cost index

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SOURCES AND METHODSCONSTRUCTION PRICE INDICES

Statistics Directorate, Organisation for Economic Co-operation and Development, Paris

Statistical Office of the European Community, Luxembourg

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FOREWORD

This publication is the result of joint work between the Statistics Directorate of the Organisation for Economic Co-operation and Development (OECD) and the Statistical Office of the European Communities (EUROSTAT). Theobjectives of this collaboration were to outline conceptual problems in the development of construction price indices,based on a comparative description of the methodologies currently used by Member countries of the OECD and theEuropean Union.

Such information will enable national statistical institutes, or other organisations compiling construction priceindices, to compare their methodology and data sources with those currently used in other countries. It will alsoprovide a range of options for countries in the process of creating their own indices, or overhauling existing indices.At present there is very little multi-country documentation available on construction price indices.

The level of activity in the construction sector is one of the key determinants of the level of short-term economicactivity in Member countries. The demand for reliable construction price indices arises from the need to assess realchanges in the output from these activities which cannot be derived solely through reference to regular building andconstruction statistics. These indices have a wide range of applications including deflation of components of nationalaccounts, adjustment of construction contracts and leases, and as a basis for indexation for insurance purposes.

At the moment, there is considerable variation in the concepts underlying the compilation of construction priceindices by Member countries, as well as in the price components and methodologies used. This variation is the resultof the different administrative and legislative environment, and differing physical characteristics, such as geographicsize, population density, climate, etc. in which organisations undertaking construction activity operate in eachcountry. Another factor are the different uses of the construction indices compiled.

The Statistics Directorate of the OECD and EUROSTAT are greatly indebted to the statistical offices of OECD andEuropean Union Member countries for their co-operation. Without this assistance, it would not have been possible toproduce this publication.

This publication is presented on the joint responsibility of the Secretary General of the OECD, and the Director-General of EUROSTAT.

Louis Kincannon Yves FranchetDirector Director-GeneralStatistics Directorate EUROSTATOECD

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TABLE OF CONTENTS

Page

Introduction ................................................................................................................................ 7

Section 1: Basic Concepts......................................................................................................... 9

A. Relationship of producer price indices to construction price indices ............................... 9Terminology used in this publication............................................................................... 9Elements of construction industry prices ......................................................................... 10Construction price indices ............................................................................................... 10

B. Main types of construction price indices .......................................................................... 12Input price indices ........................................................................................................... 12Output price indices ......................................................................................................... 12Seller’s price indices ....................................................................................................... 12Relation between the three types of indices .................................................................... 13Types of construction price indices compiled in OECD and European Union Membercountries ........................................................................................................................... 13

C. Typology of methods used by OECD and European Union Member countriesfor compiling construction price indices .......................................................................... 17

Prior breakdown methods ..................................................................................................... 17Standard factorsComponent cost method

Subsequent breakdown methods ...................................................................................... 18Quoted pricesSchedule of pricesMatched modelsBuilding volume or areaHedonic method

D. Outline of processes in developing a construction price index ........................................ 20

E. Uses of construction price indices..................................................................................... 21Use of construction price indices for deflating components of national accounts ........... 22

Section 2: Construction Price Index Compilation Issues...................................................... 24

A. Important considerations in the compilation of construction price indices ...................... 24Diversity of construction activity ..................................................................................... 24Changes over time............................................................................................................ 24Selection of appropriate prices ......................................................................................... 24Range of items for inclusion ............................................................................................ 25Ensuring geographic representativeness of the index ...................................................... 26Types of construction firms to include............................................................................. 26

B. Particular problems/issues for transition countries ........................................................... 26

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TABLE OF CONTENTS (cont.)

Page

C. Sources of information used to compile construction price indices ................................. 27

D. Major elements of construction price indices................................................................... 28Construction type/activity coverage................................................................................. 28Geographic coverage........................................................................................................ 29Items in the index ............................................................................................................. 30Weights............................................................................................................................. 30Basis of prices .................................................................................................................. 31Price collection................................................................................................................. 32Index review..................................................................................................................... 33Index formulae ................................................................................................................. 34Frequency of compilation/publication.............................................................................. 34

Section 3: Description of Country Indices.............................................................................. 35

A. Explanatory notes ............................................................................................................. 35

B. Input construction price indices .................................................................................... ... 37Australia ........................................................................................................................... 37Austria .............................................................................................................................. 39Belgium ............................................................................................................................ 42Canada.............................................................................................................................. 43Denmark ........................................................................................................................... 46Finland.............................................................................................................................. 49France ............................................................................................................................... 51Greece............................................................................................................................... 55Iceland .............................................................................................................................. 57Ireland............................................................................................................................... 58Italy ............................................................................................................................... 60Japan ............................................................................................................................... 64Mexico.............................................................................................................................. 65New Zealand..................................................................................................................... 67Norway ............................................................................................................................. 69Portugal ............................................................................................................................ 71Spain ............................................................................................................................... 73Sweden ............................................................................................................................. 76Turkey .............................................................................................................................. 78United Kingdom............................................................................................................... 79

C. Output construction price indices ..................................................................................... 81Australia ........................................................................................................................... 81Austria .............................................................................................................................. 84Canada.............................................................................................................................. 88France ............................................................................................................................... 90Germany ........................................................................................................................... 93Greece............................................................................................................................... 97

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TABLE OF CONTENTS (cont.)

Page

Luxembourg ..................................................................................................................... 99Netherlands....................................................................................................................... 101New Zealand..................................................................................................................... 104Norway ............................................................................................................................. 106Sweden ............................................................................................................................. 109United Kingdom............................................................................................................... 111United States..................................................................................................................... 116

D. Seller’s construction price indices .................................................................................... 118Canada.............................................................................................................................. 118Spain ............................................................................................................................... 120United States..................................................................................................................... 122

Section 4: Country Summary Tables...................................................................................... 124

Table 1: Main data sources used............................................................................................ 124Table 2: Methods for deriving weights.................................................................................. 128

Section 5: International Classifications Relevant to the Compilation of Construction Price Indices............................................................................................................. 132

A. International Standard Industrial Classification (ISIC), Rev. 3........................................ 132B. Statistical Classification of Economic Activities in the European Community (NACE), Rev. 1 ................................................................................................................ 133C. Provisional Central Product Classification (CPC)............................................................ 134D. Classification of Types of Construction ........................................................................... 137

Bibliography ............................................................................................................................... 138

Glossary ...................................................................................................................................... 139

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ABBREVIATIONS

CPI Consumer price index

ESA European System of National andRegional Accounts in theEuropean Community

EUROSTAT Statistical Office of the EuropeanCommunities

GDP Gross domestic product

GFCF Gross fixed capital formation

ISIC International Standard IndustrialClassification

NACE Statistical Classification ofEconomic Activities in theEuropean Community

OECD Organisation for Economic Co-operation and Development

PPI Producer price index

SNA System of National Accounts

VAT Value added tax

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INTRODUCTION

This publication provides an outline of the sourcesand methods used by OECD and European UnionMember countries in the compilation of priceindices for construction activity. Its objectives are:to provide information on techniques used on acountry by country basis; a conceptual frameworkfor the compilation of construction price indices;and indications of best practice in the compilationof these indices. Such information will enableOECD and European Union Member countries tocompare their methodology/data sources with thosecurrently used in other countries. It will alsoprovide a range of options for countries in theprocess of creating their own indices, oroverhauling existing indices. These options may beeither adopted in their entirety, or modifiedaccording to their own circumstances.

The term construction covers a wide variety ofactivities, these include the construction ofdwellings, non-residential buildings, and civilengineering works such as roads, bridges, dams,etc. Construction activity also encompasses repair,renovations, rehabilitation and maintenance ofexisting structures, etc.

The diversity of construction activity is the cause ofone of the major problems in the compilation ofconstruction price indices, that of comparability.The items comprising an index and their relativeweights are the result of different norms andstandards that apply in each country. For example,when comparing indices compiled by differentcountries for housing construction, account needsto be taken of differences in climate, culture, levelof affluence, legislative standards, physicalcharacteristics (e.g. geographic size, populationdensity, terrain) etc. These factors even influencewhat is included in a “house”, and therefore therange of items included in a price index of houseconstruction. There is considerable variationbetween countries in the inclusion/exclusion ofitems such as land, utility connection, fixtures,transport of materials, architects fees, etc. fromtheir indices.

At present there is very little multi-countrydocumentation available on construction priceindices. This publication complements twoprevious publications produced by the OECD

in 1994, Consumer Price Indices - Sources andMethods, and Producer Price Indices - Sources andMethods, and a publication produced byEUROSTAT in 1995, Industrial Trends: NationalMethods.

In February 1996 EUROSTAT hosted a seminar onconstruction price indices. Papers from thisseminar providing detailed descriptions ofmethodologies for the compilation of these indicesfor some European Union countries will bepublished in Methodological Aspects ofConstruction Price Indices in late 1996.

The demand for price indices for constructionactivity arises from the need to assess real changesin the output from these activities (i.e. to create aconstant value series) which cannot be derivedsolely through reference to regular building andconstruction statistics.

Construction price indices are used in guaranteedvalue clauses in rental, leasing, and other contracts;adjustment of sales contracts for buildings underconstruction; and as a basis for indexation forinsurance purposes. They are also used to deflatenational accounts estimates of output ofconstruction activities, and gross fixed capitalformation in residential construction.

In summary, construction price indices are used totrack changes/trends in the cost (or price) ofconstruction. They do not provide information onthe current market value of construction work,earning capacity, or rental values.

This publication comprises three sections.

Section 1 outlines basic concepts and describes therelationship between producer price indices andconstruction price indices, elements of constructionindustry prices, the main types of constructionindices, and a typology of methods used by OECDand European Union Member countries in theircompilation.

Section 2 outlines the major problems involved incompilation of construction price indices, sourcesof information used, and describes some of themajor elements in their compilation. The latter

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includes construction activity coverage, items in theindices, the calculation of weights, basis of prices,the alternate approaches to price collection, andissues relating to area coverage. Examples of bestpractice are also provided.

Section 3 briefly describes each of the three mainconstruction price indices compiled in OECD andEuropean Union Member countries. These are:input price indices, output price indices, andseller’s price indices. Where appropriate, moredetailed descriptions are provided for somecountries to illustrate important aspects of a numberof the concepts outlined in Section 1, andcompilation issues described in Section 2.

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SECTION 1. BASIC CONCEPTS

A variety of tools are used to measure pricechanges taking place in an economy. Theseinclude consumer price indices (CPIs),producer price indices (PPIs), price indicesrelating to specific goods and/or services, andGDP deflators.

CPIs are designed to measure changes over time inaverage retail prices of a fixed basket of goods andservices taken as representing the consumptionhabits of households.

PPIs provide measures of average movements ofprices received by the producers of commodities.In principle, PPIs exclude transport costs and

consumption taxes. Producer price indices are nota measure of average price levels, or of the costs ofproduction. Moreover, PPIs do not includecommercial mark-ups. Though the scope of PPIsvaries, they are generally calculated on the basis ofthe total turnover of a definable industry such asmanufacturing, agriculture, or mining.

In broad terms, construction price indices providemeasures of changes in the prices of either theinputs to, or outputs of, construction activity.However, terminology used in the context of priceindices for construction activity varies betweencountries. There is also considerable variation inthe inclusion/exclusion of items such as transportcosts, consumption taxes, fittings, etc.

A. RELATIONSHIP OF PRODUCER PRICE INDICES TO CONSTRUCTION PRICE INDICES

Terminology Used in this Publication

For the purposes of this publication it is necessaryto have a clear understanding of terminology usedin the context of construction price indices. AGlossary is provided in this publication, however anumber of key terms are also described below.These relate to the concept of the constructioncontractor, the client, purchaser, and final owner.

It should be emphasised that depending on theinstitutional framework operating within theconstruction branch of an individual country, oreven for different construction projects within acountry, these three concepts may relate to eitherseparate entities, or the one organisation/individual. For example, a construction contractorbuilding houses may also be the entity that took theinitiative for the construction work. Similarly, theclient may also be the final owner.

Construction contractor A firm which undertakes works as part of aconstruction project by virtue of a contract with aclient.

Client (“Maitre d’ouvrage”) Is the natural or legal person for whom a structureis constructed, or alternatively the person ororganisation that took the initiative of theconstruction.

Purchaser, final owner Is the person or organisation that pays the finalseller’s price. In some instances, this person ororganisation may be the same as the client (referabove).

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Elements of Construction Industry Prices

From the supply side, the price of the output ofconstruction activity is a function of the followingfactors:

• Direct inputs: These include materials, labour,energy, etc. Direct inputs generally vary inproportion to output.

• Indirect inputs and overheads: These includedepreciation, administrative expenses, etc.These are generally fixed and do not varydirectly with the volume of output.

• Productivity: Refers to the efficiency withwhich inputs are converted into outputs (e.g.through new technical solutions, increasedlabour productivity, or more effectiveorganisation of work).

• Profit: Is a residual determined by the salesprice, and combinations of the three precedingitems. Profit varies widely and may benegative.

The output price for a construction project maychange for any one or more of the followingreasons:

• widening or narrowing of profit margins due tochanges in market conditions (i.e. irrespectiveof changes in costs);

• increases or decreases in the prices of directinputs; and

• changes in productivity resulting in changes inthe quantity of direct inputs per unit of output.

On the demand side, the price actually paid by thepurchaser or final owner of the output of theconstruction activity includes a number ofadditional cost elements paid by the purchaser.These include the price of the land, costs ofobtaining planning permission, taxes andconnection fees, insurance, professional fees (legal,architects, engineers), real estate agent fees, landregistry charges, etc.

The requested price index cost elements fordeflating components of the national accounts aredescribed in Section 1E below.

Construction Price Indices

Most of the information used in the compilation ofconstruction price indices are derived from thesupply side of the industry (i.e. from constructionfirms, sub-contractors, materials supply firms, etc.).

However, a unique feature of construction activitythat impacts on the compilation of constructionprice indices is that in most situations thecompleted building or construction is not producedand sold by one construction contractor alone1.Normally, the client (or architect charged by theclient with the responsibility of supervising theconstruction) concludes contracts with a number offirms. Most of these are predominantly part of theconstruction branch, however they may also belongto other branches of the economy (e.g. steelconstruction, manufacture of fixtures, engineering,etc.).

The client (or supervising architect) invitesconstruction contractors (who in turn may invitesub-contractors) to undertake work at a building orconstruction site. The work to be done is referredto as “work category”. If the offer is accepted thework is performed and supplied to theclient/architect as a “product”. The work categoriescorrespond to the “goods” or “products” observedin other price statistics.

From the perspective of the production performedby a construction contractor, the prices in questionmay be either the prices of the various inputs to theconstruction process paid by the constructioncontractor, or the prices received by theconstruction contractor from the client for theoutput of the construction contractor. The latter areproducer prices and come close to the concept of aPPI (i.e. in the context of the construction industrythe prices received by the producers of workcategories). The construction contractor’s salesprices of individual work categories from theconstruction sector are in most cases also thepurchase prices of the client.

1 German Federal Statistical Office, Wiesbaden,

Studies on Statistics, No. 10 - Comments on theRevision of Statistics on Construction Prices,November 1959.

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An example of an input index is the index ofbuilding costs compiled in Finland which monitorschanges in the prices of 95 cost items using priceinformation obtained from construction enterprisesand price lists. On the other hand, the Austrianresidential and non-residential building output priceindex records changes in the price of residentialbuildings by monitoring changes in 82representative construction operations involved intheir construction.

There are a number of difficulties in compilingconstruction price indices using practices followedin the compilation of PPIs. These include:

• The product “building” or “ construction” or itscomponents are not produced and sold by theconstruction industry or its various branchesalone.

• Sub-contractors selling their output toestablishments and enterprises of theconstruction industry.

• The construction branch does not only producenew buildings or construction work. It is alsoinvolved in maintenance and repair work,conversions, extensions, demolition, etc. Inaddition, the turnover of the construction branchcontains turnover from other branches (e.g.transport, equipment hire, etc.). These types ofactivities are less readily observed.

As a result of these factors it is difficult to combineindividual series of price relatives for constructionwork at new buildings in the construction industryor its individual branches, as sufficient weightinginformation is seldom available. This isparticularly the case for classifying turnover onnew construction, repairs and maintenance, etc.

However, unlike PPIs, construction price indicesare not based on the total turnover of aninstitutionally definable sector, but on certainproduct categories. It is therefore difficult toproduce a PPI for the construction industry. Mostof the indices produced by OECD and EuropeanUnion Member countries are indices of a number ofbranches participating in the erection of buildings,or other construction activity.

As mentioned above construction price indices mayalso be compiled from information on the demand

side of the industry. This could entail collectinginformation on the price actually paid by thepurchaser or final owner of the output of theconstruction activity, as in the case of the Canadiannew residential housing price index. Alternatively,it could involve gathering information on a numberof additional cost elements that need to be includedin order to arrive at the actual price paid by thepurchaser or final owner. As mentioned above,these include the price of the land, costs ofobtaining planning permission, taxes andconnection fees, insurance, professional fees, realestate agent fees, land registry charges, etc.

In summary, construction price indices may bedescribed as indices compiled from:

• prices paid by the contractor for inputs to theconstruction process; or

• the price received for the completed output ofconstruction activity paid by the client; or

• the selling price including all of the demandside cost elements paid by the purchaser or finalowner.

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B. MAIN TYPES OF CONSTRUCTION PRICE INDICES

The methods used to compile construction priceindices vary significantly between OECD andEuropean Union Member countries. IndividualMember countries also use a variety of methods,data sources, etc. for the different constructionprice indices they produce.

Three main types of construction price indices arecompiled in OECD and European Union Membercountries: input price indices, output price indices,and seller’s price indices.

Input Price Indices

Input price indices measure changes in the price ofinputs to the construction process by monitoringseparately the cost of each factor. This generallyentails the compilation of a weighted index of thecosts of wages and materials.

Initially, representative object (e.g. a dwelling of aspecific type, size, style, etc.) is taken and thequantity of labour hours and materials needed forits construction calculated. These quantities areperiodically multiplied by the corresponding pricesand the outcome totalled.

Input price indices should not be used to provideinformation on price movements for finishedconstruction work as they generally do not reflectthe whole range of influences that impact on marketprices2. These include changes in productivity,profit, and trade margins of the constructioncontractor, and changes in actual market conditions.

Input price indices only provide a reflection ofchanges in the prices of construction inputs. Theindices produced are production cost rather thanproduction price indices.

As a result, the real trend of building costs maydiffer considerably from the trend compiled solelyon the basis of wages and material costs. An input

2 University of Geneva, Laboratory of Applied

Economics, Geneva - Indices of ConstructionPrices, A Methodological Inventory, LynnMackenzie, April 1994.

cost index is likely to overstate the price rise ofcompleted construction work as it ignores gains inproductivity reflected in price reductions.

Output Price Indices

Output price indices measure changes in the pricesof what is produced by entities engaged inconstruction activity.

Output price indices cover most of the itemsnormally built into the price paid by purchasers orclients to entities involved in producing thecompleted output of the construction activity.These generally include materials, labour,equipment hire, land preparation costs,bathroom/kitchen fittings, overheads, profits, andtrade margins.

Several different techniques are used to include allthese components. One method involves theinclusion in the index of all (or as many as possibleof) the individual factors involved in theconstruction of a dwelling, non-residential building,etc. These include overheads, profits, trademargins, and any other costs paid by the client orpurchaser to the builder. An alternative methodentails basing the index on the prices of actualfinished constructions. Both methods are describedin detail below in the typology of methods used tocompile construction price indices.

Seller’s Price Indices

Seller’s price indices measure changes in the pricesof construction output paid by the purchaser orfinal owner of the output of construction activity.

The term “seller’s price” is used to distinguish itfrom the “purchasers’ price” as defined in theSystem of National Accounts (SNA). The latter(which is discussed in more detail in Section 1Ebelow) excludes the land component in theownership transfer.

Seller’s price indices described in this publicationcover the total sales price of completedconstruction, including not only the cost of labourand materials, but also land, direct and indirect

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selling expenses, and seller’s profits. House priceindices compiled in the United States and Canada,and the dwelling price index compiled in Spain, areconceptually broader in item coverage than almostall input and output indices compiled in otherOECD and European Union Member countries.

The resultant indices compiled in these countriesfor houses include most factors which influencemovements in home prices. These include bothsupply factors such as wage rates, material costs,and productivity, and demand factors such asdemographic changes, incomes, and the availabilityof mortgage finance. These indices are the closestapproximations in item coverage to the actual pricepaid for construction output.

Some of these countries also compile seller’s priceindices excluding the land component.

The inclusion in the index of all the cost elementspaid for by the final owner of the construction(particularly the land, finance costs, sellingexpenses) conceptually brings a seller’sconstruction price index close to being a consumerprice index.

Relation Between the Three Types ofIndices

The item imposition of the three types ofconstruction price indices is illustrated in thefollowing diagram.

Input Price Index Output Price IndexSeller’s PriceIndex

Elements Paid by Elements Paid by Elements Paid byContractor Client Final Owner

Materials Materials Materials

Labour Labour Labour

Plant &Equipment ➜

Plant &Equipment ➜

Plant &Equipment

Transport Transport Transport

Energy Energy Energy

Other Costs Other Costs Other Costs

Contractor’sProfit Margins

Contractor’sProfit Margins

Productivity ➜ ProductivityOverheads Overheads

VAT

Land

Architect’sFees

Other Costs

Client’s ProfitMargins

In practice, there is some degree of overlap in theitem composition of the three types of constructionprice indices described above. For example, outputprice indices may include professional fees (such asarchitects, lawyers, engineers) to the extent thatthey are initially paid by the construction contractorand subsequently included in the output price paidby the client. The same principle applies to othercost elements. As will be further discussed inSection 3 the development of reliable constructionprice indices requires a thorough understanding ofall stages of the construction process from thematerials supply through to the sale of thecompleted “product” to the final owner.

Types of Construction Indices Compiled inOECD and European Union MemberCountries

There is considerable variation in the type andcomposition of construction price indices compiledby OECD and European Union Member countries.Just over half of the more than 60 constructionprice indices described in Section 3 below are inputindices. All except three of the remaining indicesare output indices compiled using either of the

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methodologies referred to above. The threeexceptions are seller’s price indices for housescompiled in the United States and Canada, and thedwelling price index compiled in Spain.

There is a continuum in the range of items includedin input and output construction price indices. Forinput indices some countries such as Belgiuminclude only labour and material inputs. Othercountries, such as Japan also include someinstallation costs (e.g. water/gas/electricity supply,bathroom and kitchen fittings, etc.). At the otherextreme countries such as Finland include a widerange of additional cost items such as transport ofmaterials to the site, equipment hire, site

preparation, conveyancing fees, outside fittings,etc.

There is a similar range of item inclusion/exclusionin output price indices reported by OECD andEuropean Union Member countries, though almostall include estimates for trade margins, overheads,and profits. The main differences between thecountries are in the inclusion/exclusion ofprofessional fees and conveyancing fees.

The types of construction price indices compiled byOECD and European Union Member countries,together with the compilation methodology, andfrequency of compilation are provided in thefollowing table.

Construction Price Indices:Types of Indices Calculated, Methods Used, and Frequency of Compilation

Country Index Title Type of Index Methods Used* Frequency ofCompilation

Australia Civil Engineering Input Standard factors QuarterlyConstruction and renovation of privately builthouses

Output Matched models Quarterly

Construction of other dwellings and otherbuildings

Proxy output Component cost Monthly

Austria Housing and estate building costs index Input Standard factors MonthlyCost index for road construction Input Standard factors MonthlyCost index for bridge construction Input Standard factors MonthlyResidential buildings price indices Output Component cost QuarterlyOther building price indices Output Component cost QuarterlyOutput price index for road construction Output Component cost QuarterlyOutput price index for bridge construction Output Component cost QuarterlyOther civil engineering work Output Component cost Quarterly

Belgium Composite construction price index Input Standard factors Annually

Canada Residential/Non-residential building inputcosts

Input Standard factors Monthly

Electric utility construction price index Input Standard factors Bi-annuallyTelecommunications plant Input Standard factors AnnuallyConstruction union wage rates Input Standard factors MonthlyApartment building construction Output Component cost QuarterlyNon-residential building construction priceindex

Output Component cost Quarterly

New housing price index Seller’s Matched models Monthly

Denmark Regulating price index for residentialbuilding construction

Input Standard factors Quarterly

Regulating price indices for civil engineeringworks


* A description of these methods is provided in Section 1C below

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Finland Index of building costs Input Standard factors MonthlyBuilding renovation costs index Input Standard factors Monthly

France Building construction sector indices (BTindices)


Price indices for civil engineering sector (TPindices)


Construction price indices for residentialbuildings (ICC)

Output Schedule of prices Quarterly

Germany Conventional construction price indices Output Component cost QuarterlyStandard house price indices Output PPI Bi-annually

Greece Input materials for the construction of newresidential buildings


Work categories for the construction of newbuildings

Output Component cost Quarterly

Iceland Index for privately built apartments Input Standard factors Monthly

Ireland Housebuilding cost index Input Standard factors MonthlyWholesale prices index of materials Input Standard factors MonthlyCapital goods price index Input Standard factors Monthly

Italy Costs index for a residential building Input Standard factors MonthlyCost index for a building for industrial use Input Standard factors QuarterlyCost index for stretches of road Input Standard factors Quarterly

Japan Construction price index Input Standard factors Monthly

Luxembourg Price index for the construction of residentialand semi residential buildings

Output Component cost Bi-annually

Mexico Price index for social housing Input Standard factors Monthly

Netherlands Price indices for social rented housing Output Component cost MonthlyHedonic price index for the low rentresidential building sector

Output Hedonic Monthly

NewZealand

Input index for the construction sector Input Standard factors(largely)

Quarterly

Output index for the construction sector Output Component cost(largely)

Quarterly

Capital goods price index for theconstruction sector

Output Component cost(largely)

Quarterly

Norway Cost indices for residential buildings Input Standard factors MonthlyConstruction cost indices for civilengineering works


Construction price index for detached houses Output Hedonic Quarterly

Portugal Construction Cost Indices Input Standard factors Monthly

Spain Construction cost index Input Standard factors QuarterlyAverage prices of dwellings per squaremeters

Seller’s Building volume orarea

Quarterly

Sweden Factor price index for residential buildings Input Standard factors MonthlyFactor price indices for repair andmaintenance of multi-dwelling, andagricultural buildings


Output price indices for houses andapartments

Output Hedonic Monthly

Turkey Building construction cost index Input Standard factors Quarterly

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Country Index Title Type of Index Methods Used Frequency ofCompilation

UnitedKingdom

Construction materials cost index Input Standard factor Monthly

Construction industry price index of averageearnings


Public sector housebuilding price index Output Component cost QuarterlyPublic sector non-housing price index Output Schedule of prices QuarterlyRoad construction tender price index Output Schedule of prices QuarterlyCommercial and industrial building tenderprice index

Output Schedule of prices Monthly

Output price indices Output Derived from above Quarterly

UnitedStates

Price index for highway construction Output Component cost Quarterly

Cost index for large projects Output Component cost QuarterlyPrice index for new one family houses Seller’s Hedonic Monthly

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C. TYPOLOGY OF METHODS USED BY OECD AND EUROPEAN UNION MEMBERCOUNTRIES FOR COMPILING CONSTRUCTION PRICE INDICES

Several different methods are used by OECD andEuropean Union Member countries to compileconstruction price indices. Each method aims atminimising the problems of comparability betweendifferent constructions and comparisons over time.

Most commonly, these entail the selection of one ormore standard (or model) types of construction onthe assumption they are representative of allconstruction projects for that type of constructionactivity (house, apartment, factory office building,etc.). The model constructions may actually exist,or be fictitious. Each model construction is definedin great detail in order to be able to obtain theprices (either actual or notional) of all or some ofthe work entailed in their construction. Prices arethen obtained from a number of sources. Theseinclude surveying construction companies,professional associations, administrative sources,etc.

The use of model types of construction projects ismore difficult for civil engineering, wherediversity, between even the same category ofprojects, makes the selection of “standard”constructions more difficult3. Methods used for thistype of construction activity include analysis of thecomposition of expenditure by civil engineeringcontractors on major construction projects,expenditures being classified according to thepurpose of the construction project, e.g. roads,bridges, dams, etc.

Seven construction price index compilationmethods used either currently, or in the recent past,by Member countries are described below. In orderto demonstrate the main principles more effectivelythese descriptions only contain the main elementsof each methodology. In practice, the more than60 construction price indices described in Section 3involve numerous variants and combinations of theseven compilation methodologies described. Thecompilation methods (primarily) used for each of

3 University of Geneva, Laboratory of Applied

Economics, Geneva - Indices of ConstructionPrices, A Methodological Inventory, LynnMackenzie, April 1994.

the construction price indices calculated in Membercountries are listed in the table in Section 1B above.

Prior Breakdown Methods 4

The starting point for prior breakdown methods is alist of carefully specified factors or components,from which the total input or output costs of abuilding or construction project are built up.

Standard Factors: This method is mainly used forthe compilation of input price indices. For anygiven year a representative construction (or smallnumber of projects) is selected and the quantities ofeach factor used to build it (e.g. materials, labour,transport, machinery, etc.) evaluated.

Changes in the costs of construction are determinedby monitoring the cost of each factor. Therepresentative building or construction choseninitially is used only to establish the weights.

