estimate the total structural cost of building construction
projects in Philippines based on six parameters which are:
number of floors, number of basements, area of floor, 4 Data Collection and Analysis
concrete volume, area of formwork, and weight of
reinforcement steel. The data used for the learning process The process of data collection is divided into two stages:
consists of data from 30 different building construction the first stage is identify the factors influencing the site
projects; this data set was divided into 60%, 20%, and 20% overhead costs in the Egyptian residential construction
for training, validation, and testing respectively. The industry and comparing the factors resulted from the
resulted model architecture was a network of six input literature review with those affecting the construction
neurons (one for each input parameter), one hidden layer industry in Egypt.
with seven neurons, and one output neuron representing the The second stage is to collect data for different
structural cost. The model was developed using MatLab residential construction projects in Egypt, with the data and
with a feed forward back propagation technique [11]. factors resulted from the analysis of the first stage of the
Finally, a study was conducted in Egypt to calculate the data collection and analysis.
overhead percentage for construction projects. The model
was developed using N-Connection professional 1997, and 4.1 Site Overhead Factors Questionnaire
used data for 52 projects with different types. The model
This questionnaire is designed to investigate the factors
performs its estimation based on 10 factors. The resulted
affecting site overhead percentage in the residential
model has an accuracy of 80% [12].
building construction projects in Egypt. And participants
The last study has some similarities to the research
were selected to have an experience more than 10 years in
conducted in this paper. However, the data collected for the
residential construction market in Egypt working in
previous study was for different types of projects.
estimation, tendering, control, financial and commercial
However, this research concentrates on the residential
technical office section, procurement, and others.
projects with a variety in contractors’ classes operating in
The first section of the questionnaire consists of thirteen
these types of projects. Also this study taking into
multiple choice questions, where participant was asked to
consideration the high fluctuations in the economic
rate each factor according to its influence on the site
environment occurring in Egypt after the revolution in 2011
overhead percentage and how each factor can affect this
and the devaluation of the Egyptian pound in 2016. For all
percentage. The selected participants are experts in the
these reasons, this study was conducted.
residential construction industry from the pioneer
companies in the field of residential construction in Egypt.
3 Research Methodology In the second part of the questionnaire the participant
was asked if there is any other factor that was not stated in
the first section that may affect site overhead percentage in
For the aim of developing a neural network to predict
the Egyptian residential construction.
the site overhead percentage, this research has to go
The results of the questionnaire as illustrated in Fig. 1
through different phases in order for this neural network to
shows that the top five factors that most affect the site
be accurate and reliable. The extensive literature study in
overhead percentage in residential construction in Egypt
the previous section serves in identification of the factors
are project location, project direct cost, project duration,
that may influence the percentage of site overhead. These
contract Type, class of company
factors mainly include project location, direct cost,
duration, complexity, payment schedule, contract type,
tendering method, class of company, contractor cash
availability, firm need of work, and number of competitors.
A questionnaire survey was conducted to focus on the
factors that influence the site overhead percentage in the
Egyptian industry.
The next step was to collect project data from the past 7
years for the aim of learning the neural network from actual
project data. Project data for 55 Egyptian residential project
was collected from various number of construction
companies in Egypt. A comparative analysis was then
performed on these projects in order to illustrate the
influence of each factor on the percentage of site overhead. Fig. 1: Questionnaire 1 results
The collected project data and the questionnaire survey
were performed upon a calculated sample size according to
the number of contractors enrolled the Egyptian Federation
 F. A. Author et al. / Preparation of Papers for International Journal of Automation and Computing

And the most stated factor mentioned in the second percentage.

