Construction Cost Indexes

Management

Introduction to Construction Cost Indexes

In the construction sector, the success of a certain company is directly related to how accurate it can calculate the costs of a project and its ability to complete the project within the planned budget. For this purpose, construction cost indexes are a valuable source of information. However, the contractor has to understand what information a specific index can provide and how to apply that index in a certain situation. The following sections provide some information some of the construction cost indexes.

Engineering News-Record (ENR) – ENR Construction Cost Index

The construction cost index (CCI) is published on a monthly basis by the ENR. You can find it in the 2nd weekly issue of each month along with other indexes provided by the ENR (such as ENR’s Building Cost Index (BCI) and materials index, skilled labor index, and common labor index).

There are indices for each of the 20 main US cities and two Canadian cities, as well as a national average for the United States. Atlanta, Baltimore, Birmingham, Boston, Chicago, Cincinnati, Cleveland, Dallas, Denver, Detroit, Kansas City, Los Angeles, Minneapolis, New Orleans, New York, Philadelphia, Pittsburgh, St. Louis, San Francisco, and Seattle are the 20 US cities utilized for the national average.

The construction cost index is composed of two main parts: labor and material. The labor part is calculated by finding that the average labor rate for the previously mentioned cities in the US and applied to 200 man-hours common labor. For the material part, ENR sums the average price for 1.128 tons of Portland cement, 1088 board-feet of 2 x 4 lumber, and 25 cwt of standard structural steel shapes. The base year against which these costs are compared is 1913 (in other words 1913 = 100)

ENR Building Cost Index

This index, the building cost index (BCI), has just a main difference compared to CCI, which is, it’s uses skilled labor instead of common labor. To calculate the skilled labor portion of the index, the ENR computes the 20-city average of wages plus fringe benefits for three trades (bricklayers, carpenters, and structural ironworkers) and applies this average to 66.38 hours of skilled labor. The material portion of the BCI is the same as the CCI. Similarly, The base year against which these costs are compared is 1913).

Boeckh Building Cost Index

Boeckh’s Building Cost Index is one of many various construction indexes that a company can produce. To compute their indexes, Boeckh gathers cost and price data from 205 cities in the United States. The data collected falls under three basic categories:

  • Material,
  • Labor, and
  • Tax and insurance

The material part is made up of 89 different elements organized into local, regional, and national levels. Three local components (face brick, concrete block, and ready-mix concrete) and 13 regional elements are present (lumber, sheet metal, reinforcing steel, and structural steel). At the national level, the remaining 73 material components are separated into commercial construction items (46 material components) and residential materials (27 material components).

Boeckh considers the current wage rates for each location for calculating labor expenses. They looks at both union wages and open shop (merit shop) salaries. While merit shop salaries predominate in certain rural regions, union wages are frequently the norm in bigger cities.

Boeckh also adds seven more components under the heading of tax and insurance charges. Sales tax, workers’ compensation, personal injury and property insurance, local taxes, social security, and unemployment benefits are some of them.

Lee Saylor Material and Labor Index

The Material/Labor Index presented here is one of two construction cost indexes produced by Lee Saylor, the other being a subcontract index. The weighted average of the two components of the Material/Labor Index is 54% for labor and 46% for materials. Additionally, this construction index offers divisions for buildings with steel, wood, or concrete frames.

The 23 distinct materials that make up the materials component are averaged among 20 US cities. The index is solely used in the US, hence the English unit of measurement is kept.

Saylor conducts research on the pay and associated benefits for nine chosen trades in 16 US cities for the labor component. Carpenters, bricklayers, iron workers, laborers, operational engineers (on average), plasterers, plumbers, electricians, and teamsters are among the crafts that are utilized. The Material/Labor Index is then calculated by adding the prevailing pay for these trades to the materials component. This index’s reference point is 1967.

Turner Construction Cost Index

Turner Construction Company has its own cost index based on multiple factors including labor rates and productivity, material cost, management and plant efficiency, and the competitive condition of the marketplace. The  reference point of this index is also 1967.

Means Historical Construction Cost Index

This cost index is created by The R. S. Means Company using a hypothetical model. This model takes into account nine different kinds of structures. Six distinct construction equipment rentals, 21 trades, and 66 material components make up the composite building.

Each component is given a weight based on how much of it is required to build the fictitious structure. Contractors, producers, wholesalers, distributors, labor specialists, and lone estimators are all part of Means’ enormous research network, which spans 305 US and Canadian locations.

January 1, 1993 is used as the base period by this index, but Means includes instructions for converting costs from any given year to another year. The formula uses a ratio of the two-year indexes multiplied by the cost in one of the years as follows.

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