This methodology, which yields a construction costindex rather than a construction price index, is usedby several OECD and European Union Membercountries. As mentioned earlier there isconsiderable variation in the range of itemsincluded.

Component cost method: This approach is used forthe compilation of output price indices. It regardsconstruction output as bundles of standardisedhomogeneous components. These componentscorrespond to the supply of standard operations (cf.Glossary). Examples would be: the supply andlaying of so many square metres of roofing tiles;installation of a hot water tank of a given capacity;construction of so many square metres of brick walletc.

Price indices are compiled using the prices of thesehomogenous components. A representative

4 Institut National de la Statistique et des Etudes

Economiques (INSEE), Paris, Bloc-Notes 4/1990- France’s Cost of Construction Index, Vincent leCalonnec, 1990.

18

construction (or number of projects) is also chosen.However, the actual work entailed in its completionis broken down into precisely defined standardservices or components.

A number of representative construction firms thathave recently performed any of these services aresurveyed to determine the price they have actuallyagreed or invoiced for these services. A priceindex is then created for each standard component.

These indices are then aggregated for the buildingsinitially defined as the benchmarks. The actualbuildings are used only to define a selection ofservices and the corresponding weights.

A variant of this approach involves the re-specification of a number of the representativeprojects on a cyclical basis.

The difference between an index based on inputfactors and one based on standard components isessentially one of degree, since components areonly factors at a more advanced stage ofproduction. However, the standard component costindex also incorporates productivity gains andchanges in profit margins, as it reflects not only thecost of the factors, but also the price of the finishedproduct paid by the customers of the constructionfirm. It will therefore include more of the priceelements listed above that determine the prices offinished construction work.

Another advantage of this method is that the pricesobtained are for components which remaincomparable over time. Fluctuations due todifferential quality or execution are eliminated.However, while components are morehomogeneous than completed buildings it isunlikely that they will be completely identical fordifferent completed buildings.

If there is a permanent change in the way acomponent is performed its definition is changed,and the new price series is spliced to the old one bymeans of chaining taking account of changes inquality.

Selecting truly representative standard components,and determining weighting coefficients thataccurately reflect construction techniques and theway buildings, etc. are usually constructed duringthe base year is the hardest and most important part

of compiling the index. However, every standardcomponent does not have to be priced separately.For example, if the price change characteristics ofbrick laying and paving are similar then prices ofonly one of (similar) standard components need tobe incorporated in the construction price index.

An advantage of both the standard factor andstandard component cost methods is that they canproduce different indices merely by changing theweighting of the indices for each component. Forexample, indices could be compiled by type ofwork, by trade, or as in the example of theconventional construction price indices compiled inGermany, by type of building.

Subsequent Breakdown Methods

Subsequent breakdown methods involve the use ofsamples of either actually completed, or fictitiousconstruction projects. They entail the collection ofprices effectively charged (or what would becharged) by the builder and incorporate changes inproductivity and profit margins. These methodsstart from the “completed” building or projectwhich are then broken down into component parts.

These methods are used primarily for thecompilation of output price indices. The hedonicand matched model methods outlined below arealso used by Member countries to compile seller’sprice indices.

Quoted prices: In this method the problem ofcomparability of components between constructionprojects is overcome by having respondents quoteprices for a standard construction output product(house, apartment, bridge, school, etc.) whosespecifications are kept constant from one period tothe next.

For example, the detailed specifications for a house(of specific type, style, size, etc.) are distributed toa sample of building firms. Bids or quotes are thencollected for the entire building as specified, aswell as the electrical work in the specifications, thebrick work, etc. Respondents are asked to bid asthough they were tendering for real work, takingaccount of prevailing market conditions and costs.The bids for each component are averaged andweighted up to an overall price, and a price index iscomputed.

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The standard construction (house, apartment,bridge, school, etc.) is updated periodically toreflect changes in materials, styles, etc. to ensurethat it is typical of those being constructed at thetime.

A major problem with this method is that it isdifficult for firms to take the process seriously.They are not bidding for real work and there is nobargaining involved.

Schedule of prices: This method entails theselection of a representative sample of constructionprojects either taking place, or completed, in agiven geographic area, over a specified period oftime. The cost of each technical component(derived from blueprints, work specifications, etc.)of a given construction in the sample is priced as atthe base reference date. This involves the use of aschedule of prices containing the price of eachcomponent of the construction at the base perioddate. Examples of this method are the constructionprice indices for residential buildings compiled inFrance, and several output price indices compiledin the United Kingdom.

By aggregating the prices for all the components atheoretical average price of the entire constructionis obtained as though it had been undertaken at thebase reference date. The general weighting isobtained from statistics on current construction. Aprice index is then obtained by calculating the ratioof the current actual price of the sampledconstruction to the recalculated price at the basereference period (derived from the sum of itscomponents compiled from the schedule of prices).

The role of the schedule of prices is to define aprice structure, not the average level of eachcomponent. The composition of the schedule ofprices may not necessarily reflect the averageprices for the base period. Obtaining such anaverage would require a very large sample.However, the relative structure of the prices on theschedule reflects market conditions at the timeperiod in question.

Matched models: Involves the specification of asample of representative construction projects (ormodels), the matching of these “model” projectsagainst actual projects carried out by contractors ina specified period, the collection of prices for the

matched projects for each period, and the weightingtogether of price movements for each project.Constant quality is maintained by calculating pricemovements on a matched sample basis (i.e. theprice movements between adjacent periods arebased on the same “model” projects each period).

This methodology is used for the calculation ofprice indices for standard project homeconstruction, as in the case of the price indices forthe construction and renovation of privately builthouses compiled in Australia. The composition ofthe list of construction projects or “models” to bematched against actual construction projects issubject to continuous review, and is determined bythe continued availability of price informationrelating to a particular model specification. If thespecification of an individual model changessignificantly, or if a price is unable to be obtained,then that model is excluded from the calculation ofprice movement.

Price information for the actual finishedconstruction is obtained for each period from asample of builders/construction firms, real estateorganisations, government agencies, etc. Theyrelate to actual sales transacted during the period.

Building volume or area5: For this index the cubicmetre is used as a common denominator tocompare the costs of a recent construction to costsin a base period. An index of the value per cubicmetre is calculated and adjusted for differences involume, quality, period, and region. Theseadjustments enable a price index to be prepared.However, the use of this method requires theconstruction activity included to be homogenous.The index is valid only for each reference building,etc. as it was originally built.

This method is no longer used by any Membercountry in its pure form, however building volumeis used in some countries (by the Netherlands for

5 Central Bureau of Statistics Netherlands,

Voorburg - A Hedonic Approach to OutputIndices for Construction, George van Leeuwen,February 1995.

University of Geneva, Laboratory of AppliedEconomics, Geneva - Indices of ConstructionPrices, A Methodological Inventory, LynnMackenzie, April 1994.

20

example) as one of the building characteristics inthe regression analysis used in the compilation ofthe hedonic construction price indices describedbelow.

A variant of this method used in the compilation ofan output price index for dwellings in Spain usesthe average price per square metre as one of thevariables collected in determining the averageprices of monitored dwellings.

Hedonic method: Regression techniques may beused to construct hedonic indices to measurepurchasers’ preferences for the differentcharacteristics of construction work. Thisapproach, which is used in the compilation of someof the price indices compiled in the Netherlands,Sweden and the United States, starts from thepremise that each construction is a combination ofcharacteristics, each of which has an implicit price.This price is set by the market and is reflected inthe over-all prices for which different combinationsof these characteristics are sold, and where differentvarieties of the same construction type, each withits own peculiar combination of characteristics, co-exist.

In addition to total price a limited number (7 to 15)of characteristics (qualitative or quantitative) aretaken into account. For a house, possiblecharacteristics include: floor area, number offloors, type of garage, method of heating, numberof toilets, etc.

Using econometric techniques (regression andcovariance analysis) weight of each of thesecharacteristics in determining the price is estimated.These weights can then be used to factor out thatpart of the price change in the next month which isdue to changes in the characteristics of the house,etc. sold. The coefficients of the regressions arecalculated first by means of total construction priceinformation and their characteristics in the currentyear, and on the basis of information on the sametype for a base period.

Each construction during the current period ispriced at what it would have cost during thereference period, once its characteristics are known.Indices are calculated from current prices and thenaggregated using either Laspeyres formula if thevalues of the characteristics are taken from the baseperiod, or Paasche if they are taken from thecurrent period.

The problem with this method, which is based onjust a few elements of construction, is that it is lessdiscerning than the schedule of prices method indetecting qualitative change. If constructionquality is enhanced the improvement will tend to beunderestimated and thus the actual increase inprices overestimated.

Furthermore, the use of these techniques requiresthe statistical agency to have access to trainedeconometricians, as well as specialist knowledge ofthe construction industry.

D. OUTLINE OF PROCESSES IN DEVELOPING A CONSTRUCTION PRICE INDEX

As with both CPIs and PPIs, the development andcompilation of price indices for constructionactivity is a complex procedure consisting of a longand varied set of operations. The usefulness of theconstruction indices compiled also depends onhaving a clear understanding of the purposes of theindices, and the characteristics of the constructionindustry in the country where it is located. Thesecharacteristics include:

• the range of construction activities conductedthroughout the country;

• construction techniques commonly used foreach type of construction activity, together withan idea of the rate of change in techniques used;

• types of entities/organisations undertakingconstruction activity, and their characteristics(e.g. size, industry concentration, etc.);

• administrative arrangements for themaintenance of building/construction standards;

• administrative arrangements for governmentauthorisation of individual constructionprojects.

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These aspects must be determined beforecommencement of work on the creation of theindex. Relevant characteristics of the countryexternal to the construction industry also need to beidentified. These could be economic, demographic,geographic, or administrative.

The major processes in the development andcompilation of construction price indices using the“model price” methodology outlined above are:

• Selection of a small, representative group ofrecently constructed buildings, civil engineeringprojects, etc. as models. The number of modelsrequired depends on the range of constructionactivity to be included in the index, diversity ofthe specifications for each type of activity, andregional diversity .

• Specification of the hundreds of detailed tasksor component trades in the construction of thesemodel projects. These are prepared usingarchitectural drawings and specifications. Alsoinvolves the development of components for thegeneral requirements (overheads and profitmargins) of the main construction contractor.

• Selection of a sample of components. Theselection of components within each trade areais based on both money value and the coverageof significant materials and/or productsinvolved. A goal might be to select componentswhich cover at least 70 per cent of the totalvalue of the trade.

• Development of specifications for eachcomponent to include quantities involved andbase-weight unit prices. Specifications must beexact to avoid the risk of varying interpretationby different respondents.

• Selection of a sub-sample of subcontractors andgeneral contractors in the appropriate

geographic areas from whom prices arecollected. An important goal is to selectcontractors who are actively engaged inbuilding sample components and can reportprice quotes based on recent experience. Somerespondents might be able to supply quotes oncomponents included in more than one model.

• Collection of periodic reports for a sample ofthese components from subcontractors. Theseshould be based on current prices they charge(including overheads and profit) for thecomponent they supply. Price collection may bedone by telephone or mail, generally after aninitial personal visit to gain co-operation anddiscuss reporting problems. The prices ofelectrical and mechanical equipment can beobtained from manufacturers of the equipment.

• Calculation of a price index for the constructionas a weighted combination of these componentprices. This is done by multiplying new pricequotations by base period weights, andcomparing the result to base period modelprices.

• Development and implementation of an on-going process of index review to revise the listof model projects, weights, component items,respondents, etc.

It could take as long as year to set up the models,enlist respondents, and begin to collect data.

Further information on each of these processes isprovided below in Section 2 of this publication.

E. USES OF CONSTRUCTION PRICE INDICES

Construction price indices are primarily used foranalysis of price movements and price formation inthe construction industry, for price escalationclauses in construction contracts, and for deflationof components of the national accounts.

More specifically, the primary uses are6:

6 German Federal Statistical Office, Wiesbaden,

Detailed indices for Construction Prices andConstruction Work, Series 4, May 1994.

22

• Measuring the changes of prices of constructionmaterials for construction work.

In developing a program of projects, preparingestimates, comparing estimates with bids, andscheduling projects within funding limits it isnecessary to have some way of judging pricemovements. The aim is to express physicalvolumes of work needed for future constructionwork in value terms.

• Studying the impacts of changing prices overthe total construction cost and selling prices ofthe construction work.

• Measuring the expenditure of consumedmaterials at constant prices.

• Estimating the short-term evolution of prices.

• To determine replacement values for insurancepurposes.

The use of construction price indices (wherequality and other changes in the pricedetermining characteristics of the constructionoperations observed have been eliminated) canhave considerable impact if they are used todetermine replacement values. If constructionwork of the original quality is no longersupplied because of substantial changes inmaterials, techniques, etc. the replacementvalues obtained from the use of constructionprice indices may be considerably less than theamount actually required to be spent on thereplacement.

• Realising price-index readjustments ofconstruction contracts.

• Planning the production of materials andchecking the efficiency of entrepreneurial units.

• Deflating components of the national accounts.In addition to the compilation of nationalaccounts at current prices there is a necessity inhaving constant price measures that separate theeffects of price and volume increases (ordecreases). This necessity is particularly strongin countries experiencing high inflation.

Use of Construction Price Indices forDeflating Components of NationalAccounts

National accounts constant value estimates areusually made by deflating estimates in currentvalues by appropriate price indices at as fine a levelof detail as possible and adding up the results. Theaim of such calculations is to enable the analysis ofperiod-to-period changes, by separating GDP andits sub-aggregates into distinct price and volumecomponents.

One of the main problems in the compilation ofprice indices for national accounts deflationpurposes is that of ensuring that an appropriateprice index is used for the national account itembeing deflated. In the context of construction priceindices the issue is primarily one of matching thenational account item being deflated with the itemcoverage of the price indices used. The formerprimarily involves the deflation of constructionindustry output and/or gross fixed capital formation(GFCF). The deflation of these components of thenational accounts by OECD and European UnionMember countries often entails the use of differentconstruction price indices.

The System of National Accounts (SNA) makes thedistinction between two types of prices for valuingoutput: basic prices; and producer’s prices.

• The basic price is the amount receivable by theproducer from the purchaser for a unit of goodor service produced as output minus any taxpayable, and plus any subsidy receivable, onthat unit as a consequence of its production orsale.

• The producer’s price is the amount receivableby the producer from the purchaser for a unit ofa good or service produced as output minus anyVAT, or similar deductible tax, invoiced to thepurchaser.

Both prices exclude transport charges invoicedseparately by the producer.

The preferred basis of valuation for deflatingconstruction industry output is at basic prices,though producer’s prices may be used whenvaluation at basic prices is not feasible. TheEuropean System of National and Regional

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Accounts in the European Community (ESA)specifies that only basic prices may be used.

Care should be taken to ensure consistency betweenthe valuation of industry output and the valuationof the price index used for deflation.

For all transactions on the uses of goods andservices such as final consumption, intermediateconsumption, and capital formation) both the SNAand the ESA specify purchaser’s prices as thepreferred basis of valuation.

The purchaser’s price is the amount paid by thepurchaser, excluding any deductible VAT orsimilar deductible tax, in order to take delivery of aunit of a good or service at the time and placerequired by the purchaser. This price includestransport charges paid separately by the purchaserto take delivery.

Therefore, on the expenditure side a purchaser’sprice index is required for the deflation of items ofconstruction falling within GFCF. For new fixedassets these include not only all transport andinstallation changes but also the costs incurred inthe transfer of ownership, in the form of fees paidto surveyors, engineers, architects, lawyers, estateagents etc., and any taxes payable on the transfer.

Output construction price indices compiled byMember countries include a number of costelements to enable the index to approximate basic,producer’s, or purchaser’s prices as defined in theSNA. The essential differences between the threeprice valuations being the inclusion or exclusion oftaxes, subsidies, and transport charges.

Due to the lack of suitable available output priceindices some countries use input price indices fordeflation purposes. Some use these indices makingallowance for productivity change, variations inprofits, and incorporation of overheads.

Seller’s price indices which include cost itemsoutside the scope of the production account forconstruction, and GFCF (in particular the cost ofthe land) may be less suitable for national accountdeflation purposes.

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SECTION 2. CONSTRUCTION PRICE INDEX COMPILATION ISSUES

A. IMPORTANT CONSIDERATIONS IN THE COMPILATION OF CONSTRUCTION PRICE INDICES

Most of the procedures involved in thedevelopment and calculation of construction priceindices (outlined in Section 1D above) are similarto those used in the compilation of CPIs and PPIs.However, listed below are a number of problemareas that are either unique to construction activity,or where particular attention is required whenconstruction price indices are developed. Theseissues are described in more detail in Section 2D.

Diversity of Construction Activity

To portray price changes by means of a price indexit is important for the data to relate to types of workthat remain constant. The main problem in thecompilation of price indices for construction arisesfrom the fact that the products/outputs ofconstruction activity (houses, apartments, factories,schools, bridges, dams, etc.) are seldom exactlycomparable with one another. Differences arisedue to variations in the plans/specifications,production location (building site), etc. for eachproduct. Civil engineering and non-residentialbuilding outputs are particularly heterogeneous.

The range of compilation methods used tominimise the impact of this diversity are outlined inSections 1B and 1C above. These include pricingcomponents rather than the entire constructionproject and the selection of individual types ofwork (or model) that regularly occur.

Another factor to consider is the type ofconstruction activity to include in the scope of theindex. Both the components, and the relative use ofthese components (weights) vary significantlybetween each type of construction activity. Eachconstruction price index relates to predeterminedtypes of construction activity and care is required toavoid the use of indices for unrelated types ofconstruction work.

Changes Over Time

Given that both the inputs to, and outputs ofconstruction activity constantly change, anotherproblem in compiling construction price indices isthat of ensuring comparability over time. Factorsthat influence such change include size, finish,style, equipment used, fashions, etc. This problemdoes not exist to the same extent for consumeritems where a price index can be compiledimmediately for the entire period over which suchproducts, their quality unchanged, are sold.

To ensure that the values reported for a particularprice series will show only “pure” price changes allthe factors contributing to a price level (the so-called price determining characteristics) must bekept constant as long as possible.

One method commonly used by OECD andEuropean Union Member countries to compare twoor more construction projects (which are alwaysdifferent), involves breaking the projects down intoelementary components that are more comparableover time.

Selection of Appropriate Prices

The selection of the appropriate price is also animportant consideration in the development of aconstruction price index. The following types ofprice data are generally available for constructionactivity7:

• tender prices• prices at the time of award of contract• invoice prices

Obtaining the “right” transaction price as opposedto list prices, the lowest price, etc. is critical. Listprices for example need to be adjusted for:

7 Austrian Central Statistical Office, Vienna,

Statistische Nachrichten - Index of BuildingPrices.

25

• cash discounts;• competitive discounts;• seasonal discounts;• trade discounts (i.e. a discount made to a certain

class of buyer);• quantity discounts.

A difficulty with one type of model pricing is thatcontractors may be asked to provide hypotheticalprices, what they would charge, rather than actualtransaction prices. It is also difficult to ensure thatthe prices compiled reflect current marketconditions and include a realistic allowance foroverheads and profit.

Finally, as with other types of price indices, it isalso difficult to separate changes in price fromchanges in quality. The latter may occur when abuilder or subcontractor alters the way thatcomponent is supplied, for example through the useof a new material or new equipment.

A prerequisite for dealing with this issue is to havestaff with detailed knowledge of the constructionindustry to ensure that price information providedby material suppliers, construction contractors, etc.can be evaluated for reasonableness, and who canask probing questions where necessary. Pricecollection staff must also be particularly alert tochanges in the quality of components.

Range of Items for Inclusion

As mentioned in Section 1B above there isconsiderable variation in the type and number ofitems included, even for the same types of indices,compiled by OECD and European Union Membercountries.

The construction of a building or civil engineeringproject often involves thousands of complexoperations and components. In developing aconstruction price index a decision is required onthe number and types of items to include to ensurethat the resulting index will accurately reflect pricechanges. The choice of items to be included in aparticular index is strongly influenced by the typeof index being compiled (input, output, seller’s),and its purpose. For example, if the primarypurpose of the index is to deflate components of thenational accounts, the item coverage of the index

should match the scope/content of the nationalaccount component being deflated.

Another consideration in compiling each type ofconstruction price index is the need to distinguishbetween the items paid by the producer (thecontractor) and those paid by the purchaser or finalowner.

Items considered for inclusion or exclusion in anyspecific index are profits, overheads, margins, theprice of land, site preparation, architects andsupervisors fees, transport, legal fees, certain typesof installations (central heating, elevators, cabletelevision systems, garages, etc.). TheEUROSTAT publication Industrial Short TermIndicators - Methodology outlinesrecommendations, rules and regulations concerningthe composition of short term indicators (includingconstruction price indices) for European UnionMember countries.

To compile indices comparable between EuropeanUnion member countries EUROSTAT recommendsthe inclusion/exclusion of the following elementsfor the three types of construction price indicesdescribed in Section 1 of this publication.

• Input: Should include at least the prices of rawmaterials and wages paid by the constructioncontractor, though not changes in thecontractor’s productivity and profits, or theprice of land, architects fees, etc. Input indicescan also include other input factors such asequipment, transport or energy.

• Output: Should include prices paid by thecontractor for all factors contributing to theconstruction activity paid by the client. Theseshould include those listed previously forinclusion in input indices, plus changes inproductivity, profits. Output indices should notinclude elements not normally paid by theclient. These could include the price of land,architects fees, etc.

• Sellers: Should include all the elementsincluded in both input and output price indicesplus the price of land, and other elementsincluded in the total sales price of the completedconstruction paid by the purchaser or finalowner.

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Ensuring Geographic Representativenessof the Index

Regional differences can have a major impact oncosts, prices, size, style (single dwelling versusmultiple dwelling constructions, low versus highdensity dwellings, etc.), construction materialsused, methods used, etc. It is particularly importantto identify any rural/urban differences. If an indexis to be applied nationally there is a need to ensurethat regional differences are represented in the pricecollection process, and that the index is compiledwith the appropriate weights reflecting thesedifferences.

Types of Construction Firms to Include

Construction activity may be conducted byspecialised businesses predominantly engaged inconstruction, either as prime contractorsresponsible for the entire project, or sub-contractorsinvolved in specific (and specialised) trades.Construction activity may also be carried out bybusinesses classified to other industries, or bygovernment. At the other extreme, constructionactivity (particularly house construction) may beundertaken by individuals for their own use (i.e.owner-builders).

The materials, construction techniques used, andeven the type of construction activity undertaken,may vary according to the type of entity involved inthe construction activity.

In transition economies there is a particular need toensure that data collection is extended to the newlyemerging private organisations (and newconfigurations of old enterprises), as well as state-owned enterprise. In other words, price data mustbe obtained from organisations representative ofthe whole range of construction activity. Forexample, selection of only the largest enterprisescurrently operating might result in the emergingprivate sector (which may only comprise smallerentities) being under-represented, or omittedaltogether.

Related to the issue of the type of constructionfirms, etc. to include in the collection of priceinformation is inclusion or exclusion of foreigncontractors, or domestic contractors workingabroad. Consideration needs to be given as towhether or not the price information obtainedreflects the price change characteristics of thecountry in which the index is being compiled.

B. PARTICULAR PROBLEMS/ISSUES FOR TRANSITION COUNTRIES

Many transition countries are currently developingtheir own construction price indices, or plan todevelop these indices in the near future. In additionto the problems faced by market economiesoutlined above, transition countries need to take anumber of particular issues and concerns unique totheir situation into consideration. These include:

• The inclusion of construction activities in theprice indices that are experiencing particularlydramatic growth during the transition period.These include the construction of hotels, shops,and private residential buildings. Whilst smallin numbers these types of construction could besignificant in terms of the gross output of theconstruction industry. At the same, work onmajor new state projects has almost beencompletely suspended in many transitioncountries.

• Movement away from the dominance of theconstruction industry by large state enterprises

by the entry of a larger number of smaller andperhaps more specialised constructionenterprises, e.g. firms specialising in theinstallation of fittings in newly restituted shops,building of private houses, etc. Related to thisissue is the need for transition countries todevelop techniques/procedures, questionnaires,etc. to obtain the required price informationfrom construction enterprises (of all sizes) in theemerging private sector.

• The inclusion of construction activity carriedout by unauthorised persons.

• The inclusion of barter arrangements betweenconstruction enterprises.

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C. SOURCES OF INFORMATION USED TO COMPILE CONSTRUCTION PRICE INDICES

From the perspective of the organisationresponsible for compiling a construction priceindex the selection of the most appropriate sourcesof information used depends on a number ofconsiderations. These include the use(s) to whichthe index will be put and the type of index required(input, output), data availability, and resources(both financial and skill) available in theorganisation. The institutional background inwhich a construction price index will be developed,will to a large extent determine the feasibility andcost of the index, and influence the methodologyused in its compilation.

The data required to compile an index may be inthe form of price information obtained fromconstruction enterprises or materials suppliers.Alternatively, components of the price index maybe obtained from administrative agencies chargedby law with the responsibility for compiling basiccosts indices, or by professional associations foruse as benchmarks for contracts in the profession.Information may also be obtained from the clientwho may be traced through building permits.

The following table summarises possible sources ofinformation for compiling construction priceindices.

Types of Information Required for Price Index Possible Data Sources

Input prices - materials • Surveys of construction, building materialsupply, or building material manufacturingenterprises.

• Associations of quantity surveyors

• Trade associations

• Chambers of commerce

• Other national statistical office collections (e.g.for producer price indices

• Government agencies charged with responsibilityof monitoring capital construction works(particularly roads, dams, bridges, etc.)

Input prices - labour • Trade unions

• Trade associations

• Collective bargaining agreements registered withgovernment

• Government agencies charged with responsibilityfor regulating wages.

• Enterprise surveys of employers

• Household surveys of employees

Transport costs • Transport associations

• Surveys of transport enterprises

• Relevant government agencies

Weight information • Construction branch structural enterprisesurveys

• Associations of quantity surveyors

• Architectural enterprises/associations

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The actual sources of information used byOECD and European Union Member countriesin the compilation of specific construction

price indices are listed in Country SummaryTable 1.

D. MAJOR ELEMENTS OF CONSTRUCTION PRICE INDICES

The major elements of construction price indicesare outlined below. These elements are interrelatedin the sense that a series of trade-offs andadjustments are made between them by theorganisation developing the index. These trade-offs are largely determined by the proposed use ofthe index, data availability, and resources availablefor developing and compiling the index. Forexample, in the case of a price index for houseconstruction, the requirement for an indexencompassing both rural and urban areas of acountry might for cost reasons be traded off infavour of including only urban house constructionby a decision to include price information for alarger number work categories, materials, etc. Sucha trade-off could be justified, for example incountries where an overwhelmingly largeproportion of house construction takes place inurban areas.

Construction Type/Activity Coverage

The decision by OECD and European UnionMember countries on the types of construction orconstruction activities to include in the constructionprice index (or indices) they compile largelydepends on the use(s) of the completed index.Some countries compile special purpose indicescovering a very narrow range of construction types(e.g. one family houses in the United States, socialhousing in Mexico, bridge construction in Austria,etc.), whilst others compile separate indices for all,or almost all, construction activities (e.g. Austriaand Australia). A number of Member countriescompile a weighted composite index of allconstruction types (e.g. Belgium and Japan).Finally, some indices include only constructiontypes undertaken on behalf public or private sectorclients (e.g. the index for privately built apartmentsin Iceland).

Several characteristics of activities undertaken inthe construction sector result in difficulties incompiling construction price indices. Thesecharacteristics include:

• the fact that the resultant indices are mainly notbased on the total turnover of an institutionallydefinable sector, but on product categories (ortypes of construction);

• the production of these types of constructionworks (residential buildings, non-residentialbuildings, roads, etc.) by several industrybranches; and

• the inclusion of these activities (joinery, steelconstruction, etc.) in other branches of theeconomy.

The type of entity (construction material supplier,construction contractor) to be priced will varyaccording to the use(s) of the construction priceindex, and the type of index being compiled (input,output, seller’s). If used to deflate components ofthe national accounts, the item content of the indexshould as far as possible, correspond to the valuecoverage of the national account item to bedeflated. Alternatively, if the index is to be used tore-adjust long-term contracts, the types ofconstruction projects included in the index shouldmatch construction activities for which contractsare to be indexed. This may not be possible in asingle construction price index, and it may benecessary to compile a number of indices.Alternatively, it may be necessary to use one indexthat best fits all or most of the uses, or from whichmost of the purposes can be met.

The compilation of price indices to portray themovement of prices across all construction typesinvolves the selection of individual projects fromeach type of construction. The impact of thediversity (particularly non-residential building andcivil engineering projects) of construction activityon price change is reduced by selecting a number ofrepresentative projects from each construction type.Some countries select projects carried out over anumber of years to eliminate any bias that mightoccur if a shorter period were chosen.

Matching the construction types or activities to beincluded in the index with proposed use(s) of the

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index entails use of a combination of differentclassifications to define the activity, industries,occupation, type of construction, etc. that areincorporated in the index. The mix ofclassifications used varies between each Membercountry, and between the different constructionprice indices compiled in each of these countries.

A number of countries have developed their ownclassifications to take account of local conditions,institutional/administrative arrangements, and workpractices. In almost all instances these nationalclassifications are compatible with standardinternational classifications. These include:

• General classifications of industries (NACERev. 1; ISIC Rev. 3): According to whichenterprises are classified.

• Classification by type of constructions(residential buildings, non-residential buildings,civil engineering, etc.), for example the draftEUROSTAT Classification of Types ofConstructions: Very often, different indices arecalculated for each of the main types ofconstruction.

