The importance of cost indices for your construction

Nick Bointon
The importance of cost indices for your construction

The construction economy is exceptionally dynamic. Prices of raw materials, labour, regulatory costs, energy fluctuate quarterly – sometimes barely, sometimes strongly, seldom down! This economic uncertainty can have a major impact in the construction industry and the continuous changes in the price level making it more difficult to control costs especially in large scale and long term and complex projects

To limit potential financial risks a clear degree of foresight is required.  This means accessing construction cost indices but are they up to date, realistic, have they been interpreted correctly? Can you have confidence in them and can a workable prognosis be made to prepare for the future? But how does this work? What types of indices are used in construction and what do they do?

How can indices support the cost of construction?

Current indices of construction provide planners, project managers and clients with the understanding how the costs and benefits of specific building types develop. For this purpose there in practice two types of indices used: the tender index and the construction cost index. Both types of indices are relevant for construction – they allow each side of construction costs to be presented together to provide a complete picture of construction economics in the Netherlands.

The construction cost index brings indices on the purchasing side of the building together and tries to show the development of labour, material and other procurement -related cost as a complete picture. The tender index shows conversely what price contractors charge for the realisation of projects. Clients may, on the basis of these indices of construction better determine what prices and trends are prevalent.

Sharper image, sharper control

Construction projects are becoming increasingly complex, while the modern economy leaves less and less room for cost overruns. With the correct use of recent indices of construction you can easily create a clear picture of the cost situation of a construction project. The result is a better, clearer understanding and overview, so you keep an increased, focused control of the results.

Are you looking for the latest indices of construction, or do you have specific questions about cost indices and indicators? Please look at www.bouwkostenindex.nl and ask for a free copy of the Handbook for the Built Environment – or contact the consultants IGG.

 

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