Developing a forecasting model for the prediction of inflation rates for use in life cycle cost analysis

Abstract

Life cycle cost (LCC) is a technique that satisfies the requirements of owners for adequate analysis of total costs. Inflation rate may be considered as one of the main parameters that may have an effect on a LCC analysis of a project. Therefore it is necessary during the life cycle cost analysis to carry out a detailed analysis and predict inflation rates for the future. This paper outlines the development of an artificial neural network model for forecasting the inflation rates for the project period. The artificial neural network back propagation algorithm is implemented by using Mat lab Package. The model trained by 25 inflation index values and tested with 25 inflation index values, by comparing the two sets, the error rates was found as 0.022. LCC spreadsheet was developed in Microsoft Excel, taking into consideration all costs that may be incurred during the project life and predicted inflation rate. © 2010 Taylor and Francis Group, London, UK.