• Classification by trade or occupation(carpenters, bricklayers, plumbers, etc.), forexample the International StandardClassification of Occupations (ISCO): Thewage component used in input prices is oftenobtained from existing indices compiled bytrade associations, etc.

• Classification by construction work categories(brick works, marble tiling).

• Classifications of geographic areas.

It is recommended that countries developingconstruction price indices use either internationalclassifications, or nationally developedclassifications that are compatible withinternational classifications. Extracts from some ofthese international classifications showing areasrelevant to construction price indices are providedin Section 5 of this publication.

Geographic Coverage

Some OECD and European Union Membercountries compile national construction priceindices from the (weighted) average of a set ofregional indices, whilst others compile regionalindices from national indices. The need to observeconstruction prices across capital cities, towns,villages and rural areas depends on the extent towhich price changes differ in each of the regions.It also depends on the resources available todevelop regional indices and to collect regionalprice data.

Where regional price trends do not differsubstantially, it is sufficient merely to distinguishmetropolitan areas, other large cities, small cities,villages, and rural areas. Some countries (e.g.Greece) compile indices only in respect of capitalcities, on the assumption they are representative ofthe urban areas for the entire country. Whereregional differences are important a goodgeographical dispersion is important. Ignoring theproblem can lead to quite misleading results,especially where a large portion of the populationlives in rural areas.

It is recommended that national price indices becompiled as averages of regional price indices andnot as indices of national price averages. In otherwords, for each regional price observed a pricerelative would be computed showing the changefrom one period to the next. These price relativeswould then be averaged over the whole country.As a result only the price changes occurring withinregions would influence the national average.Examples of the aggregation of regional indices toobtain national indices include the residentialbuilding, and buildings for industrial use inputindices compiled in Italy, and the residentialbuilding output price indices compiled in Austria.

Indices compiled in some countries take account ofdifferences in the types of terrain whereconstruction activity takes place. Examples of thisare the output price indices for road, bridge, andother civil engineering construction compiled inAustria where the weights distinguish between flat,hilly, and mountainous terrain.

In some countries separate indices can be compiledonly for very large geographic regions, and in some

30

instances it is not possible to produce any regionalindices. Whether this is important again dependson the extent of regional variation in price changesover time.

Items in the Index

The primary purpose for the collection of prices ofcategories of work, materials, etc. for constructionactivity is to record the changes to which theseprices are subject over time. The absolute pricesprovided by respondents are only used for thecalculation of a series of relatives.

As mentioned in Section 1B above, there areconsiderable differences in the types of itemsincluded in the compilation of construction priceindices by OECD and European Union Membercountries. There are also considerable differencesin the number of items actually priced, rangingfrom a few dozen to several thousand.

Determining the actual items to include in the indexis largely a matter of judgement. The compilationof an index involving several thousand items couldlead to high degrees of accuracy. However, itcould also be difficult and costly to collect the priceinformation for each of the items.

The objective is to identify the minimum number ofindicator items that collectively represent a highproportion of the total value of the constructionproject. These items are referred to as indicators8.For civil engineering projects they could include:common excavation, structural steel; structuralconcrete; Portland cement concrete surfaces; etc.When there are changes in the prices of theprincipal work item (such as bridges, excavations,road surfacing, etc.) the prices of the indicatoritems usually move in the same direction, and to thesame extent.

Other items considered for inclusion in the indexmay be surrogates, in that they will normallyparallel price changes in the hundreds of otheritems that are not included in the price index.

8 Federal Highway Administration, Washington

D.C. - FHWA Bid Price Index - 1987 Base Year,C.A. Leonin, 1989.

The decision on whether or not to include an itemin an index depends on the impact that changes inthe price of that item (or group of items) may haveon the total price of the construction. For example,including only the factors entailed in erecting theshell of a building might be insufficient to measureprice changes for the purchaser. Finishing work(such as the installation of fittings, connection ofutilities) could also have considerable impact onbuilding prices. As a result most OECD andEuropean Union Member countries include theprices of finishing and ancillary trades in theirbuilding indices.

Weights

Several different weights may be used in thecompilation of construction price indices. Thesecould include weights for:

• Individual branches of the construction industryif a composite index including several groups orclasses is compiled. These weights could bebased on the respective share of the groups orclasses to total industry output in a base year.

• Different types of building construction(residential (houses, apartments); non-residential buildings (factories, schools,commercial, etc.); and civil engineeringconstruction. These weights could be based onthe value of the respective share of each type ofconstruction to total value compiled fromapproval authority data.

• Geographic dissaggregations (e.g. regions,states, capital cities, rural/urban areas, etc.).

• Component item weights for which priceinformation are collected from constructionmaterial suppliers, construction contractors, etc.These may comprise work categories,construction materials, etc. depending on thenature of the index. OECD and European UnionMember countries primarily base their weightsfor each component item either on a single (orsmall number of) standard construction model,or the expenditure accounts of a representativesample of construction enterprises.

The availability of these weights enables thecompilation of a variety of indices, by type of

31

construction activity, regional indices, and indicesfor different work categories/material components.

Countries calculating a construction price index onthe basis of weights derived from notional typicalprojects use records of final costs of the selectedconstruction projects to determine the proportion ofthe share of the component items to the total cost ofconstruction in the base year. These weights arethen used in subsequent periodic index calculations.The number of model projects on which weightsare based varies significantly for the differentindices compiled by Member countries. TheCanadian apartment building construction outputprice index uses weights based on a singleapartment building that was actually built in 1981.Austria bases the weights for its road constructionoutput index on cost studies of around 200 roadconstruction projects.

Countries calculating construction price indices onthe basis of factor inputs or component costs,survey construction enterprises to determine therelative values of material and labour inputs orcarefully defined types of construction activitiesduring the base period. Bills of quantities oraccounting records may be used to identify theappropriate inputs and their respective weights.The analyses undertaken by OECD and EuropeanUnion Member countries range from subjectiveassessments of cost distribution derived from arelatively small number of construction enterprises,to the use of data from periodic constructionindustry surveys.

The impact the diversity of construction activity onprice trends is reduced by calculating weights froma selection of representative types of work from arange of construction projects carried out. Theproduction of a table of weights based either on theaverage shares of categories of work carried out ormaterial components represented by individualtypes of work/components, is therefore independentof the nature and purpose of a particular project.

The methods used by OECD and European UnionMember countries to compile weights are outlinedin Country Summary Table 2.

Basis of Prices

As mentioned in Section 2A above the selection ofthe appropriate price is an important considerationin the development of a construction price index.The aim is to use prices that provide the closestapproximation to market prices actually paid by thepurchaser of the construction, component item,service, etc.

In most OECD and European Union Membercountries the prices collected are net of discounts,with the exception of some of the input indicescompiled in Canada, Denmark, and New Zealand.The inclusion/exclusion of VAT and other taxesshows quite wide variation.

There are generally a number of different types ofprices available for construction price indexcompilation. These include9:

• Tender prices: Determined at the time of thesubmission of the tender. They can becalculated accurately, but are “theoretical”prices in that not all tenders lead to the award ofa contract. In that sense tender prices may notbe true market prices. The organisationcommissioning the tender awards theconstruction project to the prime contractor/sub-contractor that submitted the best offer, both interms of price and quality.

• Prices at the time of award of contract: Areprices that form the basis of agreement betweenthe owner and the contractor at the time ofsigning the contract. These prices may not beidentical to the tender price but usually reflectthe market situation at the time in question.They have the advantage of being availablevery quickly for index compilation.

• Invoice prices: Are the prices actually paid.They are therefore an exact reflection of theremuneration received for the precisely definedwork performed, construction materials, etc.The main problem in using invoice prices inindex compilation is that they may not be


Statistische Nachrichten - Index of BuildingPrices.

32

available until well beyond the “current” priceperiod.

The use of model pricing may also involve adeparture from the collection of actual marketprices. The contractor may be asked to providehypothetical prices, i.e. what they would charge,rather than actual transaction prices. It is difficultin this situation to ensure that the prices compiledreflect current market conditions, and include arealistic allowance for overheads and profit.

As mentioned previously, a prerequisite forobtaining the correct price information is to havestaff with detailed knowledge of the constructionindustry to ensure that price information providedby material suppliers, construction contractors, etc.can be evaluated for reasonableness, and who canask probing questions where necessary. Pricecollection staff must also be particularly alert tochanges in the quality of components, which mayoccur when a builder or subcontractor alters theway that component is supplied, for examplethrough the use of new materials or new equipment.

Price Collection

The issues involved in the collection of informationfor construction price indices are identical to thosefor PPIs and CPIs. The procedures implemented inthis phase of index compilation have a majorimpact on the accuracy of the indices produced.The major issues include:

• Selection of respondents: In principle, all typesof organisations involved in constructionactivity within the scope of the constructionprice index being compiled should berepresented in the sample of respondents.These include large and small, private and state-owned organisations. The techniques used byMember countries for selecting respondentsvary from judgmental selection, to the use ofrandom sample selection.

• Number of respondents: Is essentially asampling question. The larger the number ofrespondents selected, the more detailed will bethe indices produced. In practice, the size of thesample is a trade-off against cost, data qualityand respondent load. For example, it may bemore appropriate to use resources to collect

price information (by personal interview) of ahigher quality from a smaller sample.

• • Number of prices collected: It is difficult torecommend a precise number of pricequotations. In theory the optimal number ofprice quotations per enterprise may varydepending on the size and range of pricechanges (price variability), and on the size ofthe enterprise. In many countries the averagenumber of price quotations per enterprise isbetween three and five. In branches whereproducts are homogeneous and commercialtransactions simple, one quotation could besufficient to represent all the transactions of theenterprise.

• Item specification: To portray price changes bymeans of a price index it is important that thedata relate to types of work that remain constantso that hidden model and quality changes willnot distort results.

The recommended basis of accurate pricecollection is the precise specification of thefactor or component cost for which priceinformation is obtained from the constructioncontractor, building material supplier, etc. For aconstruction material component being pricedthis may entail the specification including thesystem, brand, make, model number, type, orpatent, for the item being priced10. An exampleof a component cost item specification from anAustrian output price index is:

"1 m² of covering roof area withfreshly fired clay roofing tiles ...*... cm.Product ...... laid dry, suspended/nailedon prepared battens."

An alternative procedure (used in sometransition economies) of providing respondentswith only functional descriptions of theitems/services to be priced, in effect, allows therespondent to select the actual item priced. Thisapproach might result in the reported pricescontaining a mix of quality change and pureprice variation.

• Collection method: Options for the collectionof price information are personal visit,


Statistische Nachrichten - Index of BuildingPrices

33

collection by telephone, or mail collection. Therecommended approach entails personal visit togain the co-operation of the respondent, identifythe items to be priced, firming up itemspecifications, and to discuss possible reportingproblems and issues. Price information maythen be collected by mail, telephone orelectronic data interchange (EDI). However, itis also essential for respondents to be visited atfrequent intervals to ensure that prices areprovided strictly in accordance with thespecifications, and that hidden quality changes,etc. have not crept into the price informationprovided.

The selection of strictly specified transactions inthe initial phase of respondent recruitment alsorequires use of the expertise of representativesof the respondent organisation. Theinformation required from the respondentduring the initial visit includes the selection of arepresentative set of transactions to be pricedeach month, quarter, etc. This is normallybased on a judgmental approach using theadvice of the respondent.

Finally, in order to ensure that the item beingpriced adheres to the specification provided,provision should be made for the respondent toreport changes in the actual specifications of theitem reported. It is also necessary to determinewhether any changes are temporary orpermanent.

Index Review

Irrespective of the method used for their derivation,the weights for the various components ofconstruction price indices should be characteristicof the periods being compared. As time goes byindices lose their relevance as building practicesand technology diverge more and more from thoseprevailing in the base period (the period to whichthe weights relate), whose weights continue to beused. As a result, weights for construction priceindices need to be reviewed, and where necessaryrevised at least every five to ten years.

The frequency of the revisions is largely dependenton the pace of structural and technological changetaking place in the construction industry in anyparticular country. For example, the rapidinstitutional, administrative, and technological

changes taking place in transition countries couldjustify revisions every three to five years.

More specifically, changes to the weights arerequired because of:

• shifts in construction methods and practicesfrom one base year to the next;

• differential price trends between trades;

• structural differences in the make-up of samplesof buildings constructed during the referenceperiod, e.g. use of more energy efficientdesigns.

Another objective of index review is to ease thetask of reporting entities by amendingspecifications to reflect changes in buildingmethods.

Maintenance of the continued relevance of anyindex requires the implementation on an on-goingindex review process. Elements of the process forconstruction price indices include:

• Review of the composition of the list of projects:Entails an examination of the list of modelconstruction projects to ensure that theycontinue to be representative (e.g. use of newstyles, size, etc.).

• Review of the projects themselves: Entails areview of individual projects within the list ofmodel construction projects to ensure that thedata item components (and their weights) reflectchanges in technical standards, newconstruction methods, new building materials,etc.

• Review of specifications: To ensure they usecurrent terminology, etc.

• Review of respondent organisations: To ensurethat price data continue to be obtained fromorganisations representative of wholeconstruction branch (e.g. a representativeselection of large/small, government/non-government organisations).

34

Index Formulae

The formulae most commonly used in thecompilation of construction price indices by OECDand European Union Member countries are thefixed base-weighted Laspeyres and the current-weighted Paasche.

Just over forty of the indices described use aLaspeyres formula, and a further five (in Belgium,and Canada) use chain Laspeyres (where theweights are updated annually). Seven of theindices described (in France, Sweden, and theUnited Kingdom) use the Paasche formula, whilstAustralia uses elements of both fixed and currentweighting in some of their construction priceindices.

In Japan, indices for individual items that make uptheir construction price index are calculated as aFisher Approximate Value, derived by combiningthe Laspeyres index with an approximate Paascheindex.

Frequency of Compilation/Publication

Almost all of the construction price indicescompiled by OECD and European Union Membercountries are compiled and published eithermonthly or quarterly. The Belgian compositeconstruction index is compiled annually, as aresome of the Canadian indices. Two countries(Canada, and Luxembourg) compile constructionprice indices twice-yearly.

Some countries also produce more detailed specialpurpose indices (covering for example moredetailed type of construction activity, trade groups,material components, regional disaggregations,etc.) on request.

35

SECTION 3. DESCRIPTIONS OF COUNTRY INDICES

A. EXPLANATORY NOTES

Most OECD and European Union Membercountries publish construction price indices thatmainly differ from each other by the type andpurpose of the index, construction activitycoverage, and the items included in the compilationof the index. The descriptions of the countryindices presented below are organised in three partsaccording to the three types of construction priceindices described in Section 1B of this publication:

• input construction price indices compiled by19 Member countries;

• output construction price indices compiled by14 Member countries; and

• seller’s price indices compiled by 3 Membercountries.

The descriptions of these three types of indicespresented below have, as far as possible, thefollowing structure for each country.

In order to illustrate certain aspects of the conceptsand compilation practices described in Sections 1and 2 of this publication, more detailed descriptionsare provided within some of the following sectionsfor some countries.

Resume

Provides a brief overview of the construction priceindices compiled in the country, and includes thetitle, main characteristics of the indices, method ofcompilation, and the name of the organisationprimarily responsible for the compilation of theindex.

Organisation responsible for index

The address of the organisation responsible for thecompilation of the indices is given as a contactpoint for those wishing to access the index series,or requiring further information concerning themethodology used in its compilation.

Telephone and fax numbers

Correspond as far as possible to the serviceresponsible for the compilation of the indiceswithin the above organisation.

Other organisation involved

In some countries, organisations other than theprimary organisation referred to above are involvedin the compilation of the indices. These could bethe national bank, relevant ministries, and othergovernment agencies involved in housing policy, orthe planning of civil engineering infrastructurework. These organisations may collect relevantprice information or weights for their own needs.These elements may then be used by the primaryorganisation responsible for the compilation of theprice indices.

Reference population

Describes the reporting units and the elements forwhich prices are observed. Reporting units includeconstruction enterprises, materials suppliers,government organisations, etc. The observedelements correspond to the basket of items forwhich prices are monitored in the compilation of aPPI. They can be standard categories ofconstruction works, input factors, etc.

Types of construction covered

Describes the type(s) of construction activityincluded in the indices. Often separate indices arecompiled for different types of construction.

Geographic area covered

In some countries the indices apply to a limitedarea of the national territory (e.g. capital city, urbanarea, major cities), or are provided by region.

Items included in the indices

36

Describes the components included in the pricesmonitored for the indices. The components may bethe cost of input factors such as materials, labour,profits, margins, productivity, overheads, VAT,cost of land, architects fees, etc. The inclusion orexclusion of these components determine the typeof index compiled (input, output, seller’s price).

Sources of data

Construction price indices are often compiled usinginformation from a number of sources. Theserange from “raw” data obtained directly fromconstruction enterprises, to the use of indicescompiled for other purposes.

Method of compilation

Provides a limited description of the methodologyused in the compilation of the index. For eachindex, this part refers to the typology described inSection 1C of this publication.

Compilation of weights

Describes the procedures used to compile theweights used in the indices.

Type of index, base year and frequency ofcompilation

Describes the main characteristics of theconstruction price indices compiled in the country:formula (Laspeyres, Paasche, etc.), base year, andfrequency of compilation.

Use(s) of the index

Outlines the main uses of the indices described.

Publications

Gives an overview of the data available, and listspublications and other dissemination media wherethe index series are presented.

Where available, methodological references arealso provided.

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B. INPUT CONSTRUCTION PRICE INDICES

AUSTRALIA

Resume

The Australian Bureau of Statistics (ABS) compilesprice indices based on input costs covering civilengineering works. The Bureau also compilesthree output price indices for: the construction andrenovation of houses; construction of otherdwellings; and construction of other buildings.These are described in this publication underOutput Price Indices.


Australian Bureau of StatisticsPO Box 10Belconnen, ACT 2616Australia


Tel: (+616) 252 6808

Fax: (+616) 252 5327


The index includes major civil engineering projectsclassified according to purpose, e.g. roads,communication facilities, etc.


The index is compiled for each of the eight Statesand Territories in Australia.


The price indices for civil engineering works arebased on input costs comprising: materials(excluding the cost of transport to site), labour, andequipment hire. No taxes are included in thesecosts, which reflect any discounts available.

Sources of data

A periodic collection is undertaken (most recentlyin 1985), to determine the composition ofexpenditure for a number of State andCommonwealth public sector authorities on majorconstruction projects. The expenditures areclassified according to the purpose of theconstruction projects e.g. roads, communicationfacilities.

The cost information for materials and equipmenthire is obtained from producer price index andforeign trade price index sources, together withsome specially constructed indices, for example,road building activity. Labour costs are based onthe system of pay awards, which set the legalminimum pay for each classification within anoccupation. Social contributions paid by employersare not included.


The indices are compiled using the standard factorsmethod. A number of fixed-weighted input-costindices are derived for various purpose categoriesof expenditure. The fixed weights are derived frominformation collected from various authorities onthe composition of expenditure.


The periodic data collection referred to above isused in the selection and determination of weightsfor the 80 most significant expenditure items.Although this data collection is restricted to thepublic sector, the composition of expenditures foreach purpose is considered to closely reflect thecomposition in the private sector.

The indices used for deflation in the nationalaccounts have elements of fixed and currentweighting. Fixed weighted price indices arederived for a number of purpose categories ofexpenditure. These purpose-based deflators are

38

current-weighted together using information on thevalue of work done by purpose from a quarterlyengineering construction activity survey.


They are quarterly indices, with reference periodJuly 1989 - June 1990 = 100.

Data for the index are collected quarterly.

Use(s) of index

The indices are used for deflation of correspondingaggregates in the Australian national accounts.

The indices are also used to derive quarterlyconstant price estimates of approvals,commencements, completion, and value of workdone on engineering construction in Australia intotal.

Publications

The index results are not published separately butare consistent with the total implicit price deflatorfor non-dwelling building, and construction aspublished quarterly in Australian NationalAccounts: National Income, Expenditure andProduct (ABS Cat. No. 5206.0) and the StateAccounts (ABS Cat. No. 5242.0). Separate indicesfor construction activity by State and Territory andfor some purpose categories of expenditure areavailable on request.

39

AUSTRIA

Resume

The Austrian Central Statistical Office (ÖSTAT)calculates two factor costs indices for theconstruction sector: the monthly housing and estatebuilding costs index (1990=100), and the monthlyconstruction cost index for road and bridgeconstruction (1990=100) described below.

The indices are compiled using the standard factorsmethod.

ÖSTAT also compiles five output price indicescovering the whole construction sector. These aredescribed in this publication under Output PriceIndices.


Österreichisches Statistisches Zentralamt (ÖSTAT)Abteilung 3: Produktion und DienstleistungenHintere Zollamtstraße 2b,A - 1033 WIEN


Tel: (+431) 711 28 7065

Fax: (+431) 715 68 29


Until the end of the 1980s, an index of changes inbuilding costs was calculated by the Ministry forEconomic Affairs. This was in addition to theindices compiled by the Federal Building IndustryAssociation (Bundesinnung der Baugewerbe).After the 1980s the Ministry handed overresponsibility for the calculation of a harmonisedsystem of building factor cost indices to the CentralStatistical Office (ÖSTAT).


Prices are collected for a basket of componentsbased on six specimen projects (two versions foreach of: a single-family house; a terraced house;and a multi-storey apartment building). The priceof each component, belonging either to wage costs

or to other costs, is determined in reference to atypical building, a combination of the three types ofbuildings listed above, weighted on the basis of theresults of 1986-87 ÖSTAT housing constructionstatistics.


The index is calculated for residential buildings,road construction, and bridge construction.

The housing and estate building costs index:Covers only residential buildings, and is based onthree types of building: single-family houses;terraced houses; and multi-storey apartmentbuildings.

The costs are determined for building works carriedout by the contractor and other trades such aselectricians or plumbers. They cover standard sitepreparation, main building activities, joinery,painting and sanitary installations (parts of NACERev.1 groups 45.1, 45.2, 45.3 and 45.4). Parts ofbuilding installation and completion (groups 45.3and 45.4) and furniture are not covered.

In addition, some service activities are included inthe index. These include costs of design, tendering,stress analysis, preparation of applications andwork schedule, site supervision. Costs of land, sitedevelopment, costs for special foundations are notcovered.

The road construction cost index: Covers onlyroad construction.

The bridge construction cost index: Covers onlybridge construction.

40


The price indices refer only to projects undertakenin Austria.

Items included

The housing and estate building costs indices:Show the evolution of the costs of construction ofresidential buildings from the enterprise point ofview. They are measured as a weighted average ofthe prices of two input factors needed to construct abuilding: labour and materials. It does not includeproductivity, margins, and taxes linked toconstruction activity.

Sources of data

Data for the factor prices indices are obtained fromthe following sources:

• industrial wholesale price index

• wages structural survey

• collective agreements

• social insurance costs (provided byBundesinnung der Baugewerbe).


The housing and estate building costs index:Uses weights based on 1986-87 housingconstruction statistics, and refers to thecomponents needed to build a theoreticalbuilding that is a combination of three typicalbuildings. The components are weighted asfollows:

• “wages costs”: 52.94 %

comprising:

Contractor 27.94%Auxiliary and related trades 13.84%Metalworking and electricalinstallation 11.16%

• “other costs”: 47.06%

comprising 39 products that areeach weighted as for example:

Wooden joinery 6.23%Diesel 0.74%Paint 0.40%etc.

The road construction costs index: The totalweight of the wages component is 34.8 per cent,and is taken from the contractor’s work componentin the housing and estate building costs index.Many of the products are taken from the basket ofthe wholesale price index. Imported bitumen istaken from foreign trade statistics.

The total weight of the “other” component is65.2 per cent.

Weights are available for total cost factors (wages,and other) and function groups (earthworks andsuperstructure, drainage and permanent supportsystems, asphalt work). These are further brokendown by individual functions (e.g. depreciation andinterest, repair steel, gravel, concrete etc.).

The bridge construction costs index: Uses weightsobtained from the same sources as the roadconstruction index. Weights are available for totalcost factors (wages, and other), materials groupsand individual products.


The housing and estate building costs indices: Arecalculated according to a Laspeyres formula. Thewages costs component is a weighted average ofthe:

• contractor's wage component;

• auxiliary and related trades wage component;

• wage component for electrical installations andmetalworking.

The contractor’s wage component is obtained onthe basis of the collectively agreed wage (CAW)for the building industry. The average hourlywage (AHW) is calculated in accordance with

41

ÖSTAT wage structure surveys, levelled out on thebasis of the average overpayment factor (ratio ofAHW and CAW).

The auxiliary and related trades wage componentcorrespond to the collective agreement for thecarpenter master trade.

The wage component for electrical installations andmetal working is derived from the:

• collective agreement the iron and metalproducing and manufacturing industry (for46 per cent of the value); and the

• collective agreement for the iron and metalworking trade (for 54 per cent of the value).

The other costs component is calculated on thebasis of the weighted figure for paint from theconsumers price index and the weighted figures forthe products represented in the wholesale priceindex.

The price basis for the components is the annualaverage of 1990. Since the January 1990 referencemonth, the index of building costs for housingconstruction, previously known as the MaculanIndex, has not been published, and has beenreplaced by the new housing and estateconstruction costs index calculated by ÖSTAT.The two index series may be linked by applyingfactors linking them to the official housing andestate costs index (1990=100).

The road construction costs; and bridgeconstruction indices: Are calculated according to aLaspeyres formula. The wages component,available only on a yearly basis for the civilengineering sector, is taken from the housing andestate building costs index. The other component islargely calculated from the figures for the productsrepresented in the wholesale price index, except forthe electricity component taken from the consumerprice index.

The base year for the weights of the “other”component for the civil engineering indicesis 1983.

All three indices are calculated monthly.

Publications

The three indices are published separately forresidential building, bridge construction, and roadconstruction.

The housing and estate building costs index: Arepublished monthly in the form of rapid reports,broken down by overall building costs (total,wages, other), and contractor costs (total, wages,other) in Statistische Nachrichten (Annex:Statistische Übersichten, Table 2.1; conversionwith Vol.3/1991), and stored in the ÖSTAT ISISdatabase.

The road construction costs; and the bridgeconstruction indices: Are published monthly in theform of rapid reports, broken down by overallconstruction costs (total, wages, other), the othercomponent being broken down by cost groups, andthe group indices “asphalt and surfacing work”being broken down by origin of bitumen.

It is published in the publication StatistischeNachrichten (Annex: Statistische Übersichten,Table 2.1) on a monthly basis since January 1992,and stored in the ÖSTAT ISIS database.

42

BELGIUM

Resume

The Belgian National Institute of Statisticscalculates a yearly construction factor prices indexbased on the costs of the labour and materialsinputs to the construction sector.

It aims to cover the whole field of construction:new construction, and renovation of residentialbuildings (both public and private); non-residentialbuildings; and civil engineering.


Institut National de Statistiques /Nationaal Instituut voor de StatistiekRue de Louvain, 44B-1000 BRUXELLES


Tel: (+32) 2 548 6571

Fax: (+32) 2 548 6254


The index aims to cover the whole field ofconstruction: new construction, and renovation ofresidential buildings (both public and private); non-residential buildings; and civil engineering.

The materials selected for the construction priceindex accounted for 68 per cent of the sector’s totalinputs in 1980, and belong to nine different NACEgroups.


The index covers the whole of Belgium.

Items included

The index is based on the costs of labour andmaterials. Costs of the transport of materials,equipment hire, installation costs, professional fees,profits, etc. are not covered in the index.

The labour costs data are obtained from statistics ongross hourly earnings in the building constructionindustry, as compiled by the National Institute ofStatistics. For this exercise mid-year figures areestimated as an average of the April and Octoberfigures. The earnings data do not include socialcontributions paid by employers.

The costs used exclude taxes, and include anydiscounts that apply.

Sources of data

The data on material costs are obtained from thenational index of prices of domestic industrialproduction.


The index is calculated annually, according to thechain Laspeyres method and has base period1985=100.

In constructing the index, materials and wages aregiven equal weight.

Publications

The index results are not published, but are used inthe conversion to current prices of the buildingselement within gross fixed capital formation of thenational accounts.

43

CANADA

Resume

Seven construction price indices are calculated inCanada. These comprise four input, two output,and one seller’s price indices. The four inputindices described below cover:

• Residential/non-residential building input prices• Electric utility construction• Telecommunications plant• Construction union wage rates

The sellers price index, and the four input priceindices are described in this publication underOutput Price Indices and Seller’s Price Indices.

No aggregate index combining the seven separateconstruction price indices is compiled.

Organisation Responsible for Index

Statistics CanadaJean Talon BuildingTunney's PastureOttawa, OntarioCanada KIA OT6


Tel: (+613) 951 9615

Fax: (+613) 951 2848


Residential/non-residential building input prices:Are monthly indices of input prices, covering bothprivate residential building, and non-residentialbuilding.

Electric utility construction: Measure price changefor the construction of five separate models ofelectrical utility plant. These indices are compiledbiannually. They are based mainly on the prices ofinputs to the construction of electric utilities. Atpresent they are restricted to new construction, butmay in future be extended to major renovation andrefurbishment projects.

The models relate to: distribution systems;transmission lines; transformer stations; hydro-electric generating stations; and fossil-fuel firedgenerating stations.

Telecommunications plant: Measure price changesthrough time for annual capital expenditures of theCanadian telecommunications industry. Theseindices, which are calculated annually, reflectpurchase price changes between consecutive yearsfor a matched sample of goods.

