Cost normalization for global capital projects benchmarking

Globally, many large pharmaceutical and biotechnology companies invest significant amounts of money to build manufacturing and laboratory facilities. One common concern amongst these companies is whether or not these facilities are efficient in their design and their use of human and financial resources. The Construction Industry Institute (CII) has worked with 12 of these pharmaceutical and biotechnology companies over the past seven years to benchmark the performance of their capital projects. In order to benchmark absolute cost performance (e.g., dollars per square foot), the projects' costs need to be normalized to account for location, time and currency. However, no single cost index is available to meet this need of normalizing global facilities. As a result, CII and the companies developed a procedure using established cost indices to reliably compare the cost performance of capital projects from different companies. This paper also discusses the issues and challenges of normalizing the costs associated with pharmaceutical and biotechnology capital projects. This paper contributes to a better understanding of cost normalization amongst global capital projects.