section of the questionnaire is whether the company is From the project data analysis, it is concluded that:
privately or publically owned. Second category of construction companies has the highest
average site overhead percentage. Through extensive
4.2 Major Factors Analysis research and interviews with industry experts, this results
from the strict control system of the first category
The result from the previous questionnaire categorizes
companies, unlike the second category with a relatively
the collected project data as follow:
weaker control system.
 Class of Contracting Company: First, Second,
Projects with duration between 36 and 60 months have
Third, and Forth Class
the highest average site overhead percentage. Because with
 Project Direct Cost in Million EGP: Less than 50,
project duration more than 60 months, some of the facilities
from 50 to 150, from 150 to 300, from 300 to
and site overhead influencers may be considered to be
450, and more than 450
under the long term category and no longer will be
 Project Duration in Months: less than 18, from 18
temporary, which results in decreasing their cost.
to 36, from 36 to 60, and more than 60
Projects with a direct cost between 300 and 450M EGP
 Project Location: Inside the capital city, and
are projects with highest site overhead percentage, not
Outside the capital city
projects with a direct cost more than 450M EGP. This trend
 Contract Type: Cost Plus, Unit rate, and
is caused by the relativity between the direct cost of the
lump-sum
project and the site overhead percentage. With a very high
 Ownership of company: Private, and Public
direct cost, the site overhead tends to be lowered as a
percentage from the direct cost, but it will remain high as a
At this phase of data analysis, a second questionnaire
monetary value.
was conducted and experts from residential construction
It is clear that projects outside the capital city tend to
industries were asked to weight the previous six factors and
have a higher site overhead percentage than those inside the
the weight of each factor choice. So as to understand the
capital city. This has many influencing factor such as the
influence of input and the factors governing the site
over cost of delivering materials, high accommodation
overhead cost percentage.
rates, higher fuel consumption, and many other factors.
Experts were selected according to their experience in
Contract type is a critical factor in determining the
the Egyptian residential construction market. They all have
overall pricing of the project, and by default the site
experience more than 20 years working in residential
overhead percentage. In lump-sum contract projects,
projects managerial positions or cost related positions.
contractors tend to higher the site overhead percentage in
Table 1 presents the weights for each factor affecting
order to lower the risk of cost overrun accompanied by this
site overhead percentage resulted from the questionnaire.
type of contracts.
Contracting companies with a private ownership type
Table 1: Questionnaire 2 main factors results tend to utilize all their available resources in order to
Factor Weight minimize the expenditures. On the other hand, public sector
Rank of Company 19% companies do not give the same importance for such factor,
Direct Cost 12% so the site overhead percentage tends to be higher in the
Project Duration 19% public sector contracting companies.
Project Location 15%
Contract Type 25%
Ownership Type 10%

4.3 Factor Choice Analysis

In the second part of the questionnaire where the
participants were asked to give a percentage of how may
each choice or sub-category will influence the main factor
or category. The following Table 2 summarizes the results
from this section of the questionnaire.

4.4 Project Data Analysis

Data from 55 different projects in the past 7 years were
collected in order to be used for the learning process of the
Fig. 2: Comparative Analysis for Site Overhead Factors
network. The data collected for projects was according to
the 6 major factors resulted from questionnaire (1). These
projects represent residential projects from first, second,
third, and forth class contracting companies in Egypt.
A comparative analysis was performed on the collected
project data as shown in Fig. 2 to figure out the bounding
relationship for each factor and the site overhead
 International Journal of Automation and Computing 00(0), Month 20XX

Table 2: Questionnaire 2 factor choice results Table 3: Sensitivity Analysis Run Example

The aforementioned data analysis and results set the

bases for designing the neural network required for
estimating and assessment of the site overhead percentage
for residential construction companies in Egypt.