Construction union wage rates: These monthlyindices cover wage rates for the unionisedconstruction labour trades. They measure changesover time in the current collective agreement ratesfor 16 trades engaged in building construction in22 metropolitan areas. Thus they cover tradesworking in all branches of construction activity.


Electric utility construction: All Canada.

Telecommunications plant: All Canada.

Construction union wage rates: Indices areprovided for those cities where a majority of tradesare covered by current collective agreements.


Residential/non-residential building input prices:The items covered in these input price indices arerestricted to the cost of materials (but not theirtransport to the site) and the cost of unionisedlabour. For residential construction 37 materialitems are costed, while 46 are costed for non-residential construction. For costing purposes thelabour inputs are broken down into 16 trades.

No taxes are included in the cost figures used, norare any discounts reflected. The labour costs datado not include social contributions paid byemployers.

Electric utility construction: Each model portraysan average mix of inputs from a variety of projectsin a specific base period. The elements included in

44

the indices are materials (including their transportto the site), equipment hire, labour, landpreparation costs, architects’ and engineers’ fees,major machinery elements and equipmentcomponents (e.g. turbine generators, power boilers,power transformers, tanks), overheads and profits.

Sales taxes are included where known. The pricesdo not reflect discounts.

Telecommunications plant: Elements included inthe indices are materials (including theirtransportation to the site), equipment hire, labour,land preparation costs, permits, installation costswhere applicable, engineers’ fees, overheads andprofits. The prices include provincial sales taxes.They are net of discounts.

Construction union wage rates: These are indicesof wage rates. Two rates are indexed: basic rates,indicating the straight time hourly compensation;and basic rates including supplements, such asvacation pay, statutory holiday pay and employers’contribution to pension plans, health and welfareplans, industry promotion and training funds.

Sources of data

Residential/non-residential building input prices:For these indices the data for the monthlycalculations are obtained from producer price indexsources, and, for labour costs, on the basis of ratesset in collective wage agreements.

Electric utility construction: The sources used forthe indices include purchase data relating to theelectric utilities, and consumer and producer priceindex data. The sample for the purchase datacovers 10-12 companies.

The labour costs data are obtained from surveys ofemployers as well as from information oncollective wage agreements. They do not includesocial contributions paid by employers.

A large number of items, varying between 100 and200 according to the type of project, are costed forthe indices. They are selected from an analysis ofcompleted projects data so as to cover 70 per centof total project direct costs.

Telecommunications plant: The data used inconstruction of these indices are primarily drawnfrom purchasers' records of participatingtelecommunications companies (or carriers).

Construction union wage rates: These indices arebased on signed collective wage agreements, andare obtained with the collaboration of the CanadianConstruction Association and the local (city)Construction Labour Relations Associations(employers groups), and in some cases, provincialgovernment bodies.


Electric utility construction: Each of the fivemodels was developed after extensive consultationwith major Canadian electric utilities and theCanadian Electrical Association.

Telecommunications plant: Each participatingcompany, following a set of guidelines, constructsannual price indices appropriate to their grossadditions to capital stock. The national totalspublished by Statistics Canada are aggregates ofthese carrier indices. The carrier indices are basedon current reproduction cost, i.e. the cost ofacquiring assets in a given period identical to thoseplaced in service during a comparison period.These are based on costs of materials, wages andother inputs.


Residential/non-residential building input prices:For residential construction the index weights arebased on a survey of building contractors whichwas undertaken in the late 1960s. It is planned torepeat this survey to update the weights in the mid-1990s. For non-residential construction the weightsare based on analysis of input-output tables.

Electric utility construction: The present weightsused in the indices are based on information fromsurveys, stratified by type of utility plant, covering(approximately) the years 1965-73 and about15 per cent of total construction output in thissector.

Telecommunications plant: The purchase weightsestimates come from an annual survey of the values

45

of gross additions by carriers related to the previouscalendar year.


The residential/non-residential building inputprices; electric utility construction; andconstruction union wage rates indices are calculatedaccording to the Laspeyres formula.

The telecommunications plant indices arecalculated according to the chain Laspeyresformula.

The residential/non-residential building input pricesindices have a reference base year of 1981=100.

The other three indices have a base year of1986=100 (there are also plans to change thisto 1992).

Electric utility construction: These indices arecompiled biannually.

Telecommunications plant: Are compiledannually.

Construction union wage rates: Are compiledmonthly.

Use(s) of index

These indices are used for a variety of purposes,e.g. analysing price change in construction andfixed capital formation, deflating components ofthe national accounts, for contract escalation, andfor estimates of reproduction cost, either forrecosting budgets or for revaluing fixed assets.

Publications

Residential/non-residential building input prices:These indices are not published, but are used foroutput and final expenditure deflation, contractescalation, and insurance purposes. In addition tothe aggregate results separate indices are calculatedfor materials and labour costs, by trade groups(architectural, structural, mechanical, andelectrical), and by regions (Atlantic, Quebec,Ontario, Prairies, British Columbia).

Electric utility construction: The indices are firstpublished in Statistics Canada's The Daily (Cat. No.11-001E). They are also published biannually inConstruction Price Statistics (Cat. No.62-007). Aswell as the overall index, indices are also availableby construction model components and by broadasset categories (transmission lines, transformerstations, distribution systems, generation facilities -steam, hydro, nuclear). Data are available only atnational level.

Telecommunications plant: The indices are firstreleased in Statistics Canada's The Daily (Cat.No. 11-001E). They are also published annually inConstruction Price Statistics (Cat. No. 62-007). Aswell as the overall index, separate indices are alsoavailable by major asset categories (outside plant,central office equipment, station equipment,general equipment). Data are available only atnational level.

Construction union wage rates: The indices arefirst released in Statistics Canada's The Daily (Cat.No. 11-001E). They are also published monthly inthe Daily Bulletin, and are available inConstruction Price Statistics (Cat. No. 62-007).Indices are available for basic rates and for basicrates including supplements. As well as the overallindices, separate indices are available by trade andtrade group (architectural, structural, mechanical,electrical), and by city. Indices are available for22 metropolitan cities in Canada.

46

DENMARK

Resume

Denmark Statistics calculates two sets of inputprice indices:

• the regulating price index for residentialbuilding,

• the regulating price index for civil engineering.

The regulating price index for residentialconstruction: Was created in January 1987 andfirst published in May 1989 to replace two previousconstruction costs indices covering respectively, theone-family houses, and the multi-dwellingsbuildings of prefabricated design. They takeaccount of the materials and labour costs.

The indices are compiled using the standard factorsmethod on the basis of weights corresponding to aspecific building project constructed in 1987.

The regulating price indices were created on theinitiative of the Ministry of Construction and takeinto account the major changes that had occurred inthe techniques and materials used by theconstruction industry since the 1960s. The newindices no longer distinguish between one familyhouses and multiple dwellings buildings becausethe techniques and materials used for theconstruction of these two types of buildings havebecome more similar. The number of prefabricatedhouses has increased and more and more buildingsare built with different technical characteristics. Inaddition, the weighting scheme had to be revisedbecause part of the materials and techniques used inits compilation were not used anymore.

The current weighting scheme dates back fromJanuary 1987 and should be revised at least every10 years.

The input price indices for civil engineering works:Comprise a set of six indices originally establishedat the request of the Road Directorate in theMinistry of Transports to serve as a basis for theestimation of the cost of road construction. Lateron, the indices were also used by buildingcontractors as benchmarks for the escalation ofcontracts for other civil engineering works.

The first group of indices was first calculatedin 1959 and relate to main road, and motorwayworks. The second group of indices was firstcalculated in 1976 and relate to earth works,surface asphalt works, concrete structures (bridgesof concrete), and iron structures (iron bridges).

In March 1996, the two indices of the first groupwere merged into one under the name “cost indexfor road building”, and all indices were rebatedto 1995=100.

The indices are currently compiled using thestandard factors method on the basis of weightsagreed upon by several organisations involved inthe construction sector.


Denmark’s StatistikSejrøgade, 11Postboks 2550DK - 2100 KØBENHAVN Ø


Tel.( +45) 39 17 39 17

Fax. (+45) 31 18 48 01


Regulating price index for residential building:Covers main building works, building installationand completion for new residential buildings. Sitepreparation activities are not covered by the index.

Data are broken down according to ten professionsand to a classification of seven elements of thebuilding structure (type of work). Each category ofbuilding work is supplied by one or moreprofessions. Each profession is responsible forseveral standard building operations.

Indices are calculated for the breakdowns byprofession and element of building structure, formaterials and labour costs separately and as awhole.

47

In addition to these breakdowns, special indices arecompiled for glaziers carried out as a separatecontract; and for heavy concrete structures.

The indices are not calculated according to theNACE (i.e. in terms of NACE Rev.1 activities,groups 45.2, 45.3 and 45.4), but according to aspecific classification by profession and bycategories of building works.

Regulating price index for civil engineering:Covers the new construction of six types of works:main road works, motorway works, earth works,surfacing and asphalt works, concrete works, ironworks.

Denmark Statistics plan to calculate additionalindices for the repair and maintenance of roads, andspecific indices for individual extraordinaryprojects, such as the bridge that will be builtbetween Denmark and Sweden.


The costs surveyors are situated in different parts ofDenmark, and the indices compiled cover thewhole country (excluding Greenland).

Items included

Regulating price index for residential building:The material prices are calculated on the basis oflist prices or producer prices excluding generaldiscounts such as quantity discounts, functiondiscounts that relate only to materials such asconcrete, stone or wood. Cash discounts are notdeducted.

The labour costs are calculated on the basis ofcollective agreement wages, plus compulsoryemployers contributions, minus subsidies toemployers for the payment of these contributions.

Profits, fees, VAT and employers payment ofemployee's first and second days of unemploymentare not included in the index.

The cost of land is not included in the index.

Regulating price index for civil engineering: Theprices of materials are based on wholesale pricesreceived by the producers of the input materials.

They include import duties and exclude VAT andspecial taxes. Cash reductions are not taken intoaccount.

The labour costs are limited to hours actuallyworked and are based on labour marketagreements. They include social contributions.They exclude prepayment of wages and salaries,expenses for expropriation and administrativecosts, except for the building of motor ways, forwhich administrative costs and planning costs areincluded.

The hire of equipment includes the operators.

Sources of data

Regulating price index for residential building:Data are obtained from ten professional costsurveyors and eight manufacturers of concretestructures.

Regulating price index for civil engineering: Datafor materials are obtained from producer priceindices produced by Denmark Statistics. Data forlabour costs are based on labour agreements forNord-Seeland, zone 1 and 2, plus the area outsidethe Capital City area.

The basis of prices for hire costs is the current pricerates provided for the Danish Haulage ContractorsUnion.


Regulating price index for residential building:Data are collected for:

• prices of specific materials and specificquantities,

• collective agreements on wages andsupplements to wages, and

• social contributions paid by the employer.

The index is compiled using the standard factorsmethod on the basis of weights corresponding to aspecific building project constructed in 1987.

48

Regulating price index for civil engineering: Dataare collected for:

• prices of a sample of representative materials,

• collective agreements on wages andsupplements to wages, and

• equipment hire with operator.

The index is compiled using the standard factorsmethod on the basis of weights agreed upon byseveral organisations involved in the constructionsector.


Regulating price index for residential building:The weighting system refers to a specific buildingproject (called Mölholm) that was characterised bya group of one-storey or two-storey terraced houseswith 2 to 6 flats in each building, each with anaverage net floor space area of 81 square metres perflat.

For each category of building work the share ofeach cost component (material or labour) is definedaccording to the shares observed for this givenconstruction project. In the same way, the weightsattached to each category of building works for thecalculation of the total index, were observed on theMölholm project in January 1987.

Regulating price index for civil engineering: Theaggregations are based on weights agreed upon bythe Road Directorate of the Ministry of Transport,the railways company, the Union of Contractors,and Denmark Statistics.

The weights are based on standard constructions forcivil engineering projects including sub-contractors.


Both indices are calculated on a quarterly basisaccording to a fixed weight Laspeyres formula.

Regulating price index for residential building:The base year used for the calculation of the indexis 1987.

Regulating price index for civil engineering: SinceMarch 1996, all these indices are calculatedaccording to the base year 1995=100.

Use(s) of the index

The indices are used for national accountsdeflation.

Publications

The indices are broken down into sub-indices onmaterials and labour costs according to the total,the category of building work, and by profession.

The regulating price indices are published in:

• Statistiske Efterretninger (Statistical News)

• Nyt fra Denmark’s Statistik (News fromDenmark Statistics)

• Statistisk årbog (Statistical Yearbook)

• Prisstatistik (Price Statistics)

• Statistisk tiårsoversigt (Statistical Ten-yearsReview)

• DSTB (time-series database)

Further details on the methodology of the indicescan be found in Bygge- og anlægsvirksomhed,No.°14, 1989 (Construction Industry) in the seriesStatistiske Efterretninger (Statistical News).

49

FINLAND

Resume

Statistics Finland produces the “index of buildingcosts”, a composite index compiled from a set ofmonthly input price indices based on standardfactor costs.

The indices cover new construction, both publicand private sector, of five main building types.

In addition, there is a renovation index common toall building types.


Statistics FinlandTyöpajakatu 13FN - Helsinki.


Tel: (+358) 0 1734 2238

Fax: (+358) 0 1734 3429


The indices cover new public and private sectorconstruction of five main building types:

• single-unit residential buildings• blocks of flats• office and commercial buildings• warehouses and production buildings• buildings used in agricultural production.

In addition, there is a renovation index common toall building types.

Items included

All published indices are calculated using the samenomenclature of inputs. Ninety five cost items aredefined.

The indices show the average level of buildingcosts in the whole country at the moment ofobservation in relation to the level in the base year

for a structurally identical building constructedusing the same methods as in the base year.

The indices include a wide range of cost items:materials (including their transport to site), labour,equipment hire, site preparation costs,conveyancing and professional fees, installationand fitting costs, interest on loans and trademargins.

The “building cost index for residentialconstruction” includes value added tax as a costcomponent. Otherwise, the indices do not includeVAT. Prices are net of discounts.

The salaries data are based on salaries actually paidper hour worked, rather than collective agreements.The data on labour costs include socialcontributions paid by employers.

Sources of data

A wide range of sources are used to obtain the costdata for the indices. These include bothconstruction and other enterprises, price lists,producer price index data and, in the case of oil andelectricity, producers associations.

The data on labour costs are taken from the wagesstatistics of the Confederation of Finnish Industryand Employers.


The indices measure the level of building costs withthe help of trends in the prices of the basic inputsused (labour, materials and services). Each inputinfluences the overall index in proportion to itsshare in building budgets (unit price multiplied byquantity used) in the base year.

The prices of 95 representative items that aremonitored for the indices, together with the relatedweights, were selected by the Laboratory forBuilding Economy of the Technical ResearchCentre of Finland from an examination of fivetypical buildings, one for each of the building typescovered in the indices.

50

Corrections are applied to take account of delays inobtaining data, and a 12 month moving average isused to avoid seasonal fluctuations.


The weights were determined according to eachitem's share of total construction cost in the baseyear.

The weightings are reviewed every 5 to 10 years,along with the selection of factors included in theindices.


The indices are compiled monthly according to theLaspeyres formula and relate to the baseyear 1990=100.

Publications

Data series: As well as aggregate indices, a varietyof separate indices are published, for materials andlabour costs, by trade, and by productnomenclature.

The indices are published monthly inRakennuskustannusindeksi. Statistics Finland canalso calculate other indices corresponding toclients’ needs, within the limits set by the raw dataavailable and considerations of data confidentiality.

In addition to the cost variables of the index ofbuilding costs, sub-indices of the producer priceindices (e.g. index of wholesale prices and index ofimport prices) are also available.

Methodology: The structure and principles of theindex are explained in more detail inRakennuskustannusindeksi 1990=100, produced (inFinnish and English) by the construction laboratoryof the State Technical Research Institute, andStatistics Finland. This is published by RakentajainKustannus Oy.

51

FRANCE

Resume

The International and Economic Affairs Directorateof the Ministry of Equipment and Housing(Direction des Affaires Economiques etInternationales du Ministère de l'Equipement et duLogement -- DAEI) compiles monthly input priceindices for the building construction sector (BT)based on the factors costs. Fifty indices representspecialised types of works, and one index (BT01)represents the whole building industry.

The BT indices were created for constructioncontract escalation purposes. They are normallyused when the work commences long after thebuilding contract was signed, or when constructiontakes place over a long period. They apply to bothprivate and public sector contracts.

The Ministry of Economic Affairs calculatessimilar input price indices for the civil engineeringsector (TP). Twenty five indices represent thespecialised types of works, and one index (TP01)represents the whole civil engineering industry.

These indices are used for national accountdeflation.

The indices are compiled using the standard factorsmethod on the basis of weights last revised in 1991.

An output price index is also compiled in France.This is described in this publication under OutputPrice Indices.


Ministère de l'Equipement et du LogementDirection des Affaires Economiques et InternationalesTour Pascal BF-92055 Paris-La-Défense Cedex 04


Tel: (+33) 1 40 81 26 81

Fax: (+33) 1 40 81 26 99


The BT indices are compiled by the DAEI on thebasis of formulae defined in collaboration with theNational Building Federation (Fédération Nationaledu Bâtiment), trade unions, and professionalassociations of the construction sector, and onnotice of the Prices Commission (Commission desPrix).

TP indices are compiled using precise weights ofdifferent factor price indices defined by theDirection Générale de la Concurrence, de laConsommation et de la Répression des Fraudes(DGCCRF) of the Ministry of Economy (thegeneral directorate responsible for controlling thecompetition and consumer market conditions andtax evasion) after consultation with the FédérationNationale des Travaux Publics (FNTP) (nationalprofessional association for the civil engineeringsector), at the direction of the consultativecommission on prices of materials (COCIM).

By law, the weights for both BT and TP indices arepublished in the Bulletin Officiel - Concurrence,Consommation, Répression des Fraudes(BOCCRF).


BT indices: Are calculated for 50 types ofconstruction works such as site preparation (BT02),tiling (BT09), ventilation and air conditioning(BT41), repair and maintenance (BT50).

The indices only cover the building industry, andrefer to a nomenclature of types construction ofworks covering parts of NACE Rev.1 groups 45.1(site preparation), 45.2 (complete constructions orparts of thereof), 45.3 (building installation), and45.4 (building completion).

TP indices: Are calculated for 13 types of workssuch as general earth moving (TP03), sea and riverdredging (TP06), electrification networks withequipment (TP12), metal frames and structures(TP13).

52

Cover only the civil engineering industry, and referto a nomenclature of types of works covering partof NACE Rev.1 groups 45.1, 45.2 and 45.5 (rentingof construction or demolition equipment withoperator).


The price indices used in the composition of theindex all refer to French domestic prices.

Items included

BT indices: Show the evolution of the costs ofconstruction in the building sector measured as aweighted average of the prices of the different inputfactors needed to construct a building. Theseinclude labour, materials, transports, equipment,energy and general expenses. It doesn't includeproductivity, margins and taxes linked toconstruction activity. Architect fees and price ofland are also excluded.

For a given index (type of construction work), thecosts can change according to three factors:

• rises in the prices of the input factors (labour,materials, equipment),

• changes in the quantities of input factors neededto obtain the same result, and

• quality changes in the input factors.

The BT indices are only meant to measure theinfluence of the first factor, that is changes in theprice of the input factors. The effects of quantityand quality changes are removed.

TP indices: Show the evolution of the costs ofconstruction in the civil engineering sectormeasured as a weighted average of the prices of thedifferent input factors needed to carry out a civilengineering project. These include labour,materials, equipment, energy and general expenses.It doesn't include productivity and margins linkedto the construction activity. Architect fees andprice of land are also excluded.

Sources of data

Each input price index is defined in terms of thepercentage of each component participating in thetotal cost of the construction project. A price indexcalculated by different authorities is attached toeach component. The components are:

• Salaries: general index of salaries in thebuilding and civil engineering sector publishedin the FNB.

• Expenses: percentage of social expensesaccording to salaries.

• Materials: part of the materials indices arepublished in the BOCCRF (cement, bricks, tiles,plaster, iron and steel materials, etc.). Indicesfor the other materials are compiled from listsof prices published by producers or professionalassociations.

• Equipment: index of equipment pricescalculated by INSEE.

• Transport: special index of road transport costcompiled by the DAEI together withprofessional associations. It corresponds to theweighted sum of a labour cost index (0.4), theproducer price index for transportvehicles (0.35), the consumer price index fordiesel oil (0.2) and the producer price index forthe manufacture of rubber tyres andtubes (0.05). These indices are published byINSEE.

• Energy: the energy consumed for aconstruction is multiplied by the consumptionprice index for diesel oil published by INSEE.

• Other expenses: this component includes:

⋅ 21% of building renting expenses(ICC index - Construction Output PriceIndex -- from Journal Officiel);

⋅ 16% of office and accounting paper supplies(INSEE);

⋅ 21% of communication expenses (INSEE);

⋅ 13% of other use of vehicles expenses(INSEE);

⋅ 14% of transport services (INSEE);

53

⋅ 5% of office machinery (PCs and printers)(INSEE); and

⋅ 5% engineering.

The percentages of each component forming thestructure for each index is published in theBOCCRF.



The elements of the component indices are mainlyobtained from existing indices published bydifferent institutions such as INSEE, otherMinistries, national federation of building, nationalfederation of civil engineering, trade associations,etc..

However, except for a number of basic materials(cement, bricks, tiles, plaster, iron and steelproducts), there are no official material priceindices. The DAEI and the FNB conduct twosimultaneous monthly surveys to collect 425 pricematerials from 96 suppliers. The results of thesurveys are confronted at the end of each monthand the resulting price indices are incorporated inthe index.


Each index corresponds to a category of buildingwork. For each index a structure is defined interms of percentages of input factors necessary tocarry out the construction project. These structurescan differ dramatically from one index to the other.For instance, the respective structures for theindices BT02 (site preparation), BT04 (brickwork),BT46 (painting) and BT01 (all building works) are:

Component item BT02%

BT04%

BT46%

BT01%

Salaries and socialexpenses 36 46 58 43Materials 0 31 27 32Equipment 36 5 3 4Transports 0 2 0 3Energy 10 2 0 3General expenses 18 14 12 15

For each index, the materials component item isbroken down according to a specific list ofmaterials for which the weights are also pre-defined. For instance, the materials used for thecategory of construction work "brickwork" (BT04)are bricks (16%), cement (3%), and insulationmaterial (12%).

These very detailed weights were first definedin 1974, together with the definition and coding ofthe indices, and published in the official journal (on26 May 1972). The last revision dates back toOctober 1991.


The BT and TP indices are calculated monthly.

The BT and TP indices are chained indices. Theyare calculated each month by applying to thepreceding month index the growth rate betweenmonth m and month m-1 obtained from the pricesof the current and preceding months.

They correspond to a weighted average ofcomponent indices (personnel, materials,transports, equipment, energy and generalexpenses). Each component index itself is aweighted average of element indices that are eitherofficial indices, or product price indices for theelementary products used in construction collectedfrom a number of important suppliers of theconstruction industry.

The composition of each component index isoutlined above in “Sources of Data".

The BT indices are chained starting from the baseyear 1974.

The TP indices are chained starting from the base100 corresponding to the economic conditions ofJanuary 1995.

Publications

BT indices: Are released monthly in BulletinOfficiel du Ministère de l'Equipement. Theindex BT01 is released monthly in Journal Officiel(JO) de la République Française

54

The TP indices: Are released monthly in BulletinOfficiel - Concurrence, Consommation, Répressiondes Fraudes.

55

GREECE

Resume

The National Statistical Service of Greece (NSSG)has calculated a price index for input materials forthe construction of new residential buildingssince 1971.

In 1980, this construction cost index was revisedfor the first time, and the NSSG decided tocalculate a construction output price index alsocovering new residential building. This isdescribed in this publication under Output PriceIndices.

The last revision occurred in 1990, and a total priceindex of construction costs for new residentialbuildings is now compiled quarterly. It includes thecosts of materials, as well as the labour costs andother expenditures.

The indices are compiled using the standard factorsmethod on the basis of weights obtained from theaccounting records of a number of constructioncontractors.

Three separate indices are available: cost ofmaterials (monthly); labour costs (quarterly); andother expenditures (monthly).


National Statistical Service of Greece (NSSG)14-16 Lycourgou StreetGR-10166 ATHENS


Tel: (+30) 1 32 43 669/32 89 509

Fax: (+30) 1 32 23 159


The new buildings construction activities refer to aclassification of materials in fifteen headings suchas: plaster and concrete, natural stone material,plumbing, heating and sanitary ware of metal,electrical materials or fuels and lubricants formechanical excavators and machinery.

The labour costs index refers to a classification ofconstruction works such as: excavations, wallconstruction, central heating installations,insulation.

The compiled indices refer to a catalogue ofselected materials and construction works.


The indices refer only to the buildings constructedin the Greater Athens area, but they can beconsidered as representative of all urban areas inthe country.

Items included

The prices taken into account in the index refer tothe prices paid by the constructor for the materials,the labour force and other expenditures.

The prices collected for the materials refer to pricesactually paid by building enterprises for materialsdelivered at the work site, and they includetransport and other expenses (VAT, etc.) chargedby the purchaser. They all refer to transactionsmade during the reference month.

Labour costs refer to the prices actually paid totrade persons by the construction enterprises.Labour remuneration is usually agreed between thebuilding enterprise and trade persons by specialityaccording to the volume of work, otherwiseaccording to contract work (not according towages). Use is made of contract prices collectedquarterly, and refer to the agreements made duringthe quarter concerned.

Prices for the index of other expenditures arecompiled monthly from competent organisations.

Sources of data

Data are collected through statistical surveysconducted by means of telephone enquiries andindividual visits. The information is collected fromthe following reporting units that are selectedaccording to the volume and value of theirtransactions:

56

• prices of materials obtained from commercial orindustrial enterprises (suppliers),

• labour costs obtained from the contractors(construction enterprises), and

• other expenditures obtained from competentorganisations.


The weighting coefficients were obtained from ananalysis of the accounting records of 150 buildingenterprise for the period 1988 to 1990.


The index is calculated according to a Laspeyresformula and refers to base year 1990. It iscalculated monthly for the prices of materials, andquarterly for the other components of the index.

Use(s) of the index

The index is used for statistical purposes such asdeflation and in the compilation of nationalaccounts.

Publications

The index is published in the Monthly StatisticalBulletin, the Statistical Yearbook of Greece, and inthe Concise Statistical Yearbook.

57

ICELAND

Resume

Statistics Iceland calculates a monthly price indexfor construction using the standard factors methodwhich is based on input costs.


Statistics IcelandSkuggasundi 3150 Reykjavik


Tel: (+354) 560 9800

Fax: (+354) 562 8865


The coverage of the index is restricted to privatelybuilt apartments.


The elements included in the index are the cost ofmaterials, including their transport to the site,labour, equipment hire, the cost of the leasing ofland and its preparation, permits, fittings andinstallation costs, professional fees of architects andengineers, and overheads. The installation coststhat are covered in the index comprise cold watersupply, geothermal water supply for heating, andelectricity.

The treatment of VAT is as follows. VAT onmaterials is included, but VAT on labour isexcluded, because VAT paid on labour costsassociated with residential building is refunded bythe government. The prices used reflect discounts.

Sources of data

The price data used in the index are obtained fromsuppliers of building materials and from price lists.Around 1 700 to 1 800 price quotations arereceived each month.

The labour costs data are obtained from employers,and are partly based on the wage rates set incollective wage agreements and partly on wagesurveys conducted twice a year in the constructionindustry. They include social contributions paid byemployers.


The items costed in the index were selected on thebasis of cost analyses of finished residentialbuilding constructions. 429 items are costed for theindex.


The index is compiled monthly according to theLaspeyres formula and has been newly rebated onJanuary 1996=100. A feature of the recentrebasing and revision of the index was the changefrom the use of arithmetic average prices togeometric average prices.

Publications

The index results are published monthly in thestatistical bulletin published by Statistics Iceland. Inaddition to aggregate results separate indices areprovided for materials and labour costs and bytrade.

58

IRELAND

Resume

Several cost or price indices for the constructionsector are calculated in Ireland by differentorganisations according to their needs.

The Dublin Municipal Authority calculates amonthly house building cost index. Thiscorresponds to a standard house built by the State.It applies to a limited area: the Capital City(Dublin).

This index is compiled using the standard factorsmethod.

The Irish Central Statistical Office (CSO)calculates a monthly wholesale price index forbuilding and construction materials. The CSO alsocalculates a capital goods price index, derived bycombining a special hourly wage rate index withthe wholesale price index mentioned above.


Central Statistics OfficeSkehard RoadCORK


Tel: (+353) 21 - 35 90 00 ext. 5547 or 5565

Fax: (+353) 21 - 35 91 65


The monthly index of house building cost iscompiled by the Dublin Municipal Authority.


House building cost index: The survey for thisindex follows the prices of a representative basketof materials used in the construction of a standardhouse in 1975, as well as the labour costs of skilledand unskilled workers involved in the constructionof this house.

Wholesale prices index of materials: The reportingunits for this index are the wholesalers, who reporton all building materials combined, and for elevenseparate categories of materials.


The classification used to identify "products" ormaterials in the construction sector is the CombinedNomenclature [i.e. Council Regulation (EEC)No. 2658/87 on the tariff and statisticalnomenclature and on the common customs tariffs].

House building cost index: The house buildingcost index is based on a typical house built in 1975in the framework of the State housing policy. Theindex covers only local authority housing.

Wholesale prices index of materials: Covers aselected list of building materials, and excludeswater and sanitary services.


The house building cost index relates to the area ofDublin: Capital City.

Items included

House building cost index: Measures the change inthe cost of building a standard house in 1975 interms of materials and labour costs. These costsnormally do not exceed 65 per cent of the totalprice of the house.

Wholesale prices index of materials: Show theevolution of wholesale prices (VAT excluded) asreported by enterprises using the materials. Homeproduced and imported materials are covered.

Capital goods price index: Aims to estimate thecost of construction taking into account labourcosts and prices of materials. It is obtained bycombining the price of materials index with hourlywage rates obtained from the quarterly averageearnings and hours worked survey.

59

Sources of data

The data used for the three indices come fromdistinct statistical surveys based on stratifiedsamples.


House building cost index: Relates to costs(construction materials and labour) ruling on thefirst day of each month.

The monthly price ratio for each of the commodityheadings are generally derived as a simplearithmetic average of the monthly ratio for theconstituent items surveyed. These commodityprice ratios are combined to produce the publishedprice indices.


Wholesale prices index of materials: Uses weightsbased on the costs of materials used by enterprisesas reported in the 1982 Census of Building andConstruction.

The weights are taken from national accounts.


House building cost index: The final index iscompiled using the Laspeyres formula.

Wholesale prices index of materials: Is also aLaspeyres index.

Capital goods price index: Is derived from theLaspeyres type wholesale price indices of materialsand an hourly wage rate index. The index isrebated every 7 to 8 years.

Data are collected monthly for all three indices.

Use(s) of the index

The capital goods price index is mainly used asdeflator for transportable capital.

Publications

Short term production data are released inWholesale Price Index, and Housing StatisticsBulletin.

60

ITALY

Resume

The Italian Statistical Institute (ISTAT) calculatesseveral input construction indices for the costs ofconstructing a:

• residential building;• building for industrial use; and• for stretches of road.

The indices refer to the base year 1990=100.

The indices are compiled using the standard factorsmethod on the basis of weights representing theproportion of each factor cost to the total cost of thework undertaken in the base period.

Costs index for a residential building: ISTAT hascalculated the monthly index for the prices offactors involved in the construction of a residentialbuilding, both at provincial and at national levels,since January 1967. The purpose of the index is tomonitor the progress over time of the costs thatapply to the provision of housing on Italianterritory.

Cost index for a building for industrial use: ISTAThas calculated a quarterly index for the prices offactors involved in the construction of a buildingfor industrial use since 1980. The index monitorsprices that are meaningful for this type of building.They do not relate to the whole non-residentialbuilding construction sector.

Cost index for stretches of road: ISTAT hascalculated a quarterly index for the prices of factorsinvolved in the construction of two types ofstretches of road (with and without tunnel)since 1980. Road building represents the greatestfinancial outlay of all civil engineering worksundertaken in Italy.


Istituto Nazionale di Statistica (ISTAT)Via Tuscolana, 1788I - 00173 ROMA


Tel: (+39) 6 54 900323

Fax: (+39) 6 722 2457


Factor prices for a residential building: From thevariety of residential buildings constructed, ISTAThas chosen a “standard” building whosecharacteristics are described in great detail relatingto standard categories of works, and exactmeasurements of the size and volume of thedifferent elements of the building. The costchanges reflected in the index are valid for both thestandard building and other buildings which havesimilar characteristics.

The building consists of three blocks connected bya single service staircase.

Factor prices for a building for industrial use: Thestandard building for industrial use, which isassumed to be constructed in a provincial capitalfor each region, is described with the same detail asthe residential building, specifying the differenttypes of construction works according to theirdimensions.

Factor prices for stretches of road: Index iscalculated for two 100 metre stretches of mixedroad type - with and without tunnel, using thefollowing roadway typology:

• open air sections (without tunnel)

⋅ on embankment;⋅ in cutting;⋅ on viaduct.

• section of road with tunnel

⋅ open air section,⋅ section in a tunnel.

This roadway typology is crossed classified withthe five following types of construction workcategories:

61

• movement of materials,• civil engineering works,• underground jobs,• miscellaneous jobs,• superstructures.


Three series of indices are calculated for the factorcosts implied by the standard categories of worksinvolved in the construction of a residentialbuilding; a building for industrial use; and twotypes of stretches of road.

The indices are broken down into group indices forlabour, materials, and transport and hire.

Each group is further broken down into categoriessuch as skilled workers (in the Labour group), inertmaterials, binders, or heating equipment (in theMaterials group), etc.

Each category includes a number of products forwhich elementary indices are calculated. Forinstance, the “inert materials” category includes thefollowing products: sand, gravel, crushed stones.

A different breakdown is used for each index.


All indices are calculated on the basis of weightsreferring to twenty provincial capitals, one perregion, excluding the Valle d’Aosta, and includingthe autonomous province of Bolzano.

The indices for the factor prices of a residentialbuilding are calculated not only at the nationallevel, but also for the twenty provincial capitals.

All indices are also calculated for Italy as a whole.

Items included

All three indices measure variations in the directcosts in the construction of a residential building, abuilding for industrial use, or stretches of road.They do not include the costs of land, planning, jobmanagement and connections to the variousservices. The contractor's profits and margins arealso excluded.

The factors for which the prices are monitored arelabour, materials, transport, and the hire ofmachinery.

Sources of data

Factor prices for a residential building: Thetechnical characteristics and the dimensions of thebuilding whose construction costs are monitoredhave been supplied by the National Association ofConstruction Contractors (Associazione NazionaleCostruttori Edili - ANCE).

The availability of blueprints and elevations of thebuilding, and detailed metric calculations,combined with the relevant prices, has made itpossible to know the overall cost of theconstruction of the building in each provincialcapital considered.

Factor prices for a building for industrial use: Thetechnical characteristics and the dimensions of thebuilding for industrial use whose construction costsare monitored have been supplied by the Ministryof Industry, Commerce and Crafts, in conjunctionwith the ANCE.

Factor prices for stretches of road: The technicalcharacteristics of the two stretches of mixed roadwere determined in conjunction with theAutonomous National Road ConstructionEnterprise (Azienda Nazionale Autonoma delleStrade - ANAS).


All three indices are compiled using the standardfactors method.

The costs for the three types of indices are assessedseparately for each of the following threecomponents:

Labour costs: Hourly labour costs are recorded inthe same way for the three types of indices. Theyare different for each category of worker(specialised, skilled, labourer). They are made upof the contractual minimum initial payments, alladditional allowances, and the social charges takenfrom the national contract for workers in the

62

industry, complemented by any provincialcontracts. They are recorded by ISTAT.

Prices of materials: Are recorded differentlyaccording to the type of index. For the cost of aresidential building, and a building for industrialuse, the factor prices collected refer to averagemonthly prices for goods delivered “free to site”,excluding VAT. They are recorded by theStatistics Offices at the Chambers of Commerce,Industry, Crafts and Agriculture. Those for Trentoand Bolzano are recorded at the Provincial Offices.

For residential buildings, the factor pricesincorporate the installation costs excluding thebuilding works.

For the stretches of road, the prices of the materials,excluding VAT, are obtained from the suppliers(quarries, brickworks, manufacturers, wholesalers)for large quantities, and include vehicle loading,packaging and wastage costs, etc. These arecollected by the Regional Civil EngineeringOffices.

Transport and hire costs: Transport costs refer toquintals per kilometre (q/km) at average distancefor the excavation and filler materials.

Hourly hire costs are only considered for machinesthat have a significant weighting (excavators,diggers, concrete-mixers and cranes).

Transport and hire costs are considered on the basisof actual operating time. They include fuel and/orelectricity consumption, and the services of theoperator. They are recorded by the Regional CivilEngineering Offices.


Factor prices for a residential building: Theindices are compiled on the basis of elementaryprovincial indices. These monitor the pricechanges of each product in each region. (Thebreakdown of the indices into groups, categoriesand products is described above under types ofconstruction covered).

On this basis, indices are compiled for individualcategories and groups, aggregate group, as well as

at the provincial and national levels. Weights areavailable for each of these aggregation steps.

Provincial category indices are calculated on thebasis of provincial elementary indicescorresponding only to the products most commonlyused in a given province. In addition, the regionalweights for a given product differ from province toprovince because of the relative differences inprices for the same physical quantity.

Provincial group indices are also calculated.

The national category indices are obtained byaggregating the provincial category indices.

The national group indices are obtained byaggregating the provincial group indices.

The weight of each province used in the calculationof the general index is represented by the value ofhousing investments made in the region in theperiod 1988-1990.

The values of the regional investments are dividedinto each cost category found in the province.These values are converted into provincialweighting coefficients for the calculation of thecategory index at the national level.

The distribution of the regional investment valuesin the individual cost group of the respectiveprovinces allows weighting coefficients to becalculated for the provinces in order to determinethe indices of each group at national level.

Finally, the weightings of the national groupindices for the determination of the general indexare respectively: for labour 46.00 per cent; formaterials 45.25 per cent; and for transport andhire 8.75 per cent.

Factor prices for a building for industrial use:Weights are represented by the regional investmentvalues, which are translated into national weightingvalues in the following way:

The values of the regional investments in theperiod 1988-90 in non-residential buildings forindustry were attributed to the province belongingto the region, and distributed among the individualproducts on the basis of the proportion of theproduct in total construction in the province. The

63

sum of the provincial values of each product givesthe weight of the item for the aggregation of thenational indices.

Factor prices for stretches of road: Weights usedto aggregate the elementary indices into groupindices and into national indices, are obtained fromthe ratio between the partial costs and the totalcosts of the work carried out in the base year,broken down according to the roadway typologyand type of work categories (refer “Referencepopulation” above).


The construction costs indices for a residentialbuilding are compiled monthly.

The construction costs indices for a building forindustrial use, and for stretches of road arecompiled quarterly.

Factor prices for a residential building: Theelementary provincial indices are obtained byrelating the cost observed during the month inquestion to the average monthly cost recorded inthe base year 1990.

The provincial indices of category and group, andthe general province index, are obtained byaggregating the respective provincial elementaryindices using the Laspeyres formula.

The national category and group indices areobtained by aggregating the provincial indices.However, the national general index is obtainedfrom the national group indices.

Factor prices for building for industrial use: Arecompiled according to the Laspeyres formula. Theelementary provincial indices, referring to each costitem in each provincial capital, are calculated. Thecost recorded in one quarter is related to theaverage costs of 1990.

The provincial indices are weighted together toobtain the national elementary indices. Thenational categories and group indices, and thegeneral national index, are then obtained usingweighted arithmetic averages.

Factor prices for stretches of road: Variousspecific indices are compiled according to theroadway typologies (listed above) and the type ofwork categories. Each index is broken down intoelementary indices according to factor types. Theweightings attributed to each factor differ withrespect to the roadway typology and the type ofwork categories.

The national indices are compiled according to theLaspeyres formula.

The base year for the three series of indicesis 1990=100.

Publications

All indices are published at group and categorylevels, but not at the product level.

The indices for stretches of road are publishedaccording to the roadway typology, type of workcategories, and for the two types of stretches ofroad (with, and without tunnel) (refer Referencepopulation above).

The indices for the factor prices for theconstruction of a residential building are publishedfor twenty provincial capitals, one per region,excluding the Valle d’Aosta, and including theautonomous province of Bolzano.

The indices are published in the Monthly StatisticalBulletin.

Further details concerning the methodology can befound in the ISTAT publication Numeri indici delcosto di costruzione - base 1990=100, Metodi eNorme - edizione 1994 (Construction costs indexnumbers - base 1990=100, Methods and Standards- series A - No. 29, 1994 edition).

64

JAPAN

Resume

The construction price index calculated in theJapanese Ministry of Construction is based on inputcosts.


Statistics BureauStatistical Standards DepartmentManagement and Co-ordination Agency19-1 Wakamatsu-choShinjuku-kuTokyo 162


Tel: (+81 3) 5273 1145

Fax: (+81 3) 5273 1181


The indices cover most of the construction field,new construction of residential and non-residentialbuildings, and private civil engineering works.


Elements included in the indices are: the costs ofmaterials and labour, and installation costs forwater, gas, electricity, bathroom, kitchen, andoutside fittings.

The prices used in calculation of the index includetax elements. They reflect discounts.

Sources of data

The price data are obtained from a variety ofsources. These include price lists of buildingmaterials and service enterprises published by theBank of Japan, input weights from the producerprice tables in input-output tables.

The labour costs data are based on rates set incollective wage agreements and are obtained from

surveys of employers. They include socialcontributions paid by employers.


About 200 individual input items are costed for theindex, these being combined into 26 groups.

Input weights of construction materials, labour, etc.allowing precise calculation of weights areavailable from input-output tables only every fiveyears . The aggregation of individual indices arebased on estimates of investments in construction.


The index is calculated monthly at the aggregatelevel using the Paasche formula, given that weightsat the main aggregate level are obtained annually.The indices for the individual items that make upthe index are calculated as a Fisher ApproximateValue, derived by combining the Laspeyres indexwith an approximate Paasche index using currentweights estimated by adjusting base period weightsin line with price changes.

The index has the fiscal year 1985 as referencebase.

Use(s) of index

The construction price index is intended for use asa construction cost deflator.

Publications

The index results are published in MonthlyConstruction Statistics and various otherpublications. Results are given for construction asa whole and by type of construction.

65

MEXICO

Resume

The Bank of Mexico calculates a monthly priceindex for construction using the standard factorsmethod.


Banco de MexicoGerencia de Informacion EconomicaAv. Juarez No. 908 Piso, Col. CentroMexico, D.F., C.P. 06059


Tel: (+52) 521 9047

Fax: (+52) 512 4813


The index measures the monthly change in the costof 42 construction materials and the cost of17 labour activities in social housing. Socialhousing is defined as a dwelling for one or severalpeople with basic services: a bathroom, kitchen,living-room, dining-room, laundry, one or severalbedrooms, and for which credits at special rates aregranted to persons with fixed revenues for itsacquisition.


All of Mexico. Cities with less than 60 000inhabitants according to the 1970 population censusare excluded.

Prices are collected in 23 cities throughout thecountry.


The elements included in the index are the cost ofmaterials, including their transport to the site,labour, water, gas and electricity installations costsand bathroom and kitchen fittings.

The prices of the materials used in calculation ofthe index include VAT, and are net of discounts.Labour costs include social contributions paid byemployers.

Sources of data

Prices are collected from enterprises that sellconstruction materials, from constructioncompanies, and other small companies specialisingin construction activities. 2 773 price quotationsare made, from 280 enterprises, for the cost of42 construction materials, and the cost of 17 typesof building work.

Labour cost data are based on both minimumwages and surveys of employers.


All prices are obtained directly by data collectorsand are notified on a price quotation register(registro de cotizaciones). Prices are collected forconstruction activities (corresponding to materialand labour costs) such as masonry, iron works,carpentry, sanitary hydraulic fittings, electricalfittings, plaster work, painting and floor work.

In each city 59 generic indices (corresponding tothe different types of costs) are derived from simplearithmetic monthly averages of price quotations.


The index is based on a typical apartment blockconstruction project for which 59 input factors wereidentified. These are weighted according to theirrelative importance to the total cost of the projectin 1974.


The index is calculated monthly using theLaspeyres formula with reference base 1974=100.

66

Publications

Indices other than the all-items national index arecalculated for each of the 59 items

The results are published monthly in Carpeta deIndicadores Economicos, and Revista Indices dePrecios, both from the Bank of Mexico.

Examples of some of the 59 items for which indexresults are published are sand, cement, gypsum,toilet, paint, glass, etc.

Indices for total cost of both construction materialand labour are calculated at the national and citylevels.

67

NEW ZEALAND

Resume

Three construction price indices are calculated inNew Zealand: input price indices coveringintermediate consumption (i.e. current purchasesexcluding labour and capital expenditure); outputprice indices for the construction industry groupmeasuring changes in the prices of what isproduced by businesses predominantly engaged inconstruction activities; and a capital goods priceindex which measures price movements inproductive capital assets purchased by NewZealand industries.

The methodology for the input price indices for theconstruction industry group is described below.The output price indices for the constructionindustry group, and the capital goods price indexare described in this publication under Output PriceIndices.


Statistics New ZealandPO Box 2922Wellington


Tel: (+644) 495 4600

Fax: (+644) 495 4617


The input price index for the construction industrygroup measures movements in the prices paid fortheir intermediate consumption by businessespredominantly engaged in construction activities.All activities of the construction group are coveredin these indices, including non-characteristicactivities.


The input price index for the construction industrygroup paid for by the industry covers intermediateconsumption, i.e. current purchases of the industry,

but not capital expenditure or labour inputs. Themain elements normally included are: materials(including the cost of transport to the site),equipment hire, land preparation costs (but not landpurchase costs), permits, bathroom, kitchen andoutside fittings, overheads, and indirect trademargins (i.e. on materials, etc.). Direct margins areexcluded.

Professional fees are included to the extent thatthey are paid by the construction industry firm .However, the building owners often hire their ownarchitect, engineer, etc. in which case these costs donot enter into the index.

Sources of data

The data used in the indices are obtained from avariety of sources. Construction and otherenterprises are a major direct source, while somedata collected in the first instance for use elsewherein the producers price index are also used for theconstruction price index. Use is also made of thepublication, New Zealand Building Economist,which gives regional estimated prices for installedwork.


A number of models and projects are used in thecompilation of the indices. Two approaches aretaken.

A range of 18 models, derived from schedules ofquantities, is priced each quarter. These modelsspan a wide field, from school and office buildingsto factories, sheds, and a church. Prices forinstalled work are used together with somematerial, labour and plant prices.

More generalised models are used for a range ofdisparate project types, ranging from road andrailway construction, through to water and gassupply, to car park and power line construction, andirrigation schemes. For these, most pricing iscarried out at the work phase level, e.g. earthworks,metalling, sealing, or at the materials/labour/plantlevel.

68

The list of models and projects used is reviewed atapproximately ten-yearly intervals. The projectsthemselves have mostly not been revised since theearly 1980s.


The price indices for the various projects that arepriced are combined using weights based primarilyon the 1984/85 Census of Building andConstruction.


The Laspeyres formula is used to calculate theindex.

The indices are calculated quarterly using thefourth quarter of 1989 as a base. For publication,however, the indices are spliced to the standardProducers Price Index based on the fourth quarterof 1982 (taken as equal to 1 000).

Publications

The index results are published in a variety ofoutlets including the monthly bulletin KeyStatistics, the quarterly information release Hot OffThe Press, and through the on-line system INFOS.

69

NORWAY

Resume

Statistics Norway has calculated monthlyconstruction cost indices for residential buildingssince 1978. Quarterly construction cost indices forcivil engineering works have been calculatedsince 1985.

The indices are compiled using the standard factorsmethod on the basis of weights obtained from coststudies of a sample of completed buildings.

These indices are used to regulate costs ofconstruction works.

Statistics Norway also compiles a quarterly outputconstruction price index for detached houses. Thisis described in this publication under Output PriceIndices.


Statistics NorwayDivision for Construction and Service StatisticsP.O.B. 1260N-2201 Kongsvinger


Tel: (+47) 62 88 54 27

Fax: (+47) 62 88 54 62


Prices are collected for a representative basket ofmaterials based on studies of construction projects.The price information is obtained from a sample ofsuppliers to the construction industry.

The price of labour is evaluated through analysis ofannual changes in collective agreements and insocial costs. Wage increases in excess of thecollective agreement are not included, neither is theVAT.


The construction cost indices are broken down by aclassification by types of works appropriate to eachtype of construction.

For every type of work a total cost index and amaterial cost index are calculated and published.Aggregated indices for the total residentialbuildings, or civil engineering works are notcalculated.

Construction cost indices for residential buildings:Cover input factors used in the construction ofthree categories of residential buildings: detachedhouses, row houses, and multi-dwelling buildings.

Construction cost indices for civil engineeringworks: Cover road construction, maintenance ofroads, and water power plants.


The construction cost indices show the evolution ofthe costs of construction of three categories of newresidential buildings, and three categories of civilengineering works.

The prices are measured as a weighted average ofthree input factors: labour, materials andmachinery. The factor price index does not includeproductivity, margins and taxes linked toconstruction activity. Architects and administrativefees, price of land, connection to road, water andsewerage services and other costs, are alsoexcluded.


Both series of indices are calculated using thestandard factors method.

Residential buildings: Data are collected throughmonthly surveys of 180 price materials. About320 suppliers to the construction industry (mainlywholesale companies) provide prices as at the15th of each month. In addition, some prices are

70

obtained from existing price statistics calculated byStatistics Norway.

Civil engineering works: The necessary input dataare mainly obtained from existing indices publishedby Statistics Norway.


Residential buildings: Weights are based on coststudies of a sample of completed buildings. Thebuilding work is divided into twelve constructionwork categories. Each component a structure isdefined in terms of percentage of input factors(labour, material and machinery) necessary to carryout this particular work.

The basket of materials for each category is brokendown to a representative list of materials for whichthe weights are also predefined.

The weights for residential buildings were updatedin 1990.

Civil engineering works: Weights for the two roadindices are based on specifications from thenational road authority. The weights for roads wereupdated in 1991.

The weights for power plants are based on a powerplant project completed in 1980.


The indices are calculated according to a Laspeyresformula.

The base years used for the various indices are asfollows:

• Detached wooden houses: 1978=100;

• Terraced wooden houses: 1978=100;

• Multi-dwellings houses: 1978=100;

• Main road and provincial road: Firstquarter 1985=100;

• Maintenance of main road and provincial road:First quarter 1985=100;

• Water power plant: First quarter 1985=100.

The construction cost indices for residentialbuildings are compiled monthly. The constructioncosts indices for civil engineering are compiledquarterly.

Use(s) of the index

These indices are used to regulate the cost ofconstruction works.

Publications

Detailed breakdowns are published by type ofworks in the monthly construction statistics reviewBygginfo.

71

PORTUGAL

Resume

The Portuguese National Institute of Statistics(INE) calculated an index of civil construction inLisbon based on a March 1949 reference monthuntil 1987.

To renew the old methodology and to meet nationalneeds, INE created a Construction Cost Index forResidential Buildings for the whole of Portugal(excluding overseas territories) in 1988.

The indices are compiled using the standard factorsmethod taking account of materials and labour.


Instituto Nacional de EstatisticaGabinete de Estudos EconómicosAvenida Antonio José de Almeida, 5P-1078 LISBOA


Tel: (+351) 1 847 00 50

Fax: (+351) 1 848 10 30


The index produced by INE is only a small part of alarger system of price indices developed under theresponsibility of the Commission of Indices andContract Escalation Formulae (CIFE).


The index includes labour and materials used in theconstruction of residential buildings. It covers allbuildings under construction.


The price indices used in the composition of theindex cover the whole of Portugal (excludingoverseas territories).


The standard factors included in the indices areconstruction materials and labour.

The prices of materials are based on producer priceindices for eight families of products (steel bars,bituminous, cement, red ceramics, blue ceramics,floor tiling, special and exotic woods, and uncoatedcopper wire).

The labour costs refer to the costs borne byconstruction enterprises in the Lisbon Capital Cityarea.

Sources of data

The basic information used for the prices ofmaterials corresponds to producer price indicescompiled by INE.

The labour costs indices are provided by theMinistry of Qualification and Employment.



In 1988, the indices were first calculated on thebasis of the value reached by the old index in thelast period covered, and on price indices compiledby the CIFE, the Council of Private and PublicConstruction Works (CMOPP), and the Ministry ofSocial Equipment.

Since then, in each period, a change rate is appliedto the theoretical value of the new index in theprevious period.

The indices compiled by the CIFE are used for therevision of prices of contracts signed between theState and private persons, and between privatepersons.

For this purpose, the CIFE calculates:

Every month, the estimated values of 57 indicesshowing the evolution of the producer prices of

72

several families of materials (16 with referenceperiod March 1968, and 41 with reference periodDecember 1991). These indices are representativeat the continental territory level.

Every quarter, the estimated values of an indexrepresenting the evolution of the labour costs borneby construction enterprises (with reference periodJanuary 1975). These indices represent fiveoccupations broken down into 18 occupationcategories.


The formulae used to compile the indices are basedon fixed weights. The legislation concerning therevision of contract prices provides formulae tocalculate several composite indices, according tothe type of construction. For each type ofconstruction the legal text provides, as anindication, a weight structure.

The weights structure for roads (compiled only byCIFE), and residential buildings (INE) are forexample:

Standard factor coeff. roads resident.building

Salaries (S) u 0.38 0.50Steel bars M

0b

00.08 0.07

Steel cope M1

b1

0.10 --Bituminous M

2b

20.08 0.02

Cement M3

b3

0.02 0.07Explosives M

4b

40.06 --

Diesel M5

b5

0.15 --Pine tree M

6b

60.01 0.04

Red Ceramics M7

b7

-- 0.05Blue ceramics -earthenware tilesM

8

b8

-- 0.02

Special and exoticwoods M

9

b9

-- 0.06

Uncoated copperwire M

10

b10

-- 0.02

Sandstone pipesM

11

b11

-- --

Fibrocement pipesM

12

b12

-- --

Constant C c 0.12 0.15

These detailed weights were first defined inAugust 1975, together with the definition and

coding of the indices. They were last revised in1990.


The formulae used to compile the indices have thefollowing form (referring to the weights structuredescribed above):

I uS

Sb

M

Mb

M

MCt

t ti

it

i

= + + +0

00

00 0

The indices are compiled monthly and refer to thebase year 1990=100.

Publications

The construction cost index for residentialbuildings under construction is published by INE.All other indices are published by the CIFE.

73

SPAIN

Resume

The Ministry of Civil Engineering Works(Ministerio de Fomento - formerly MOPTMA:Ministerio de Obras Públicas, Transportes y MedioAmbiente) calculates input price indices for theconstruction industry as a whole as well as for thebuilding and civil engineering sectors. Theseindices follow the evolution of prices of the inputscontributing to construction activity. They are usedto deflate the value of construction in order toestimate a volume index of production.

A seller's price index showing the average price persquare metre of dwellings is also compiled. This isdescribed in this publication under Seller’s PriceIndices.


Ministerio de FomentoDireción General de Programación Económica yPresupuestariaPaseo de la Castellana, 67E- 28071 Madrid

Telephone and Fax numbers

Tel: (+34) 1 - 597 82 72

Fax: (+34) 1 - 597 85 24


Spain uses the national classification of activitiesCNAE 74 to determine the units to be surveyed.The activities covered are those defined in thisclassification, however the Ministry plans to useCNAE 93 (in line with NACE Rev.1) in 1997.This will mean all activities concerningconstruction of buildings, civil engineering works,or the repair, installation and completion ofbuildings or civil engineering works.

Nevertheless, a classification by type of work isused for the presentation of the results.

Geographical area covered

The geographical area covered is all the nationalterritory classified by the 17 "ComunidadesAutónomas".

Items included

The construction cost index shows the evolution ofthe cost for construction activity incurred by theconstructor. It is used to deflate the value of theproduction in order to obtain a measure of thevolume of production. The components of thecosts are intermediate consumption, labour costs,and gross operating surplus. The value of land isnot included. The components of intermediateconsumption are mainly raw materials.

Sources of data

The elements of the construction cost index areobtained from indices already available from othersources: Producer Price Indices calculated by theSpanish Statistical Office (INE) are used to compilethe index of intermediate consumption. The labourcost index is calculated from the tables of wagespresent in collective agreements of each provincia.


The total construction cost index is calculated byaggregating two indices: the price index ofintermediate consumption and the labour costindex.

The structure of intermediate consumption isobtained using weights derived from the 1990structural enquiry. The resulting weights are:

• Raw materials (cement, iron & steel, ceramicproducts, tiles, etc.): 78,77%.

• Other expenses: 21,23%; including

• the renting of equipment represents 1/3;

• financial expenses represents 1/4; and the restare

• transport expenses, etc.

74

For practical reasons, the price index ofintermediate consumption only includes rawmaterials. This index shows the evolution of theprices of raw materials and is calculated byweighting the Producer Price Indices (source INE)according to weights derived from the1990 structural enquiry. The consumption ofenergy (electricity, coal, gas oil, etc.) is alsoincluded in this index.

In order to calculate the labour cost index, the totallabour costs for each salary component (basesalary, holidays, extra payments, transportpayments and social contributions) are weightedaccording to the number of annual working daysand for 12 occupation categories (architect,foreman, specialist, worker, etc.), and an index foreach provincia is calculated. These indices areweighted by the number of persons employed ineach provincia in order to obtain a national index.

Method of weighting

The weights used to calculate the construction costindex are obtained using weights derived fromthe 1990 structural enquiry. The weightscorrespond to intermediate consumption and wagesand salaries and are available for total constructionas well as for building and civil engineering.

These weights are:

Totalconstruct.

Building CivilEngnr.

IntermediateConsumption 62.78% 63.26% 61.31%Labour Costs 37.22% 36.74% 38.69%

The weights of a list of 35 raw materials used tocalculate the price index of intermediateconsumption are also obtained from the results ofthe 1990 structure enquiry. These weights are alsoavailable for building and civil engineering.

For instance:

Totalconstruct.

Building CivilEngnr.

Iron & Steel 12.1% 11.9% 12.8%Cement,plaster 19.4% 18.4% 23.8%Ceramicproducts. 4.4% 5.2% 1.1%Electricalcables 3.6% 4.1% 1.3%Electricity 0.38% 0.32% 0.63%etc. ... ... ...