5 Design of Neural Network

“Neural Designer” software was used for developing the
neural network; it is very easy to use and has a friendly user
interface to work on. The software is applicable on
windows and free to download.
The developing of the model was done using the trial
4.5 Sensitivity Analysis and error method in order to reach the optimum model
structure.
In order to validate and assure the accuracy of the data
This section presents the steps taken to develop the
collected from the questionnaire and the resulted
artificial neural network.
percentages for the factors affecting site overhead
1. Collecting the needed project data for the
percentage for residential projects in Egypt. A sensitivity
learning process
analysis was done for the collected and resulted
2. Coding of each input
percentages on the bases of the weighted arithmetic mean.
3. Design the network architecture and choosing
the transfer function
4. Determine the learning algorithm
(1)
5. Training of the network
6. Validation of the network
Where:
7. Testing the network
Fn is the total weight of the factor
Sub.Fn is the weight of the factor choice 5.1 Data Set
n is the number of factors
“Neural Designer” enables the importing of an excel
Based on the collected project data, the weighted data file. It divides the data set to 60% for learning, 20%
percentages from the sensitivity analysis were compared to for validation, and 20% for testing and verification the
the actual data for project site overhead percentage. This network. Before importing the data set file, project data
process is for the aim of ensuring that the resulted was coded in order to be properly imported to the “Neural
percentages from the questionnaire are reflecting the actual Designer” as shown in Fig. 3.
trend of the factors influencing the site overhead
percentage.
Table 3 shows the steps for the sensitivity analysis by
the weighted arithmetic mean; these steps were performed
for all the 55 collected projects. From the analysis of the
project data and measuring deviations between the actual
site overhead percentage and the weighted % resulted from
the sensitivity analysis, it was concluded that the weights
collected from the questionnaire are considered to be highly
applicable with an accuracy reaching 95% for the collected
project data and their site overhead percentage.
Fig. 3: Data Set Interface
 F. A. Author et al. / Preparation of Papers for International Journal of Automation and Computing
After importing the data set file, the software categorizes
by default all data variables to inputs and outputs, so in the
model for estimating site overhead percentage, the six input
variables are the rank of company, project direct cost,
project duration, project location, contract type, and
ownership type of the company. And the output or target
variable is the site overhead percentage as shown in Fig. 4.
Fig. 4: Variables Interface
5.2 Training the Network
The most important principle of developing a neural
network model is to define which training algorithm to use.
Training the network may be done by various learning
methods to adjust weights. All the models were trained by a
supervised learning rule using back-propagation algorithm.
In supervised learning, the learning rule is provided with a
set of examples (the training set) of proper network
behavior where each input to the network corresponds to a
correct output. As the inputs are applied to the network, the
network outputs are compared to the targets [13]. The
learning rule is then used to adjust the weight and biases of
the network in order to move the network outputs closer to
the targets.
The back-propagation works on the gradual error
reduction between inputs and the target output. It develops
the inputs to output leveling by minimizing the root mean
squared error and the training process shall be finished
when the RMSE (2) become constant.
(2)
Where:
n is the number of projects to be evaluated
xi is the model output related to the sample
E is the target output
5.3 Network Architecture
The “Neural Designer” at this stage needs to set the
number of hidden layers, the number of neurons in each
layer, the transfer function for each layer.
The process of designing the network was done using a
traditional trial and error method in order to reach the best
possible model. The best model was chosen according to
the lowest root mean square error and the correspondence
error values.
The trial and error of models resulted in a number of 92
models categorized as follows:
 Models with one hidden layer (with hidden
neurons varies from 3 to 12) and hyperbolic
tangent transfer function
 Models with one hidden layer (with hidden
neurons varies from 3 to 12) and logistic transfer
function
 Models with two hidden layer (with hidden
neurons varies from 3 to 10 each) and hyperbolic
tangent transfer function
 Models with two hidden layer (with hidden
neurons varies from 3 to 10 each) and logistic
transfer function
5.4 Model Selection
The run of the trial and error process as discussed before
resulted in 92 trial models categorized into four packages
that vary in the number of hidden layers, number of
neurons in each layer, and the transfer function.
Table 4 shows the top 10 models resulted from running
the training algorithm.
Table 4: Top 10 models
By reviewing the 92 models, it was concluded that
Model 65 is the most accurate model with 2 hidden layers,
6 neurons in the first hidden layer, 5 neurons in the second
hidden layer, and a logistic transfer function.
5.5 Model Testing
To test and evaluate the predictive model and its
accuracy, 6 projects were randomly selected aside from the
previous 55 projects used for network learning. The relative
error (3) between the predicted and the real life values
determines the accuracy of the model.
(3)
These projects represented new cases for the model to
work on, that should test the accuracy of the developed
model whether it is within the acceptable range of relative
percentage error or not. If the value of the relative
percentage error exceeds the acceptable range of the model,
the prediction would be considered a wrong prediction.
And if the value of the relative percentage error lies within
the acceptable range, the prediction would be considered
right. Table 5 shows the test project and their results.
Table 5: Model testing results
 International Journal of Automation and Computing 00(0), Month 20XX
The developed model has an acceptable relative
percentage error of ±3.05%. By considering this error
margin and after running the program on the 6 test projects,
the model predicted 5 out of 6 projects within the
acceptable range. That represents an accuracy of
approximately 84%. The accuracy of the developed model
is considered to be very high for predicting the site
overhead percentage of residential projects in Egypt.
5.6 Developing Graphical User Interface
Neural networks and its application programs are not
widely used or introduced in the Egyptian market. So, it is
necessary for the developed model to have a friendly user
interface to be used by the ordinary user.
“Neural Designer” provides the option of exporting the
developed model to various programming languages like R,
and Python. So the developed model was exported to
Python expression and the script was used to develop a
graphical user interface for the neural network.
The developed GUI (graphical user interface) offers the
user to select inputs by a drop list for each factor and chose
the factor choice from the selected list as shown in Fig. 5;
instead of writing the code for each input that might
confuses the user resulting in a wrong estimate.
Fig. 5: Graphical User Interface
6 Conclusion
The uncertainty and instability in the economic
environment encourage the introduction of new
technologies in cost estimating. The study demonstrates the
benefits of using artificial intelligence and the neural
network technology in the estimating process of the site
overhead costs, and the undeniable advantages of the
proposed model to predict the site overhead percentage for
residential construction projects in Egypt are its simplicity,
calculation speed, and accuracy. The collected factors from
the literature and its application on the Egyptian residential
industry showed that the major factor affecting the site
overhead cost is the contract type followed by project
duration, rank of company, project location, direct cost, and
ownership type respectively.
The model was developed through running training data
for 55 different residential projects using trial and error
method to determine the satisfactory network architecture.
A number of 92 models were developed in order to reach
the most accurate model. The most accurate model was
determined according to the lowest RMSE value that was
for model 65 with network architecture of 6 input neurons,
2 hidden layers with 6 and 5 neurons in the first and second
layers respectively, logistic transfer function, RMSE of
0.188, and relative error of 3.05%.
Testing the developed network proved the estimation
accuracy of the model also reflected the accuracy of the
collected data. The model was tested on 6 projects that
were not previously introduced to the model in the training
phase; the test resulted in an 84% accuracy that is
considered to be high comparing to early phase estimation.
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