The construction cost index is a Laspeyres index. Itis calculated from the price index of intermediateconsumption and the labour cost index which arealso Laspeyres indices. The base year is 1990.

The price index of intermediate consumption iscalculated monthly. The labour cost index iscalculated quarterly. The total construction costindex is calculated quarterly.

Use(s) of the index

The construction cost indices are used to deflate thevalue of production series in order to obtain thevolume index of production for the totalconstruction industry, and for the building and civilengineering sectors.

Publications

The construction cost index is available for thefollowing activities:

• total construction industry,• building sector,• civil engineering sector.

The price index of intermediate consumption is alsoavailable for the same activities. It covers theperiod 1980 to the present.

The construction cost indices are published by theMinisterio de Fomento in Boletín estadístico. Thepublication is also available on floppy disk which

75

includes historic information and software tomanipulate the data.

The methodology used to compile the input priceindices was published in 1995 in Boletínestadístico. Notas metodológicas (ISBN 84-498-0077-3).

76

SWEDEN

Resume

Statistics Sweden has calculated two types ofindices to estimate the price development of inputcosts involved in the building process since 1910:

• The “contractor’s costs index” takes account ofthe costs for the contractor. The index iscalculated both with and without architect’sfees.

• The “total factor price index” which alsoincludes other client’s costs (such as mortgageand interest rates) and architect’s fees. Thisindex monitors the input costs from the client’spoint of view and doesn’t take account ofchanges in productivity and profit margins.This type of index is not common practice inother countries.

These two input price indices are calculated in twoversions, one including wage drift, the otherexcluding wage drift. The index including wagedrift is calculated both with and without VAT.Other input price indices are calculated for repairand maintenance in multi-dwelling buildings andfor agricultural buildings.

An output price index for residential buildings isalso compiled in Sweden. This is described in thispublication under Output Price Indices.


Statistiska Centralbyrån SCB (Statistics Sweden)Karlavägen, 100Box 24 300S - 115 81 STOCKHOLM


Tel: (+46) 8 783 46 31

Fax: (+46) 8 783 49 05


The prices for materials are obtained from suppliersto construction contractors and investors.Transport costs are reported separately.

The price of labour correspond to wages calculatedthrough changes in current collective agreements,social security contributions and similar costs.


Indices are calculated separately for:

• multi-dwellings buildings (excluding wagesdrift and VAT);

• collectively built one or two-dwelling buildings(excluding wages drift and VAT);

• maintenance costs in multi-dwelling buildings(including VAT);

• agriculture buildings (excluding wages drift andVAT);

• multi-dwelling and collectively built one ortwo-dwelling buildings (including wages driftincl./excl. VAT).

The input price indices cover input factors used inthe construction of new residential buildings,agricultural buildings and in the repair andmaintenance of multi-dwellings buildings.


The indices are calculated for the whole of Sweden.


The input price indices estimate the relative changein the cost elements involved in the buildingprocess. The indices do not measure productivitychanges. They also do not reflect profit margins.

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Indices are available for the following breakdownby cost elements:

1. materials for:

• building works• building services• electricity

2. wages and salaries (excl. wages drift)

3. machinery

4. transport

5. Expenses for:

• civil servant wages• other

(1-5) contractor’s costs for:

• all building works• subcontracted building works• building service installation• electrical installation

(1-5) contractor’s costs index (incl. architect’sfees)

6. Other client’s costs

• Architects fees

(1-6) total factor price index

Sources of data

Data for the input price indices are obtainedthrough surveys conducted by Statistics Swedenusing questionnaires.

The sample is based on a judgmental selection ofenterprises and goods.


The indices calculation is based on representativestandard goods for which prices are obtained fromprice lists.


Different items are weighted together to form theinput price indices, for example, the materialsindex.

Different weights are used for the contractor’s costsindices and for the client’s cost indices. Theweights are based on housing cost studies, andstatistics from Statistics Sweden.


The indices are calculated monthly using theLaspeyres formula according to a fixed base.

The weighting system dates back from 1984.

Use(s) of the index

The indices are used for deflation and analyses, andare used as input indices in the consumer price andproducer price indices.

Changes in productivity and profits can beestimated by comparing the Swedish building priceindex and the factor price index.

Publications

All input price indices are released in thepublication Byggindex.

78

TURKEY

Resume

The State Institute of Statistics calculates aquarterly building construction cost index based onthe standard factor method.


State Institute of StatisticsPrime MinistryNecatibey Cad. 11406100 Ankara


Tel: (+90) 312 418 50 27

Fax: (+90) 312 417 04 32


The purpose of the index is to identify changes inthe cost of input items used in constructionprojects. The index covers the construction ofhouses and apartments, shops and commercialbuildings, medical buildings, schools and culturalbuildings, and administrative buildings. In totalthese categories cover more than 90 per cent ofconstruction activity in Turkey.


The index covers all of Turkey.


Included in the index are costs of materials, labourand machinery. No taxes are included in the pricesused in the calculation of the index, but the pricesare net of discounts.

Sources of data

Most of the cost data used are obtained throughsurveys of construction and other enterprises aswell as from price lists. The data are collectedfrom 24 provinces which have been chosen to

represent all the regions of Turkey. Pricequotations are obtained for each of the items costedfrom three establishments in each province. Intotal, 295 items are priced from around1 300 suppliers to construction firms.


The selection of items for inclusion in the indexwas made after extensive consultation withinterested bodies, including the Finance andIndustry Statistics Divisions within the StateInstitute of Statistics, the Chamber of CivilEngineers and of Architects, trade unions and anumber of other institutions and associations.

With the help of the Turkish Scientific andTechnical Resource Institution and their publicationConstruction Unit Price Analysis, the items wereselected and weights determined through detailedexamination of bills of quantities for a sample ofcurrent projects representative in terms of regionaldistribution and project type of construction activitywithin the scope of the index.


The index is calculated quarterly according to theLaspeyres formula.

The index has base period 1991=100.

Publications

The index results are published by the StateInstitute of Statistics in the publication QuarterlyBuilding Construction Cost Index. In addition tothe aggregate results, separate indices are publishedfor materials, machinery and labour costs, as wellas for apartments, houses, other construction.

The methodology used in the compilation of theindex is published in Methodology of the BuildingConstruction Cost Index.

Regional results as well as national indices forTurkey are presented.

79

UNITED KINGDOM

Resume

The system of construction cost indices in GreatBritain includes construction material cost indicesand indices of construction industry wagescompiled by the Department of Environment(DOE) using data collected by the Office forNational Statistics (ONS). Separate indices arecompiled for the costs of materials, and forconstruction industry average earnings.

The indices are compiled using the standard factorsmethod on the basis of weights reflecting therelative value of purchases of these materials, andcomponents for new housebuilding, other newwork, repair and maintenance, and for the wholerange of construction activity.

Several output price indices are also compiled inGreat Britain. These are described in thispublication under Output Price Indices.


Department of Environment (DOE)Room P1/0162 Marsham StreetLONDON SW1 P 3EB


Tel: (+44) 1 71 276 47 64

Fax: (+44) 1 71 276 38 26


Data are presented according to the followingclassification:

• new housebuilding,• other new work,• repair and maintenance,• whole range of construction activity.

The producer price indices used to compile thematerial cost index are calculated for a number ofcategories of material: bricks (facing, engineering,common), concrete building blocks, sand and

gravel, crushed rock, cement, fibre cementproducts, concrete roofing tiles, ready mixedconcrete, slate.

The index of average earnings covers total wagesand salaries for manual and non-manual employeescombined, employed by enterprises in theconstruction sector (NACE Rev.1 division 45).


The geographic area covered is Great Britain.Northern Ireland, the Isle of Man, and the ChannelIslands are excluded.


Material cost indices: Are produced by combininga wide range of producer price indices for buildingmaterials and components, using weights reflectingthe relative value of purchases of these materialsand components for new housebuilding, other newwork, repair and maintenance and for the wholerange of construction activity.

Index of average earnings: Covers total wages andsalaries for manual and non-manual employeescombined. The index reflects changes such as thenumber of overtime hours worked, short-time,payments by results, numbers of employees, anddifferent occupations, as well as changes in wagerates.

Sources of data

Data are obtained from a survey usingquestionnaires, and partly from professionalassociations. The sample is derived by systematicsampling.


The indices are compiled using the standard factorsmethod (materials and labour).

80


The weights of the material cost indices are rebatedto reflect the materials currently being used.


The indices are calculated monthly according to aLaspeyres formula with base year 1990.

Use(s) of the index

Material and labour costs indices are used asdeflators for the repair and maintenance outputseries (at constant prices).

Publications

All construction cost indices are publishedquarterly for the whole construction industry, andfor the following breakdown:

• New Housing

• Other New Work

• Repair and maintenance

⋅ Housing⋅ Other work

Data are published monthly in the ONS MonthlyBulletin of Indices and quarterly in the DOE releaseHousing and Construction Statistics. Indices arealso available quarterly on subscription.

81

C. OUTPUT CONSTRUCTION PRICE INDICES

AUSTRALIA

Resume

The Australian Bureau of Statistics (ABS) compilesthree output price indices for: the construction andrenovation of houses; construction of otherdwellings; and construction of other buildings.These are described below.

The index for the construction and renovation ofhouses is calculated quarterly.

The indices for the construction of other dwellings,and the construction of other buildings are proxyoutput indices calculated monthly. Both indices arecalculated by the Australian Construction Services(ACS), which is part of the CommonwealthDepartment of Administrative Services.

The ABS also compiles price indices based oninput costs covering civil engineering works. Thisis described in this publication under Input PriceIndices.


Australian Bureau of StatisticsPO Box 10Belconnen, ACT 2616


Tel: (+616) 252 6808

Fax: (+616) 252 5327


The index for the construction and renovation ofhouses covers privately-built houses. Only “projecthomes” (dwellings constructed on the basis of astandard design) are included in the index. Theindex covers both construction of new houses, andalterations and additions

The indices for the construction of other dwellings,and the construction of other buildings, coverprivately-built dwellings other than houses (e.g.apartments, etc.), and non-residential buildings.

No composite index is prepared.


The three indices are compiled for each of the eightStates and Territories in Australia. Onlyconstruction activity in each of the eight capitalcities is included.


Construction and renovation of houses: Cover thecost of labour, materials (including transport to thesite), and equipment hire, plus the installation (butnot connection) of water, gas, electricity andtelephone services. Internal fittings are included,though an attempt is made to exclude everythingwhich is not under the roofline. Architects' fees,trade margins, overheads, profits and the interestcosts of building contractors are also included.

Taxes on material inputs are included in the prices,but not duties related to the final sale. The pricesare net of any discounts that apply.

Construction of other dwellings; and otherbuildings: Among the elements included in theindices are: the cost of labour, materials (excludingcost of transportation to the site), equipment hire,and land preparation costs (excluding the costs ofland purchase), installation costs of services andfittings, trade margins, overheads and profits.Indirect taxes are included, as are discounts wherepossible.

Sources of data

Construction and renovation of houses: Arepresentative sample of projects is obtained ineach of the eight capital cities, a total of

82

110 projects. This ranges from 20 in the largerStates, to 8 in the smaller States and Territories.The data are obtained from major constructionenterprises.

Price information for project homes is obtained atthe end of each quarter from a sample of projecthome builders in each city.

Sale prices of established houses are obtained fromreal estate organisations and government agencies.They relate to actual sales transacted during thequarter.

Construction of other dwellings; and otherbuildings: Uses information from a number ofsources, including a sub-set of the 150 cost indicesmaintained by the ACS.

Construction material prices are generally obtainedeither from ABS publications or by telephoningsuppliers and making adjustments for knownbiases. The latter method is also used for otherintermediate inputs. In addition, information isobtained from tenders, and profit mark-ups areobtained from local master builders and theirassociations.

Data on wage rates are based on the system of pay“awards”, which set the legal minimum pay foreach classification within an occupation.Adjustments are applied to allow for paymentabove the minimum rate and for changes to non-wage labour costs. Social contributions paid byemployers are not included.


Construction and renovation of houses: Theindices are compiled using the matched modelmethod and is based on a representative sample ofprivately built project houses whose prices aremonitored from one quarter to the other, and theprice movements for each model weighted together.

Construction of other dwellings; and otherbuildings: Are compiled using the component costmethod. This entails the specification of arepresentative building project as a model. Forthese indices the models comprise a smallapartment block, and a composite of various types

of non-residential building for each of the eightcapital cities.

The significant items of expenditure for the projectare identified. From an examination of a range ofbuilding projects about 75 per cent of the total costis determined by 25 per cent of the majorcomponents of a bill of quantities. To minimise thecost of establishing and maintaining cost indices,the value of each of the less significant items isadded to that of the cost-significant item most akinto it, that is one which would be expected to have asimilar growth rate.

For each significant item a cost index is derived asthe weighted average of the wage, material andother imputed costs. The ACS maintains a rangeof about 150 cost indices. Each represents a tradeor a trade sub-section, etc. and is a weightedaverage of wage rate indices and price indices forintermediate inputs. To each cost index a variablemark-up is applied to take account of overheads,contractors’ risk and profit. Only a sub-set of the150 cost indices are used in the compilation of theABS cost index.

The total project cost is derived by combining thecomponent cost indices on the basis of informationrelating to the total project specifications. TheACS determined the cost of each of thecomponents of the buildings using a bill ofquantities for a model project for each buildingtype provided by the ABS in the early 1980s.


Construction and renovation of houses: Thesample of projects is priced on a quarterly basis andis subject to continuous review. The projectsthemselves are respecified on a cyclical basis withon average a particular project being included in thesample for a period of two to three years. Thevarious sample projects are equi-weighted withineach state.

Construction of other dwellings; and otherbuildings: Quarterly cost estimates are producedfor a small apartment block, and for a composite ofvarious types of non-residential building for each ofthe eight capital cities. These use a bill ofquantities for a model project for each buildingtype supplied by the ABS in the early 1980s. The

83

base period costs of each component areextrapolated forward using cost indices developedby the ACS.


The Laspeyres formula is used for the compilationof the construction and renovation of housesindices. Construction of other dwellings and otherbuildings indices is essentially a Laspeyres index,though the composition of the significant cost itemcomponents does vary over time.

The indices for the construction and renovation ofhouses currently have base year July 1989 toJune 1990=100.

The reference period for both construction of otherdwellings, and other buildings indices is July 1989to June 1990=100.

Data for the construction and renovation of housesare collected quarterly. Data for construction ofother dwellings and other buildings are collectedmonthly.

Use(s) of index

The indices for the construction and renovation ofhouses are compiled for use in the compilation ofthe Australian consumer price indices, and fordeflation of corresponding aggregates in theAustralian national accounts.

The indices are also used to derive quarterlyconstant price estimates of approvals,commencements, completion, and value of workdone for each State and Territory.

Publications

Construction and renovation of houses: Theoverall index results are not published separatelybut are consistent with the total implicit pricedeflator for dwelling construction as publishedquarterly in Australian National Accounts:National Income, Expenditure and Product and theState Accounts. The component home price indicesare published in House Price Indices: EightCapital Cities (ABS Cat. No. 6416.0). Separate

indices for the construction of new houses and foralterations and additions are available on request.

Construction of other dwellings; and otherbuildings: The index results are not publishedseparately but are consistent with the aggregatedwelling and non-dwelling building andconstruction implicit price deflators as publishedquarterly in Australian National Accounts:National Income, Expenditure and Product (ABSCat. No. 5206.0) and the State Accounts (ABS Cat.No. 5242.0). Price indices at a more disaggregatelevel are available on request.

Indices are calculated for each of the eight Statesand Territories of Australia.

84

AUSTRIA

Resume

The Austrian Central Statistical Office (ÖSTAT)calculates an output price index comprising fivebroadly similar quarterly sub-indices for:

• construction of residential buildings• other building construction work• construction of roads• bridge building• other civil engineering work

The indices are compiled using the component costmethod.


Österreichisches Statistisches Zentralamt (ÖSTAT)Abteilung 3: Produktion und DienstleistungenHintere Zollamtstraße 2b,A - 1033 WIEN


Tel: (+431) 711 28 7065

Fax: (+431) 715 68 29


Prices are collected from enterprises involved inconstruction activity. Enterprises supply prices forconsistently-defined types of building operations onthe basis of their most recent contract. If there areseveral contracts available for selection for areported quarter, the contract selected for priceinformation is roughly equivalent to a four-storeyresidential building with approximately20 apartments.


Prices are monitored for a number of individualtypes of building and construction operations meantto be representative for the whole constructionprocess for building and civil engineering. Forinstance, item 35 in group 8 (roofworks) of the

Standard Specification for Building Construction isdefined as follows:

"1 m² of covering roof area with freshlyfired clay roofing tiles ...*... cm. Product...... laid dry, suspended/nailed on preparedbattens."

Residential and non-residential buildings: In 1986,the Standard Specification for BuildingConstruction [LB-H] recommended for use by theFederal Ministry for Economic Affairs was adoptedfor the uniform description of twenty individualtypes of construction operation groups brokendown into 82 representative individual types ofbuilding operation (see example above).

These 20 types of construction operation are splitinto building contractor’s works (earthworks,bricklayers, etc.) and other building works (joinery,locksmith, electrical installation, etc.).

Residential building price indices: Covers bothpublic and private construction of houses andapartment blocks. Reporting enterprises are askedto supply on a questionnaire, prices from their mostrecent contracts, some of which should relate toproperties equivalent to a four storey block of about20 apartments, and some to housing estateconstruction. The index covers land preparation,main building works, installation and completion,and the installation of domestic appliances.

Other building price indices: Encompasses allbuildings not intended primarily for residentialpurposes.

Road construction: For this index, prices aremonitored for 19 individual construction operationsgrouped into the following 5 constructionoperations groups: earthworks, drainage works,concrete and walling works, paving, surfacing.

Bridge construction: For this index, prices aremonitored for 22 individual construction operationsgrouped into 5 construction operations groups:earthworks and foundation works, concrete andwalling works; stone deliveries, sealing works,bridge equipment, surfacing.

85

Price index for other civil engineering: Other civilengineering in this context covers all civilengineering work that cannot be attributedspecifically to road or bridge engineering work.However, it excludes power plants not covereddirectly in this series of indices.

A survey of activity under the heading other civilengineering revealed that the bulk of the workinvolved the construction of water supply andsewerage treatment plant. Price observation istherefore restricted to this branch of the activity,which is felt to be representative of the headingother civil engineering as a whole.

For this index, prices are monitored for23 individual construction operations grouped intothe following five construction operations groups:earthworks, pressurised pipelines and drainagesections, mass concrete and reinforced concrete,shaft construction, other building works.


The indices are weighted for 9 regions in Austria.

Weights for the road and bridge constructionindices also take into account the type of terrain.Each region has percentages of flat, hilly andmountainous terrain.

The total area covered is Austria.


For all indices, the prices collected are prices on thebasis of concluded contracts. These may not be thefinal prices, but reflect the prices at the moment ofobservation. They have the advantage of beingavailable relatively quickly, in contrast to invoiceprices.

The indices include the installation costs of water,gas and electricity, and internal fittings.

Excluded are: land purchase and preparation costs,telephone installation costs, external fittings,professional fees.

The prices are net of discounts, and generally donot include VAT.

Sources of data

The price observation method varies by sub-index.

Residential building and other buildings priceindices: For residential and other structuralbuilding a shuttle questionnaire is sent to thebuilding companies who provide information on avoluntary basis. The approximate number ofenterprises reporting prices each quarter for thedefined individual work types of buildings is asfollows:

• construction of residential buildings 770

• other building construction work 730

Price indices for road construction; bridgeconstruction; and other civil engineering: Forroads the provincial construction departments andcompanies responsible for awarding road buildingcontracts provide the prices to ÖSTAT.

For bridges the provincial construction departmentsagain perform this role.

For other civil engineering, survey questionnairesare sent to provincial construction departments andspecialist associations. This approach reflects thepublic character of these types of construction andreduces the reporting burden on enterprises.

The approximate number of civil engineeringprojects per quarter reported by provincialconstruction departments is:

• construction of roads 70

• bridge building 35

• other civil engineering work 80


The component cost method is based on prices forrepresentative types of construction operations.

For each sub-index a list of types of constructionoperations is drawn up. Price indices are calculatedby forming an average price from the (maximum ofeight) price reports received for each individualoperation in each Federal State. When comparedwith the corresponding reference price (average

86

price for the base period), this average price givesan index.

The 738 indices (82 types of constructionoperations for nine Federal States) produced in thisway each quarter are combined to produce GroupIndices and the Overall Index for Austria, boththrough weighting the individual types ofconstruction operations and also by means ofregional weighting.

The types of construction operations are identifiedaccording to a detailed classification.

Wherever possible the prices are collected for typesof construction operations consistently-definedfrom period-to-period. Where a change in thedetailed specification of the work is unavoidable,the change is reported on the questionnaire (with afigure on the new basis also being reported for theprevious period) and taken into account by makingbase adjustments when calculating the currentindex values.

Residential building price indices: A similarnumber of prices is collected in each region foreach type of construction operations (generallyaround 5-10 for each individual type of operationfor each sub-index) and an average price iscalculated for the region. These regional averagesare then weighted together using the share of theregion in the value of production in the base period.

Other building price indices: Employs a similarmethodology to that used for apartment block andhousing estate construction. Special care is takento ensure that the diversity of types of constructionoperations included are appropriately weighted inthe calculation of the final sub-index.

Price indices for road construction; bridgeconstruction; and other civil engineering: Forthese indices, the weights take into account thenature of the terrain (flat, hilly, mountainous) aswell as the region. The same number of projectsare drawn randomly for each type of terrain. Fromthese are determined the shares of the workcategory groups in each project, as well as the shareof the work categories within these groups. Thusfor each terrain type, the average share of eachcategory group, and category is determined.

These results are weighted using the share of eachterrain type in each province to give averageweightings of categories and category groups forAustria. These regional weights are based on theshares of the value of road production in the baseyear.


The number of projects used in determining theweights for each sub-index at the last weight reviewwas:

• construction of residential buildings 92

• other building construction work 135

• construction of roads 200

• bridge building 114

• other civil engineering work 141

The group weights and regional weights are notrevised at each base change, nor at the same timefor each sub-index.

The lists of types construction operations andassociated weights are reviewed approximatelyevery ten years.


All indices are compiled according to the Laspeyresformula.

The reference base year for the overall index iscurrently 1994, which is always the base year of themost recently revised sub-index.

Sub-indices with other base years are, for thecalculation of the overall index, mathematicallyrebated to this year.

The Austrian index of construction prices, and allsub-indices are compiled quarterly.

87

Use(s) of the index

The index is used for deflation of national accountsand will also probably be used for the plannedproduction index in construction.

Publications

The residential building sub-index index is alsoavailable, broken down between buildingcontractor’s work and other building work.

The two sub-indices, residential building and otherbuilding construction work are combined to give anindex for structural building.

The road construction sub-index is combined withthe similarly-constructed sub-index for bridgebuilding to give an index for combined road andbridge building.

The other civil engineering sub-index is combinedwith those for road and bridge building to give anindex for civil engineering as a whole, with a smallelement being included for power stationconstruction.

The indices for structural building and civilengineering are weighted together to give anoverall construction index, using the shares ofbuilding output in 1986 as weights.

Finally, the indices are published according to thefollowing breakdown (between brackets, the weightof each sub-index in the overall Building PriceIndex in 1986).

• Building price index (BPI) [100%]

• BPI for Buildings [55.3%]

⋅ BPI for residential buildings(incl. alterations) [25.7%]

⋅ Building Contractor’s work⋅ Other Building work⋅ BPI for Other buildings

(incl. agricultural) [29.6%]

• BPI for Civil Engineering [44.7%]

⋅ Road construction [18.0%]⋅ Bridge construction [02.4%]⋅ Other Civil Engineering [24.3%]

The indices are calculated and published only at thenational level. No regional breakdown isdisseminated.

All the sub-indices and the overall index arepublished quarterly by ÖSTAT in

• Statistische Nachrichten,

• Schnellbericht - Baupreisindex

• ÖSTAT database ISIS.

Further details on the methodology of the indicesare published in Der Österreichische Baupreisindex1971-1985, Heft 810, ÖSTAT, Wien 1989 (TheAustrian Construction Price Index 1971-1985) andin the following issues of Statistische Nachrichten:

• S. N., 46, Jahrgang 1991 (Neue Folge), Heft 6.



88

CANADA

Resume

Seven construction price indices are calculated inCanada. These comprise two output, four input,and one seller’s price indices. The two outputindices described below cover:

• apartment building construction• non-residential building construction

The seller’s price index, and the four input price aredescribed in this publication under Input PriceIndices and Seller’s Price Indices.


Organisation responsible for Index

Statistics CanadaJean Talon BuildingTunney’s PastureOttawa, OntarioCanada KIA OT6


Tel: (+613) 951 9615

Fax: (+613) 951 2848


Apartment building construction: Measurecontractors’ selling price change of public andprivate sector apartment building construction.

Non-residential building construction: Measurescontractors’ selling price change of non-residentialconstruction (i.e. commercial, industrial, andinstitutional). This quarterly index, which istermed the Canada Composite, is mainly based onthe pricing of five standard constructions,representing the three broad categories ofconstruction (commercial, industrial, andinstitutional), although there is also an input costselement. A sixth model representing hospitalconstruction (in the institutional construction

category) will be included in the next addition tocoverage by building types.


Apartment building construction: The datacollected for this index covers about 60 per cent ofconstruction output of apartment blocks. It isrestricted to seven cities in five provinces.

Non-residential building construction: The datacollected for this index covers about 40 per cent ofconstruction output of non-residential buildings,and is also restricted to seven cities in fiveprovinces.


Apartment building construction: The costscovered in the index include most of the mainconstruction items plus kitchen cupboards andcarpets, but exclude appliances. The costs of landpurchase and preparation, and architects' andengineers' fees, are also excluded. Prices includeoverheads and profits. Goods and service tax is notincluded, but other (provincial) taxes are. Pricesare net of discounts.

Non-residential building construction: The pricescovered in this index are roughly equivalent tothose included in the index for apartment buildingconstruction. Thus, they include most of the mainconstruction items. The costs of land purchase andpreparation, and architects' and engineers' fees, areexcluded. Goods and service tax is not included,but other (provincial) taxes are. Prices are net ofdiscounts.

Sources of data

Data for both indices are obtained by a combinationof personal visit and telephone from constructionand other enterprises, and from producer priceindex sources. In some cases data on union wagerates are obtained from surveys of employers andsigned collective agreements. The labour costs datainclude selected social contributions paid byemployers.

89


Both indices are based on the pricing of a standardconstruction, although there is also an input costselement. The standard construction for theapartment index, which was actually built inCanada in 1981, is a 53 unit reinforced concretestructure with 7 storeys, a basement parking facilityand a penthouse unit.

The apartment building construction index standardconstruction is taken as being representative of bothpublic and private sector apartment building.

The standard constructions for the non-residentialbuilding construction index were also actually builtin Canada and comprise an office building, awarehouse, a shopping centre, a light industryfactory building and a secondary school.

Prices for both indices are obtained fromcontractors and sub-contractors who constructapartment and/or non-residential buildings, on thebasis that they are bidding on a fixed specificationand quantity under current market conditions.

It is intended to review the standard projects forboth indices at approximately 10-yearly intervals.


Apartment building construction: Weights werederived from a detailed cost analysis of the modelapartment building. While the standard project isheld constant the weights used in combining thevarious city indices that make up the Canada totalare updated annually, in January, in the light ofresults taken from 36 months of building permitdata in relation to the census metropolitan areas(cities). This survey covers about 60 per cent ofconstruction output of apartment blocks, but isrestricted to seven cities in five provinces.

Non-residential building construction: Weights arederived from detailed cost analyses of eachstructure wherein quantities or values for eachmodel were expressed in 1986 price levels. Whilethe standard constructions are held constant theweights used in combining the various buildingprojects and city indices that make up the CanadaComposite are updated annually, in January, in thelight of results taken from 36 months of building

permit data in relation to the census metropolitanarea. This survey covers about 40 per cent ofconstruction output of such projects, but isrestricted to seven cities in five provinces.


Apartment building construction: A fixed weightformula is used at the city level. A chain Laspeyresindex formula is used for the seven city compositelevels, for which the weights are derived frombuilding permit data for the previous three years,valued at the price levels of the fourth quarter ofthe last year.

Non-residential building construction: A fixedweighted formula is used at the model level. Achain Laspeyres index formula is used foraggregations at the city and seven city compositelevels, for which the weights are derived frombuilding permit data for the previous three yearsvalued at price levels of the fourth quarter of thelast year.

Both indices are compiled quarterly and have baseyear 1986=100 (shortly to change to 1992).

Use(s) of index

These indices are used for a variety of purposes,e.g. deflation of construction industry output,deflation of expenditures on gross fixed capitalformation, contract escalation, and assetrevaluation.

Publications

Both indices are first published in StatisticsCanada, The Daily (Cat. No. 11-001E). They arealso published quarterly in Construction PriceStatistics (Cat. No. 62-007). As well as the overallindex, indices are also available for individual tradegroups (architectural, structural, mechanical,electrical). For the non-residential buildingconstruction index indices are available for broadcategories of construction (commercial, industrial,institutional).

For both indices data are available for seven citiesin Canada.

90

FRANCE

Resume

The Indice du Coût de la Construction (ICC) is aquarterly output price index of new residentialbuildings calculated and published by INSEE onthe basis of data provided by the Ministry ofEquipment and Housing.

This index was first created in 1953 to serve as abenchmark for interest rate evolution for a specifictype of saving account for potential house buyers.

The ICC is compiled on the basis of a schedule ofprices referred to below as the “Bordereau Générald’évaluation des travaux neufs” (BGE).

The current methodology for the ICC is describedbelow. However, the Ministry of Equipment, incollaboration with INSEE, plan to modify thisindex which method is very costly.

The Ministry of Equipment and the Ministry ofEconomy also calculate two input price indicesdescribed in this publication under Input PriceIndices.

The output indices described below are used fordeflation of components of the national accounts.


INSEE18 Boulevard Adolphe PinardF-75675 PARIS - Cedex 14

Ministère de l'Equipement du Transport et du TourismeTour Pascal BF-92055 Paris-La-Défense Cedex 04


INSEE

Tel: (+33) 1 41 17 51 15

Fax: (+33) 1 41 17 63 11

Ministère de l'Equipement

Tel : (+33) 1 40 81 28 98

Fax (+33) 1 40 81 28 27


Data for the ICC are collected by the sub-directorate for information - Construction statistics,Surveys Office from the Ministry of Equipment.


The reference population is defined in terms ofhouses or buildings with two or more dwellingsbuilt during the reference period (one quarter). Thestatistical information is obtained through buildingpermits linked to these constructions.

The first step is to eliminate those permits thatdidn't lead to construction and those that do notcorrespond to residential buildings. For eachselected permit, the future owner (maître d'ouvrage)is then contacted and asked to provide the Ministryof Equipment with financial and technicaldocuments related to the construction of thebuilding.

The financial documents (price of works (total orbroken down by trade), mode of escalation andrevision of prices, reference date for the prices,etc.) are used to calculate the actual and currentprice of the construction.

The technical documents (plans, description ofworks, etc.) are used to evaluate with the help ofthe BGE (see description below) the theoreticalprice of the construction in the referenceyear (1987). That is the price that would have beenpaid for exactly the same building in the base year.


The ICC only covers new residential buildingsexcluding residences for communities (e.g.orphanages, prisons, etc.) and activities linked torepair and maintenance.

91

For each building selected in the sample, atheoretical base year price is evaluated with thehelp of the BGE. This is a register containing theunit prices (collected in the base year) forapproximately 4 000 elements of construction.These elements are defined according to afunctional classification; each element is linked toits main function in the building.

For example, the item external superstructure wallsincludes the following components: walls, heatinsulation, inner coating, openings, balconies,loggia, etc.

In terms of activities, the index does not cover sitepreparation (NACE Rev.1 group 45.1) and repairand maintenance. The coverage falls partly withinNACE Rev.1 groups 45.2, 45.3, and 45.3.


The total area covered is metropolitan France(excluding overseas departments and territories).

The database is sorted by region. Five largeregions have been defined on the basis of the22 administrative French regions (excludingoverseas départements and territories). These fiveregions were defined so that each has a similarweight, and differs as much as possible from otherregions regarding the construction price level.


The ICC shows the evolution of the price paid bythe future owner (maître d'ouvrage) of a newbuilding (house or building with two or moredwellings).

Wages for architects or quantity surveyors are notincluded in the prices collected except in the caseof individual houses sold “on catalogue” for whichthe client pays a global selling price includingarchitects' fees.


Data for the ICC are collected through buildingpermits and financial and technical files obtainedfrom the client.

The survey is based on a sample. The samplerepresents the buildings constructed during thereference quarter. The sample for the ICC formonth T comprises approximately 1 000 buildingpermits delivered in month T-2 randomly selectedwith probabilities proportional to the size(measured by the number of dwellings in thebuilding). The sample is stratified according to thefollowing criteria:

• type of permit (individual house or multipledwelling building);

• size;

• sorted by region.

Out of these 1 000 permits those not correspondingto the coverage of the survey are eliminated. Thosefor which building contracts are not yet signed arekept in a reserve until it is signed. Contracts thatwere signed more than 9 months before thecalculation term are not taken into account.

For each permit selected, the related financial andtechnical documents are collected from the client.

Approximately 320 to 350 files are normally keptin the final sample. As the sampling rate applied tolarger buildings is high, these correspond to around6 000 dwellings per quarter (6 per cent to 7 per centof all dwellings built during a quarter).

On the third quarter of the year the procedures forthe collection of financial and technical informationdirectly from the client (described above) is verydifficult as many people are not available duringthe summer period. The index for the third quarterof each year is derived from the BT input priceindices (refer to Input Price Indices).

A strong and stable relationship can be observed inthe past between the ICCs rate of change and thatof the BT01. The ICC is then estimated accordingto the linear relationship between its quarterlygrowth rate in quarter T and the correspondinggrowth rates of the BT01 for quarters T and T-1.

92


Each construction selected in the sample isweighted according to its size and type:

• individual;• grouped individual;• 2 to 9 dwellings;• 10 to 29 dwellings;• 30 or more dwellings;• apartment buildings;• 2 to 19 dwellings;• 20 to 49 dwellings;• 50 or more dwellings.


The ICC is similar to a Paasche index, the weightsare updated every quarter and correspond to thecurrent state of the building trade.

The index corresponds to the ratio of the weightedreal average price to the average weightedtheoretical price.

The theoretical price (BGE price) calculated on thebasis of the technical characteristics of the buildingis corrected to eliminate the impact of differenttypes of dwelling structures.

The index is expressed in base 100=1953. Thebase year is the year preceding the referencequarter.

Data for the ICC are collected quarterly except forthe third quarter when the index is directlyestimated from the input price index BT01.

Use(s) of the index

ICC is used to deflate the value of production fornew residential buildings.

Publications

The ICC is published quarterly in Journal Officiel(JO) de la République Française, and Bulletinmensuel de la Statistique (BMS).

The index is also available on minitel 3615-3616,code INSEE (series starting in 1970).

Finally, the series can be requested by telephone(+33) 1 43 45 70 75.

The methodology of the ICC is further described inINSEE - Méthodes No.17, février 1992 (INSEE -Methods No.17, February 1992).

93

GERMANY

Resume

The Federal Statistical Office of Germany(Statistisches Bundesamt) calculates constructionprice indices for selected important types ofconstruction that fall into two broad groups:

• construction of conventional design, andmaintenance of residential building (quarterly)

• single-family houses of prefabricated design(half-yearly)

The first index is compiled using the componentcost method and is referred to in this publication asthe conventional construction price indices.

The second index was created in 1968 when theconstruction of prefabricated single-family housesexperienced a boom and reached a market share of10 per cent of total house construction in the mid-1970s. In 1991, system-built houses stillrepresented 7 per cent of the market in the formerWest Germany. This index is comparable to aproducer price index and is referred to in thispublication as standard house price indices.


Statistisches BundesamtGustav-Stresemann-Ring, 11D 65189 WIESBADEN


Tel: (+49) 611 75 2441

Fax: (+49) 611 72 4000


Conventional construction price indices: Datacollection for these indices is undertaken by theregional Statistical Offices (State Authorities) usingmethods and instructions provided by the FederalStatistical Office.

Standard house price indices: For these indices,the Federal Statistical Office conducts the price

survey, (except in Bavaria where prices arecollected by the Bavarian Land Statistical Office).


The reporting unit is the enterprise with activities inthe building and civil engineering sectors.


Conventional construction price indices: Theactivities covered quarterly by the referencepopulation are almost equivalent to NACE Rev.1division 45. Reporting units may also beenterprises with secondary activities withindivision 45. The price indices for structures ofconventional design and for the maintenance ofresidential buildings cover new construction andrepairs of a selection of important types ofbuildings and other constructions.

The indices are based on a selection ofrepresentative construction work categoriesidentified according to the “Verdingungsordnungfür Bauleistungen” (VOB). This is a classificationby type of construction activity.

The VOB is a code for the granting of contracts forthe construction of public buildings, but it is oftenused as the basis of private building contracts aswell. Part C of the VOB contains the GeneralTechnical Conditions of Contract (ATV), whichdefine all construction work categories(construction services rendered) that are the objectof a specific contract between the client and thecontractor. In a contract, a price is attached to eachof these categories of construction work (tiling,roofing, etc.).

By examining these records, the statistical officedefines typical construction work categories ascollection items and provides relevant frameworkdescriptions. The reporting firms first add detailsto the framework description by specifying the wayin which they regularly perform the collection item.All further price notifications will refer to thesespecified construction work categories.

94

Construction price indices for the individual typesof building are shown in a breakdown by types ofconstruction work. Types of construction work arean aggregation of construction work categories, theallocation being made according to the VOB. Thebreakdown by types of construction work is verydetailed, for instance the breakdown for roadbridges is as follows:

• earthworks

• roadway construction work, surface layers ofasphalt

• concrete and reinforced concrete work

• structural steelworks

• metal work

• scaffolding work

Currently, 220 standard construction workcategories are defined as collection items. Therelevant prices reported are included in thecalculation of construction price indices for ninemain types of structure:

• residential buildings;

• non-residential buildings (office / industrial andcommercial);

• road construction;

• road bridges;

• sewerage system;

• dams;

• sewerage treatment plants;

• maintenance of residential buildings.

The results are also partially computed for differenttypes of buildings or other constructions. Forexample, apart from the price index of residentialbuildings, price indices are computed for single-family houses, multi-family houses, and otherresidential buildings.

Standard house price indices: Are calculated forthe following breakdown:

• system-built houses with system-built orconventionally constructed cellars

• system-built houses without cellars.

The activities cover only the main construction andinstallation and completion of residential single-family buildings.


The territorial classification by 16 Länder is usedfor the conventional construction price indices fordata collection and processing.

The total area covered is Germany after unification,i.e. the borders as of 3 October 1990.


For both indices the prices notified are marketprices at the time of the award of the contract (nottender prices) excluding VAT. VAT rate changesare reintroduced in the calculation of the index.

Sources of data

All the data used to compile construction priceindices are obtained from surveys conducted by theregional and federal statistical offices.

All data collection is done using questionnaires sentand collected by the Regional Offices.

Conventional construction price indices: Thereporting unit is the enterprise with activities in thebuilding and civil engineering sectors.

Standard house price indices: The reporting unitsare chosen from the producers of prefabricatedsingle-family houses. A judgmental sample ofreporting units is used.


Conventional construction price indices: TheRegional Offices first calculate for each pricenotification, the firm’s index figure. This is theratio, multiplied by 100, of the current price of anitem of construction work category to thecorresponding average price in the base year.

The firm’s index figures for a collection item arethen averaged and the resulting 220 Land indexfigures are sent to the Federal Statistical Office.

95

The Federal Office then calculates a federal indexfigure for each survey heading (construction workcategories) by weighting the Land index figureswith the construction industry turnovers of theLänder in the base year.

Finally, the federal index figures are weighted bymeans of structure-specific weighting schemes.

As prices are surveyed excluding VAT, the laststage is to increase (or decrease) the price indicesby the change in the tax rate.

Standard house price indices: The price indices forprefabricated design houses are usually producerprice indices. The producer can build a number ofsimilar houses for subsequent sale. In this case, theproducer price can differ from the purchasing price,and the methods used to calculate the indices aresimilar to those used for manufacturing industries.


Conventional construction price indices: Billingrecords and invoices are obtained for the buildingconstruction categories for given types of structureperformed during the base year. Property ownersare contacted. For each billing record, the FederalStatistical Office totals the prices of all constructionwork categories that can be allocated to a specificcollection item. This total is then divided by thetotal price of the structure to obtain the relativeweight of the collection item in question.

Because this methodology is very time consuming,weights are only renewed for some of the types ofstructure. For the 1991 base year, the weights ofroads and road bridges were renewed in addition tosewerage treatment plants, which were included forthe first time.

The weights for the collection items for the othertypes of building (and other constructions) areupdated according to the price development for therespective types of buildings (and otherconstructions) since the latest base year.

Standard house price indices: Uses weightscorresponding to the proportion of the turnover ofthe category of reporting firms.


The indices are calculated according to a Laspeyresformula.

The base year is 1991.

Conventional construction price indices: Data arecollected quarterly in February, May, August andNovember.

Standard house price indices: Data are collectedhalf-yearly. The prices refer to 1 April and1 October.

Publications

Conventional construction price indices: Ispublished quarterly for selected types of structures:

• all residential buildings:⋅ single-family residential buildings⋅ multi-family residential buildings⋅ mixed used residential buildings

• office buildings

• all industrial and commercial buildings⋅ 2 variants

• total road construction⋅ 2 variants

• all road bridges⋅ 2 variants

• sewerage system

• dams

• sewage treatment plants

• total maintenance of multi-family buildings⋅ 2 variants

Regional indices are available for some Länder, andare published by the respective regional statisticaloffices. Due to restrictions on confidentiality,and/or smaller databases, regional statistics aremore aggregated.

Construction price indices are published inMeßzahlen für Bauleistungs preise und Preisindizesfür Bauwerbe - (subject matter series 17, series 4)(Index Numbers of Prices for Construction Work

96

Categories and Price Indices for Buildings andother Constructions).

The methodology is further detailed in ZurNeuberechnung der Baupreisindizes auf Basis 1991in Wirtschaft und Statistik 1/1191, p.21ff. (Newcomputation of the building price indices with base1991).

97

GREECE

Resume

The National Statistical Service of Greece (NSSG)has calculated a price index of work categories forthe construction of new residential buildingssince 1980. This index is compiled using thecomponent cost method.

A price index of cost elements covering materials,labour, and other expenditures is also calculated.This is described in this publication under InputPrice Indices.


NSSG - National Statistical Service of Greece14-16 Lycourgou StreetGR-10166 ATHENS


Tel: (+30) 1 32 43 669 / 32 89 509

Fax: (+30) 1 32 23 159


The prices are collected from constructionenterprises and contractors.


The activities related to the construction of newresidential buildings are covered by reference to aclassification of type of works categories in 19headings.


The indices refer only to buildings constructed inthe Greater Athens area which is considered to berepresentative of all urban areas in Greece.


The prices paid for the individual works whichcomprise the index of work categories of new

residential buildings refer to the prices actually paidto subcontractors, and which usually coverexpenditures for materials, labour, depreciation offixed assets, and profit.

Payment agreements for the construction of severalsections of the building are made according to typeof work categories. Prices refer to the constructionwork categories, e.g. square or cubic metres, pricesof work, etc. according to the kind of work.

Sources of data

Data are collected through statistical surveysconducted by means of telephone enquiries andindividual visits.

Reporting units are sampled according to thevolume and the value of their transactions.


The data collected refer to prices agreed during thequarter in review.


The weighting coefficients were obtained from ananalysis of the accounting records of 150 buildingenterprises for the period 1988 to 1990.


The index is calculated quarterly according to aLaspeyres formula.

The base year is currently 1990.

Use(s) of the index

The index is used for statistical purposes such asdeflation of national accounts.

98

Publications

Indices are published in the Monthly StatisticalBulletin, the Statistical Yearbook of Greece, and inthe Concise Statistical Yearbook.

99

LUXEMBOURG

Resume

The Statistical Office of Luxembourg (STATEC)has calculated twice yearly price indices for theconstruction of residential and semi-residentialbuildings since 1972.

The indices are compiled using the component costmethod.


STATECDépartement des statistiques de court terme6, Bd. RoyalBP 304L - 2013 LUXEMBOURG


Tel: (+352) 47 84 244

Fax: (+352) 46 42 89


Reporting unit: The information is obtained fromkind of activity units or enterprises from all tradesparticipating in construction activity.

Observation unit: Prices are collected for standardcategories of building covering all types of worksinvolved in the construction of residential or semi-residential buildings.

These categories of building operations are roughlydefined by the STATEC. Each reporting unit thenamends these definitions according to the detailscorresponding to the building techniques theenterprise generally use. These specificationsallow for clear identification of the buildingoperations priced period after period.


The construction price indices cover theconstruction of new residential and semi-residential

buildings. NACE Rev.1 groups 45.1 to 45.4 arepartially covered in this respect.

Two types of classifications are used to compile theconstruction price indices: a classification by typeof building, and a nomenclature of standardcategories of building operations. The standardbuildings are classified as follows:

TYPE A

• Single family detached house• Built according to individual plans• Standard built (turnkey house)• Single family house in rows• Built according to individual plans• Standard built (turnkey house)• Multi-dwelling houses with less than 6 levels

TYPE B

• Multi dwelling houses with 6 or more levels• Semi-residential buildings• Mainly residential• Mainly non-residential

The nomenclature of standard categories ofbuilding operations is a 4-digit classificationincluding site preparation, main building works,building installation and building completion.


The index relates to the whole area of Luxembourg(country).


The indices show the evolution of prices of newlybuilt residential and semi-residential buildings.The price includes all factor prices, as well asmargins and productivity changes. The methodused to calculate the index is based on theobservation of real prices of standard categories ofbuilding operations.

100

Sources of data

Data are obtained through a sample survey of thebuilding sector.

The prices are obtained from the reportingenterprises using questionnaires. During an initialmeeting with STATEC agents, the enterpriseprecisely defines the standard categories of buildingoperations it will report over the next 10 years.

Price changes due to quality changes in thestandard operation are eliminated. The price isestimated by the respondent where a category ofoperation is provided for one or two periods in aform that does not correspond to its definition.

Where the specification of a standard categorychanges dramatically, the definition is modifiedaccordingly and the new corresponding series arestatistically linked to the former one.

When an enterprise in sample disappears it isreplaced by another which conducts activities asnear as possible to former standard categories ofbuilding operations.

The sample comprises 200 enterprises selectedaccording to their main activity and size.


The index is compiled using the component costmethod. A basket of 140 standard categories ofbuilding operations is defined and each reportingunit is asked to provide the real price received foreach of the standard operations performed in thelast six months. Each standard category of buildingoperation is weighted according to its importance inthe total cost of a typical building in order tocalculate a global index.


A basic index is calculated for each standardcategory of building operation that is weightedaccording to their respective importance to the totalcost of a standard building. These weights areobtained every 10 years from a general survey ofarchitects, building contractors, and real estatedevelopers.


The indices are compiled according to theLaspeyres formula every 6 months (in April andOctober).

The base year is currently 1990. It is renewedevery 10 years.

Use(s) of the index

The indices are used as an economic indicator, adeflator for national accounts, and as a benchmarkfor fire insurance contracts, and building andselling contracts in the construction sector.

Publications

The indices are released in the publicationIndicateurs rapides - Série A2, under the title Bi-yearly Indices of Construction Prices (Residentialand Semi-residential Buildings).

A methodological note on the construction priceindex was published in Bulletin du STATEC 1991No.5 under the title “Méthodologie - Le passage àla base 1990” (Methodology - the change to thebase year 1990).

101

NETHERLANDS

Resume

Statistics Netherlands (the CBS) has calculated thePINB indices, a system of yearly construction priceindices for residential buildings of the social rentedsector, since 1964.

These indices were compiled using the componentcost method based on a detailed analysis of theconstruction plans collected within the frameworkof cost-quality evaluation procedures used forpublic housing policy formulation (e.g. thecalculation of subsidies).

The relevant data for these evaluations werecollected by the Dutch Ministry of Public Housing,Planning and Environment, and were madeavailable to the CBS.

Responsibility for public housing policy wasrecently transferred to the municipalities and therequired data are now no longer available at thenational level. As a result the CBS decided tocollect the data for its own needs and to calculatethe index using an hedonic price index method.This method is based on a econometric model inwhich variables correspond to the different pricecomponents observed in the costs-qualityevaluation procedures involved by the PINBsystem. The aim of the revised method is to avoidcostly and time consuming evaluation procedures.

Both methods are described below.


Central Bureau voor de Statiestiek/StatisticsNetherlandsPrinses Beatrixlaan, 428Postbus 959NL-2270 AZ VOORBURG


Tel: (+31) 70 337 5522

Fax: (+31) 70 3877 429


Data for the PINB were collected by the DutchMinistry of Public Housing, Planning andEnvironment. The index was compiled by theCBS.

The hedonic price index system set up by the CBS,and which relies on data collected by the CBS, wasestablished from the beginning of 1995.


PINB: Uses a reference population comprisinghouses or buildings with two or more dwellingsbuilt during the reference period in the social rentedsector. The required statistical information isobtained through use of building plans andfinancial documents related to the buildingcontract.

Hedonic price index: Uses the same referencepopulation, but covers the whole low rentresidential building sector.


PINB: Covers only new residential buildings forthe social rented sector, excluding activities linkedto repair and maintenance. Within this range themethods used to compile the indices rely onclassifications specific to the construction sectorsuch as, by type of works, and by type ofcomponent of a standard building. In terms ofactivities, it does not cover the site preparation(NACE Rev.1 45.1), and repair and maintenance.The coverage falls partly under NACE Rev.1groups 45.2, 45.3 & 45.4.

Hedonic price index: The coverage of the hedonicprice index was extended to the entire low rentresidential building construction sector.

102


PINB: One of the criteria used to weight the partialindices used in the composition of the PINB indexis the region (North, East, South, and West).

Hedonic price index: Also uses regions as one ofthe specification components of the econometricmodel used in this price index method.

The total area covered is the Netherlands.


PINB: Shows the evolution of the price of theresidential building construction output in the socialrented sector. The PINB is constructed byweighting partial price indices corresponding to anumber of residential building plans. The partialprice indices used in the compilation of the PINBindex are weighted according to the number ofdwellings in the buildings, and by region.

Wages for architects or quantity surveyors are notincluded in the prices collected.

Sources of data

PINB: Uses data collected through financial andtechnical files collected by the Ministry of PublicHousing, Planning and Environment.

Hedonic price index: Uses price index datacollected by the CBS. The index is based on anexhaustive survey of the reference population.


PINB: The partial indices used to compile thePINB result from detailed cost-quality evaluationprocedures delegated by the Ministry of PublicHousing to external certified experts. Theprocedures consist of filtering out the pure pricechange of residential building construction bymatching a theoretical reference price with the realprice observed. Two kinds of prices are available:

• the gross amount specified on the contract forthe construction of a residential buildingselected in the sample; and

• the basic costs of a standard designcorresponding to the building constructed.

The gross contract amount is reduced to CBSbuilding costs (approximately 85 per cent of thegross amount) by deducting:

• excessive costs for setting up building sites (1-3 per cent, depending on the region);

• costs for special facilities not included in thestandard plan [central heating (5 per cent),sound damping installation (0.2 per cent), orother (1.5 per cent)]; and

• costs pertaining to above standard designquality (6-8 per cent).

The basic costs of the standard design are grossedup to obtain the reference costs by adjusting theprice according to:

• the size (in cubic metres) and type of building(single or multi-family buildings);

• the depth and type of foundations (importantcharacteristic depending on the type of soil,including one specific to certain regions ofNetherlands where piles are necessary); and

• (dis)economies of scale depending on the size,type, design, and number of dwellings in thebuilding.

The partial index is the ratio of the building costs tothe reference costs.

Hedonic price index: Is based on observed realseries over the period 1980 to 1991, and the factthat the share of each of the price componentsdescribed above has either a stable or "explainable"evolution that can be modelled by relating it toobservable variables. These variables correspondto the characteristics of the building plans (grosscontract amount, size in cubic meters, number ofstoreys in the building, number of building blocks,number of dwellings, foundation depth, etc.).

103


PINB: The partial indices entering in thecomposition of the PINB are weighted according toseveral criteria:

• size of the building in cubic metres;

• type of building (single or multiple dwellingsbuildings);

• number of dwellings in the building; and

• region.


PINB: Is compiled monthly according to theLaspeyres formula.

Hedonic price index: Is the result of an hedonicregression calculated monthly.

The base year for both indices is 1995.

Use(s) of the index

The PINB was used in the national accounts todeflate the value of construction output for newresidential buildings, and the gross domestic fixedcapital formation in residential construction.

This system relied on the fact that social housingonce represented a large part of new residentialbuilding construction. However, this share hasgradually decreased over time to approximately25 per cent. This is the reason why the coverage ofthe hedonic price index (which replaced the PINB)was extended to the whole residential buildingsector.

Publications

Only one series is published corresponding to thelow rent residential housing.

The index is published in Price Indices for theOutput of New Residential Buildings.

104

NEW ZEALAND

Resume

Three construction price indices are calculated inNew Zealand: input price indices coveringintermediate consumption (i.e. current purchasesexcluding labour and capital expenditure); outputprice indices for the construction industry groupmeasuring changes in the prices of what isproduced by businesses predominantly engaged inconstruction activities; and a capital goods priceindex which measures price movements inproductive capital assets purchased by NewZealand industries.

The methodologies for the output price indices forthe construction industry group, and the capitalgoods price index are described below. The inputprice indices are described in the this publicationunder Input Price Indices.


Statistics New ZealandPO Box 2922Wellington


Tel: (+644) 495 4600

Fax: (+644) 495 4617


Output price indices for the construction industrygroup: Measures movements in the prices of whatis produced by businesses predominantly engagedin construction activities. All activities of theconstruction group are covered in these indices,including non-characteristic activities. Forexample, if a building company operates a quarryor a freight service and does not keep separateaccounts for these activities they are included in theconstruction indices. Similarly, all work bybusinesses not predominantly classified to theconstruction industry are excluded.

New work, repair/renovation work andsubcontracting work are included. Intra-industrytransactions are not netted out.

Capital goods price index: Covers the full range ofconstruction activity where industries, includingcentral and local government, are the purchaser.The index includes alterations and additions tobuildings. Repair work is excluded as this isnormally regarded as a current expense. Dwellingspurchased for the household sector are excluded.


Output price indices for the construction industrygroup: Includes all those items normally built intothe price paid by purchaser of the building to thebuilder. These include materials, labour,equipment hire, land preparation costs, permits,bathroom, kitchen and outside fittings, professionalfees (in some cases), overheads, profits and trademargins.

Value added tax is not included in the prices usedin calculation of the indices. Due to practicaldifficulties the figures are not net of discounts.

Capital goods price index: Measures pricemovements in produced capital assets purchased byNew Zealand industries. It includes a sub-index forbuildings and other construction. This representsfinished work, but due to practical difficulties mostof the pricing is done from specific and generalisedmodels (refer below) rather than by using data onactual finished constructions.

The range of elements included in these modelsvaries according to the nature of the goodspurchased. Though not necessarily identifiedseparately in the prices for capital goods purchased,the main components are materials, labour,equipment hire, land preparation costs, fittings,trade margins, overheads and profits, withexpenditure on permits and professional fees onlyincluded in some cases, since they are oftencovered by the purchaser rather than the builder.

Taxes are not included in the prices used incalculation of the indices. Due to practicaldifficulties the figures are not net of discounts.

105

Sources of data

Output price indices for the construction industrygroup: Uses data obtained from a variety ofsources. Construction and other enterprises are amajor direct source, while some data collected inthe first instance for use elsewhere in the producersprice index are also used for the construction index.Use is also made of the publication New ZealandBuilding Economist, which gives regional estimatedprices for installed work.

Capital goods price index: Data used in thecompilation of this index are obtained from avariety of sources, normally via a postalcommodity price survey of construction and otherenterprises. These data are often used in a numberof price indices. Extensive use is also made of thepublication New Zealand Building Economist.


A number of models and projects are used in thecompilation of both types of output indices. Threeapproaches are taken.

A range of 18 models, derived from schedules ofquantities, is repriced each quarter. These modelsspan a wide field, from school and office buildings,to factories, sheds, and a church. Prices forinstalled work are used together with somematerial, labour and plant prices.

More generalised models are used for a range ofdisparate project types, ranging from road andrailway construction, water and gas supply, to carpark and power line construction, and irrigationschemes. For these most pricing is carried out atthe work phase level, e.g. earthworks, metalling,sealing or at the materials/labour/plant level.

Output prices for complete jobs are collected for asmaller number of more easily defined projects,such as well drilling and swimming poolconstruction.

The list of models and projects used is reviewed atapproximately ten-yearly intervals. The projectsthemselves have mostly not been revised since theearly 1980s.


The price indices for the various projects that arepriced are combined using weights based primarilyon the 1984/85 Census of Building andConstruction.


The Laspeyres formula is used for both types ofindices.

The indices are calculated quarterly using thefourth quarter of 1989 as a base. For publication,however, the indices are spliced to the standardProducers Price Index expression base of the fourthquarter of 1982 (taken as equal to 1000).

Publications

The index results are published in a variety ofoutlets including the monthly bulletin KeyStatistics, the quarterly information release Hot OffThe Press, and through the on-line system INFOS.

In addition to these outputs indices, details of wagerate movements for the construction industry groupare published in the Labour Cost Index.

106

NORWAY

Resume

Statistics Norway has calculated a quarterlyconstruction price index for detached houses (onedwelling building) since 1990. The index iscalculated using an hedonic method using multipleregression techniques, and computed according to aPaasche year to year chained formula.

Statistics Norway also calculates monthlyconstruction cost indices for residential buildingsand quarterly construction cost indices for civilengineering works. These are described in thispublication under Input Price Indices.


Statistics NorwayDivision for Construction and Service StatisticsP.O.B. 1260N-2201 Kongsvinger


Tel: (+47) 62 88 54 64

Fax: (+47) 62 88 54 62


The price index is currently financed by theAssociation of Norwegian Insurance Companies,and is used to regulate the estimated value ofresidential buildings.

Statistics Norway is responsible for the calculationand publication of the index.


The reference population is all detached housescompleted in the reference period. Detachedhouses with less than 50 square metres, or morethan 450 square metres of useful floor space are notincluded. Detached houses with unusually high orlow building costs are also excluded.


The price index only covers new detached houses.In the last five years, approximately 35-40 per centof residential dwellings completed were detachedhouses.

In terms of NACE Rev.1, groups 45.1, 45.2, 45.3and 45.4 are partly covered, but no breakdown byactivity is available.


One of the variables used in the multiple regressionis geographic location. This distinguishes betweenZone 1 (covering Oslo, part of Akershus, Nordland,Troms and Finmark (which is given a heavyweight)), and the rest of the country treated with adummy variable.

The geographic area covered by the referencepopulation is the whole Norway.


The price index does not include site value, or suchcosts as, connection to road, water and sewerservices, duties and administrative fees, and intereston building loans.

The VAT is included in the price calculation.

The variables used in the regression analysiscorrespond to characteristics that influence theprice of detached houses. These comprise: usefulfloor space, number of rooms, number ofbathrooms, number of WCs, number of fireplaces,different types of self-built works, category ofhousing loan, ground site quality, ventilation andheating systems, sauna, roofing, geographiclocation, terrace, central vacuum cleaner.

Sources of data

The data for computing the price index are obtainedfrom two different sources: the Ground Property,Address and Building Register (GAB), and aquarterly survey.

107

The administrative register (GAB) containsinformation on all ground properties, addresses andbuildings in Norway.

The municipalities currently provide the necessaryinformation for the GAB based on data supplied bythe responsible client and authorities.

The GAB provides information on dwellingscompleted during the reference period, and detailsabout the final owner of the building. In addition,the register contains information on classificationand quality variables such as, the type of building,location, useful floor space, and qualitycharacteristics that may have an influence onprices.

A questionnaire is distributed quarterly to allinvestors (final owners) of new detached houses(about 1 500 to 2 000 every quarter in 1995).


For the quarterly survey, Statistics Norway requeststrue prices and several quality characteristics.Approximately 65 per cent of the populationcomplete the questionnaire. Quality tests indicatethat there are no essential differences between thefinal sample and the population concerning thefloor space and the location of the houses.

Residential buildings (also detached dwellings)vary in size, type, interior and exterior quality, etc.A price index should not be affected by the fact thathouses built in different periods differ in quality. Inother words a method of “quality purifying” isrequired. To achieve this objective the so-calledhedonic method was applied.

This method is based on the hypothesis that thevalue of a product is dependant on its attributes andcharacteristics. Hedonic prices are defined as theimplicit value of a product’s attributes.

Assuming there are a sufficient number of newdetached dwellings sold on the open market, andthat the investors are acting rationally, the price of agiven dwelling can be related to its attributes, byusing a multiplicative regression model.

The quality of the index depends on the quality ofthe regression model. Two conditions are

important: which variables you choose to include inthe model, and how the model is specified.

Statistics Norway uses a linear regression equation,with price (P) per square metre as the dependentvariable. With X1,........,Xn as n numerical qualityand classification variables, the linear regressionmodel takes the form:

P b b X b Xt t t t nt nt t

t

= + + + +=

0 1 1 ... εε error term

A reason for selecting the price per square metre asdependent variable, instead of the price perdwelling, was the problem of heteroscedasticity.Price variations were found to increase with thesize of the dwelling. Floor space had the greatestinfluence on the variation in house prices.

The relation between the price per square metre andfloor space was not found to be linear. Thelogarithm of floor space gave an approximate linearrelation, and less variance for the estimatedcoefficient.

Most variables in the equation are dummy variablesor classification variables. Some variables are notdirectly linked with the quality standards of thehouses but to some extent influence the variationsin prices. These are factors such as location,category of housing loans, the extent of “selfbuilding” work undertaken by the investor, etc.These variables are treated as dummy variables.


Parameter estimates are based on 6 600observations from 1993 and 1994.


The price index is computed according to thePaasche formula as a chain index with annual links.This model has computational advantages over theLaspeyres formula because the coefficient b needonly to be calculated once a year for the baseperiod.

Observations from both the base year and the yearbefore are used in the regression analysis to obtain

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more confident and stable estimates of the hedonicprice functions. The price elasticities b1.....bk areassumed to be constant for that period of time.

The base year used for the calculation of the indexis 1990=100.

Data are collected, and the index is compiledquarterly.

Publications

The indices are published according to a detailedbreakdown by types of work in the monthlyconstruction statistics review Bygginfo.

109

SWEDEN

Resume

The Swedish Statistical Office (SCB) calculates aquarterly building price index for new residentialbuildings using an hedonic price methodology.The index is computed according to a Paasche yearto year chained formula. The evaluation of pricesis carried out by multiple regression that takesaccount of the heterogeneous impacts of qualityattributes of the houses on prices.

The SCB also calculates a factor price index for theconstruction industry. The methodology for thisindex is described in this publication under InputPrice Indices.


Statistiska Centralbyrån SCB (Statistics Sweden)Karlavägen, 100Box 24 300S - 115 81 STOCKHOLM


Tel: (+46) 8 783 47 86

Fax: (+46) 8 783 49 05


The survey unit is a government aid loan for newconstruction where the average useful floor spaceof dwellings is at least 45 square metres or, wherethe residential primary useful floor space is equal ormore than twice the total of non-residential usefulfloor space, plus accessory space.


The building price index covers two categories ofnew residential buildings: collectively built one ortwo-dwelling buildings, and multi-dwellingbuildings.

Privately financed multi-dwelling buildings (1 percent of the total), and new dwellings located in

mainly non-residential buildings (also 1 per cent ofthe total) are not covered by the index.

One or two-dwelling buildings built withoutgovernment aid as well as those financed by agovernment loan, but individually built (as opposedto collectively) are also not covered by the index.

The index covers 40-65 per cent of one or twodwelling buildings.

NACE Rev.1 groups 45.1, 45.2, 45.3 and 45.4 arepartly covered, but no breakdown by activity isavailable.


The building price index is calculated for the wholeSweden.


The prices used to compile the building price indexcorrespond to the building prices prevailing at thetime of construction, including costs of groundpreparation, primary planning, and VAT.

A wide range of items are covered in thecalculation of the index. These include the cost ofmaterials (including transport to site); the cost oflabour; the cost of permits; the cost of hire; landpreparation costs (excluding purchase); installationcosts for gas, electricity and telephone (excludingconnection fees for water); internal and externalfittings; professional fees; interest payable onloans; trade margins, overheads and profits.

Sources of data

The data used to compile the price index areobtained from investors, and from applicationforms submitted to government authorities toobtain housing aid for new construction.

This information has been recorded on magnetictapes by Statistics Sweden since 1968 (IDLA-project). The information stored relates to pricesand quality characteristics on the stock of houses,as well as structural variables that influence prices.

110

At the moment, as the reference population islimited, data collection is based on an exhaustivesurvey. When it exceeds 500 individuals for eachtype of building the SCB plans to use a stratifiedsample.


The building price index is an hedonic indexcomputed on the basis of a regression analysis.The variables used are those that explain thevariation in the building prices of differentcategories of buildings.

The building prices used in the regressioncalculations are expressed in terms of price persquare metre of primary useful floor area(dependent variable).

The regression analysis is based on two sets ofexplanatory variables that are expressed in a similarway.

The first group corresponds to estimated averagesof quality characteristics that influence the price ofa building, and assumes that the market prices ofnewly built buildings are strongly correlated withthese quality characteristics. The variablescorrespond to weighted averages of the values ofseveral kinds of equipment and enclosed areas ofwalls and roofs. The estimates are derived fromcalculations of the mortgage value of houses, andare provided by the National Housing Board.

The second group corresponds to structuralcharacteristics that influence the building price,such as geographic location, type of building, theinvestor’s category, and the size of the project.


The building price index is compiled monthlyaccording to a year to year chained Paascheformula.

The base year is the preceding year.

Use(s) of the index

The index is used for deflation, national accounts,and the consumer price index. It is also used foranalysis purposes. The change in productivity andprofits can be estimated by comparing the buildingprice index and the factor price index.

Publications

Separate indices are published for multi-dwellingbuildings, and for collectively built one or twodwelling buildings.

The index is released in the monthly publicationByggindex.

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UNITED KINGDOM

Resume

The Department of Environment in the UnitedKingdom produces a range of price indices relatingto:

• Public sector house building,• Public sector non house building, and• Road construction price (new and renovation).

In addition, the Royal Institute of CharteredSurveyors calculates and disseminates quarterlycommercial and industrial building indices.

On the basis of these indicators, and new ordersdata, the DOE derives composite output priceindices for the construction sector.

All indices are compiled on the basis of theschedule of prices methodology, except for thepublic sector housebuilding price index compiledusing the component cost method.

Several input construction price indices are alsocompiled for Great Britain. These are described inthis publication under Input Price Indices.


Department of Environment (DOE)Construction Market Intelligence Division2 Marsham StreetLONDON SW1P 3EB


Tel: (+44) 1 71 276 47 51

Fax : (+44) 1 71 276 38 26


The commercial and industrial building priceindices are compiled and disseminated by the RoyalInstitute of Chartered Surveyors.


The reference population is defined in terms ofbuilding projects for which the DOE collects thesuccessful tender prices.

The prices correspond to the price offer made by acontractor to take charge of a project. It coversmaterials (including their transport to the site),labour, equipment hire, land preparation costs,building permits, installation of gas, electricity andwater, installations and completion, professionalfees (architects, engineers and solicitors), intereston loans, trade margins, overheads and profits.


Tender price indices: Different tender price indicesare calculated according to the type of buildingcovered. The following breakdown is used:

• Public Sector buildings:⋅ New housing (dwellings in blocks of up to 4

storeys)⋅ New non-housing (schools, hospitals,

prisons, courts, etc.)

• Private Sector buildings:⋅ New Commercial buildings⋅ New Industrial buildings

• New Road construction

The price indices described here are all based onthe collection of prices obtained from bills ofquantities attached to one construction project. Thebill of quantities details the work to be done initems or services corresponding to type ofconstruction work categories.

A list of well-defined items is proposed in thesurvey form used for the public sector housebuilding price index. Each of these items isselected to represent all the work in a particulartrade section:

The other tender price indices do not use a pre-defined list due to the greater diversity of work inthese types of construction.

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Output price indices: Separate output price indicesare calculated for each of the following:

• New housing:⋅ Public housing⋅ Private housing

• Other new work:⋅ Infrastructure⋅ Public non-housing building⋅ Private industrial⋅ Private commercial

• All new construction.

The price indices cover the main building activities,as well as installations and completion. It does notcover repair and maintenance, alterations andextensions.

The indices follow the same breakdown by type ofconstruction work as the orders received data.

NB: The infrastructure series are estimated on thebasis of the road construction tender prices (75 percent), and the tender prices for industrial buildings(25 per cent). The prices for other types ofinfrastructure (bridges, sports fields, tunnels, airfields, etc.) are not directly measured.


Tender price indices: The scope of the publicsector housebuilding tender price index is limited toEngland and Wales. The public sector non-housingbuilding, and the road construction tender priceindices cover England, Scotland and Wales, but notNorthern Ireland. The commercial and industrialbuildings tender price indices cover the wholeUnited Kingdom.

Output price indices: Cover the same geographicarea as the tender price indices from which they arederived.


Tender price indices

Public sector housebuilding price index: Providesa measure of the change in tender prices based onthe bill of quantities for the successful tenders for

dwellings in blocks of up to four storeys built bytraditional methods.

Public sector non-housing price index: Measuresthe movement of prices in competitive tenders forbuilding contracts in the public sector.

Road construction price index: Provides a measureof the change in tender prices based on the bill ofquantities of the winning tenders for new contractswith a work cost of £1m or more.

Output price indices

Output price indices measure inflation in the totalamount of a particular type of construction beingcarried out during the reference quarter.

Sources of data

Depending on the index, data are obtained fromdifferent sources:


Public sector housebuilding price index: The datacorrespond to prices listed in successful tenders forall schemes undertaken for local authorities, andHousing Associations in England and Wales.

Public sector non-house building price index: Themain data sources are the Ministry of Defence,Scottish Development Department, Department ofHealth, Department of Social Security, HomeOffice, and Department for Education.

Road construction tender price index: Uses dataobtained from authorities in charge of the differentkinds of road construction. These include theEnglish Department of Transport, the Scottish andthe Welsh Offices, county councils, metropolitandistricts and London boroughs.

Commercial and industrial building tender priceindex: Uses data obtained from the members of theRoyal Institute of Chartered Surveyors.

113


Output price indices are derived from the tenderprice indices mentioned above, and from the neworders indices also compiled by the DOE.


Tender price indices: Are calculated by analysingbills of quantities, one for each construction projectconsidered. These provide for each item or service(building operations covered by the contract) thecontribution (in £s) this operation provides to thetotal value of the contract. The sum of thesecontributions equals the total tender price of theproject.

These values are converted into quantities and ratesto obtain quantifiable items. The rate in £s per unitquantity, for the index base year, is known from aseparate exhaustive study carried out in the baseyear. Thus, for each item in the bill of quantitiesthe actual price and a hypothetical base year priceare available.

A Paasche index is then calculated for each projectby taking the quotient of the sum for allquantifiable items in the bill of quantities of theactual prices and the sum for the same items of thehypothetical base year price. These project indicesare then combined and various smoothingtechniques are applied to obtain the publishedtender price index.

The details of the method for each index aredescribed below.

Output price indices: Are derived from tenderprice indices, and are used as deflators to convertcontractors output of new construction work fromcurrent prices to constant prices.

Output of new construction work in a quarter ismade up of work done on contracts let during orbefore that quarter. The deflator can be constructedfrom the value and volume of orders placed inprevious quarters once adjustments have been madeto tender prices for changes in materials and labourcosts for which reimbursement is allowed under“variation of price” clauses.

The value of orders placed in a given quarter usedto estimate the value of output is obtained from thestatistics on orders.

The volume of orders is obtained by deflating thevalue of orders placed in one quarter by the tenderprice index of this quarter.

The output price index corresponds to the quotientof the value at current price of the work done inquarter T on the basis of contracts placed inquarter T, and in preceding quarters, and thevolume of the same work done.

For construction types such as private housing, orvarious forms of repair and maintenance work, forwhich the Government has no tender price indicesto employ, a mix of material cost indices, andlabour cost indices is used instead.

The output price index for private housing iscompiled using the method described above with aproxy-tender price index calculated on the basis of:

• house prices at mortgage approval stage (50%of the index);

• house building costs of materials (25%);

• house building labour cost (25%), comprising:

⋅ 56% of skilled labour,⋅ 29% of unskilled labour,⋅ 8% of labour on heating and ventilation,⋅ 7% of labour on electrical work.

The output price series for infrastructure are basedon the road construction tender price index (for75 per cent), and the tender price for industrialbuilding (for 25 per cent).



Public sector housebuilding price index: Is basedon the pricing of 21 well defined items selected torepresent all the work in a particular trade section.Price movements of work in a trade section areassumed to be broadly similar to those of therepresentative item.

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The index is compiled as a Laspeyres price index inwhich a weighted arithmetic average of the pricerelatives is taken for the 21 items for the currentquarter in relation to the base year. This method isclose to the concept of the standard componentmethod.

Public sector non-house building price index: Anindex is calculated for each project surveyed byrepricing projects at base year rates. Each contractis broken down into disjoint sub-sections, and itemsamounting to 25 per cent by value are costed withineach sub-section. The base period prices are takenfrom the Schedule of Rates, a document publishedevery five years.

The quarterly index is calculated from all theproject indices according to the Paasche formula.A simple three point moving average is applied tomedian values estimated from the project indicesfor three quarters centred on the reference quarter.

The use of the Paasche formula, rather than theLaspeyres formula as in the housing index, reflectsthe much greater diversity in these non-housingprojects. This method is close to the concept of aschedule of price method.

Road construction tender price index: Entails thecalculation of individual project indices accordingto the Paasche formula. All items included in thebill of quantities are costed for each project. Thesenumber around 2 000 items taken across allprojects. The base period prices are taken from theSchedule of Rates, a document published every fiveyears.

For each quarter, the individual project indices forthat quarter, and the 11 past quarters are used tocalculate adjustment factors by type of work, sizeof contract, and region of country. Quarterlymedians are obtained from the individual projectindices. The medians are transformed (tonormality) after being divided by the public sectornon-housing price index. The resultant series issmoothed using a Kalman filter, the transformationis reversed and the result multiplied by the publicSector non-housing index to obtain the publishedindex.

This method is close to the concept of schedule ofprice method.

Commercial and industrial building tender priceindex: Is calculated on the basis of a Paascheformula according to a method similar to that usedfor the public sector non-house building priceindex.


The type of index used is described above under“Method of compilation”.

All indices are expressed in base 100=1990.

The following price indices are compiled quarterly:

• Public sector housebuilding tender price index

• Public sector non-house building tender priceindex

• Road construction tender price index

• All output price indices.

The commercial and industrial tender price indicesare calculated monthly.

Use(s) of the index

Tender price indices are used to calculate the outputprice indices.

The output price indices are used to deflate thecontractors’ output of new construction work fromcurrent prices to constant prices.

Publications

The public sector housebuilding tender price index,the public sector non-housing building tender priceindex, and the road construction tender price indexare published quarterly and annually in:

• Housing and Construction Statistics (DOE);

• through a quarterly subscription service; and

• Quarterly Building Price and Cost Indices(Building Research Establishment).

In addition, for the public sector non-housingbuilding tender price index, separate indices arepublished by type of contract, fixed price andvariation of price contracts, and all-in contracts.

115

Separate adjustment factors are also published for36 areas of Great Britain, as well as for 21 differenttypes of building.

The commercial and industrial buildings tenderprice indices are published together, and as separateseries in the monthly bulletin of the RoyalInstitute’s Building Cost Information Service.

116

UNITED STATES

Resume

In the United States a variety of cost and priceindices are calculated for the construction sector bypublic and private sector agencies.

Two output construction price indices are compiled.These cover highway construction, and large projectssuch as dams and power plants.

A seller’s price index for new one family houses isalso compiled. This is described in this publicationunder Seller’s Price Indices.

Organisations responsible for index

Federal Highway Administration400 Seventh Street S.W.Washington D.C. 20590

Bureau of ReclamationUS Department of InteriorDenver, Colorado


Federal Highway Administration

Tel: (+202) 366 4636

Bureau of Reclamation

Tel: (+303) 236 6924


Highway construction price index: Shows the pricetrends for Federal-aid highway construction in theUnited States, and represents the current purchasingpower of the Federal-aid construction dollar asmeasured by six indicator items. The index covershighways, roads and bridges projects with value overUSD1.0 million.

Cost index for large projects: Measures constructioncost trends for large projects such as dams and powerplants.


Highway construction price index: Covers totalUnited States.

Cost index for large projects: The indices reflectsthe Bureau of Reclamation’s cost of constructingdams and reclamation projects in eleven westernstates.


Highway construction price index: This index isbased on bid prices submitted by contractors at thetime of award of the contract. Elements included inthe bid prices are materials (including the cost oftransportation to the site), labour, equipment hire,land preparation costs, overheads and profits. No taxelement is included in the prices, though they doreflect discounts where these are available.

Cost index for large projects: Is calculated as aweighted average of labour, material and equipmentcosts based on unit costs from contracts let.Elements included in the index are materials(including the cost of their transportation to the site),labour, equipment hire, land purchase costs, the costof permits, overheads and profits. Taxes anddiscounts are reflected in the unit prices collected.

Sources of data

Highway construction price index: The data areprovided by the State Highway Agencies, which areresponsible for the highway construction program.About 1 500 executed contracts are sampledannually.

Cost index for large projects: The data used in thecompilation of the index are obtained from varioussources, including directly from constructionenterprises, from producer price index data sources,and from components of the Federal price index forhighway construction.

Bid prices are obtained for common excavation,portland cement, concrete pavement, bituminousconcrete pavement, reinforced steel, structural steel,and structural concrete.

117

The labour costs data used are obtained from theU.S. Department of Labor, and are based on rates setin collective wage agreements. They include socialcontributions paid by employers.


Highway construction price index: The index iscompiled using data for each sampled project on thecost of six major indicator items (commonexcavation, Portland cement concrete surfaces,bituminous concrete surfaces, structural reinforcingsteel, structural steel , and structural concrete), whichtogether represent about a third of overall projectcost.

Average unit cost data for each item are then derived,and weighted together in calculation of the indexaccording to the Laspeyres formula. Data for 1987was used to determine the weights, on the basis ofsurvey information covering about 35 per cent ofoutput in this construction sector.

Cost index for large projects: The index iscalculated as a weighted average of costs based onunit prices. At the basic level calculations are carriedout for seven different types of heavy constructionproject. Unit costs are calculated for 10 to 300 itemsdepending on the nature of the project (e.g. dams,pumping plants, pipelines, etc.).

For the categories of reclamation work included inthe index (e.g. dams, pumping plants, canals, hydro-electric power plants, transmission lines, etc.) thebasic cost components have been defined andrelative weights for each of these componentsderived from contracts awarded.

All projects owned by the Bureau of Reclamation areexamined for index purposes.


Highway construction price index: The base foreach state is its own particular “market basket” ofquantities and costs during the base period. Thecomposite index for each state measures the changein that state’s index since the base year. The annualindex is a weighted average of the indicator items forthe composite index.

Cost index for large projects: What is essentially aLaspeyres methodology is used, with the weights andthe types of project that are analysed being reviewedand adjusted periodically by the U.S. Bureau ofReclamation to take account of changes inconstruction technique, labour efficiencies andlabour and material inputs.


Both indices are calculated quarterly according to theLaspeyres formula.

The highway construction price index has referencebase 1987=100, and the cost index for large projectshas reference base 1977=100.

Use(s) of index

The indices calculated by Federal agencies are usedas deflators of monthly data on the value ofconstruction work done, for the purposes of theBureau of the Census publication Value of NewConstruction Put in Place (Current ConstructionReports (C30)).

Publications

Highway construction price index: The index resultsare published each quarter in Price Trends forFederal-Aid Highway Construction (Publication No.FHWA-PD-94-006). In addition to the aggregateresults, separate indices are published for six biditems relating to excavation, paving and structures.Composite index data are available for individualstates.

Cost index for large projects: The index results arepublished each quarter in Engineers News- Record.

118

SELLER’S CONSTRUCTION PRICE INDICES

CANADA

Resume

Seven construction price indices are calculated inCanada. These comprise two output, four input, andone seller’s price indices. The seller’s price indexdescribed below measures changes over time in thecontractors’ selling prices of new residential houses,where detailed specifications remain the samebetween two consecutive periods.

The input and output construction price indices aredescribed in this publication under Input PriceIndices and Output Price Indices.



Statistics CanadaJean Talon BuildingTunney’s PastureOttawa, OntarioCanada KIA OT6


Tel: (+613) 951 9615

Fax: (+613) 951 2848


The new housing index relates to actual completedconstructions of private houses. Flats are excluded,as well as condominiums, custom built and self-builthouses and rural housing. The index does notmeasure shelter costs and price changes for existinghouses.


Price information are collected monthly in20 metropolitan regions.


The prices measured are sale prices, based oncontracts, and therefore cover all the costs relating toconstruction of the property, including those for landpurchase and preparation, installation and fitting,architects' and engineers’ fees, interest paid bycontractors on loans, trade margins, overheads andprofits. Basic taxes are not included, nor are notaryfees, and real estate agents fees and commissions.However, a separate series including estimated goodsand service tax is available. Prices are net ofdiscounts.

Sources of data

About 230 residential building contractors aresurveyed each month. The builder providing the datais asked to give, as well as the total price, anestimated price for the land alone, so that thebuilding price can be estimated as a residual.

Interviewers (who also work on the consumer priceindex) meet the respondents at least quarterlyintervals to ensure that data quality is maintained.They also obtain background data on the localmarket conditions to evaluate the representativenessof the sample.


The prices are obtained for houses defined by a fixedspecification, i.e. matched models are used month-to-month. By its nature this index is self-weighting.

Prices collected relate to the 15th of the month or thenearest business date. The selling prices are adjustedfor any changes in quality of the structure and theserviced lot.


The sample of builders are given an equal weight inindex calculations as are the multiple price reports

119

any given builder might supply. Amongst the cities,weights are obtained from housing completion data.


The index is calculated monthly using a chainLaspeyres formula.

The index has base year 1986=100 (there are plans tochange this to 1992).

Use(s) of index

These indices are used for a variety of purposes, e.g.deflation of construction industry output, deflation ofexpenditures on gross fixed capital formation,contract escalation, and asset revaluation.

Publications

The index is published monthly in the Daily Bulletinand is available quarterly in Construction PriceStatistics (Cat. No. 62-007). City, regional andprovincial indices are available. Indices are availablefor the total selling price, and also for the structureand land elements separately. Output is available for20 cities in Canada.

120

SPAIN

Resume

The collection of data in the construction sector iscarried out by the Ministry of Civil EngineeringWorks (Ministerio de Fomento - formerlyMOPTMA: Ministerio de Obras Públicas,Transportes y Medio Ambiente). The average priceper square metre of dwellings aims to measurechanges over time in the average price of dwellingsusing information provided by Taxation Societies.


Ministerio de FomentoDirección General de Programación Económica yPresupuestariaPaseo de la Castellana, 67E- 28071 Madrid


Tel: (+34) 1 597 74 47

Fax: (+34) 1 597 85 24

Population of reference

The reference population is defined in terms ofprivately built dwellings valued at market prices.Dwellings receiving grants of any type from publicor private organisations, or whose values are limited,are excluded.

The reporting units are financial societies that haveaccess by law to the mortgage market.


Information only covers completed dwellings, anddoes not include dwellings built with the help of asubsidy (unless they can be sold at open marketprices), dwellings in non-residential buildings,communal residences, and dwellings not yetcompleted.

Geographical area covered

The indices cover all of Spain.

The NUTS II geographic classification is used.

Items included

The variable monitored is the average price persquare metre of dwellings. The price of the dwellingis the open market price as defined by the MinisterialOrder of 4 October 1985 (Orden del Ministerio deEconomía y Hacienda, fecha 4-X-1985).


The following information is collected in order tocompile the average price of the monitoreddwellings:

• date of the valuation

• constructed area (in square metres) of thedwellings

• dwelling price

• age of the dwelling

• postal code and name of the town council wherethe dwelling is built.

The constructed area is defined in the MinisterialOrder of 28 June 1989 (Orden del Ministerio deEconomía y Hacienda, fecha 28-VI-1989). It isdefined as the useful floor area of the dwelling (totalarea inside the external walls). The useful floor areaincludes also 50 per cent of the area of privateexternal spaces (e.g. balconies).

The age of the dwelling is computed from the date itwas completed or from the date of the last largeredevelopment.

The average price per square metre of dwellings iscross classified by the information from the postalcodes database (containing name of the municipality,number of inhabitants, Comunidad Autónoma, etc.)in order to produce results for each stratum:Comunidad Autónoma, geographic area,municipalities size, etc.

121

Type of index

For each dwelling an average price per square metreis calculated. These average prices are divided bythe number of dwellings in each post code to obtainan average price for each post code.

The average price for each town county is thencalculated using the weighted mean of the averageprices of the different post codes.

The average prices for the Comunidad Autonomaand for the whole country are obtained byaggregating the different town counties indices.

Method of weighting

The weights correspond to the number of inhabitantsof the town councils in which the dwellings arelocated. This information is obtained from the1992 Population Census.


Information required to calculate the average pricesare obtained from mortgage valuation files availablefrom financial societies that by law have access tothe mortgage market. The information is availableon tape and is collected quarterly. Prices obtainedare published in absolute values (pesetas).

Use(s) of the index

The information is used to monitor housing policy.

Publications

The average price per square metre of dwellings isavailable for different breakdowns such as:

• average price per size of "Comunidad Autónoma"(region level: NUTS II)

• average price per size of the municipality, ofdwellings less than one year old

• average price per size of the municipality, ofdwellings more than one year old

• average price per geographical situation of themunicipality (in the cost or inside the country)

• average price per homogeneous geographicalareas

• average price per age of the dwellings

The average price per square metre of dwellings ispublished quarterly by the Ministry of CivilEngineering Works (Ministerio de Fomento) inBoletín estadístico and annually in the monographPrecios medios del m2 de las viviendas.

The information is also available on floppy diskwhich includes historic information and software tomanipulate the data.

The methodology used to compile the average priceper square meter of dwellings was published in 1995in Boletín estadístico. Notas metodológicas (ISBN84-498-0077-3).

122

UNITED STATES

Resume

In the United States a variety of cost and priceindices are calculated for the construction sector bypublic and private sector agencies.

A seller’s price index for new one family houses iscompiled, and is described below.

Two output construction price indices are alsocompiled. These cover highway construction, andlarge projects such as dams and power plants.These are described in this publication underOutput Price Indices.


Bureau of the Census


Tel: (+1) 301 457 4597

Fax: (+1) 301 457 4583


This index is designed to measure changes overtime in the sales price of new one-family houseswhich are the same with respect to many importantphysical characteristics. The index is calculated bythe Bureau of the Census, and is based on thehedonic method, with prices for a sample of newprivately-built houses being regressed againstcharacteristics of those houses.


The price index covers the entire United States.


The prices used in this index are actual sale pricesof new houses, and as such cover all the elementsinvolved in their construction. The sales prices ofthe houses exclude taxes.

Sources of data

The sale price data, together with information onthe physical characteristics of the houses, areobtained from the Bureau’s Housing Sales Survey.The survey collects information on the physicalcharacteristics and the sales prices of new one-family houses sold. This is done through monthlyinterviews with the builders or owners of a nationalsample of these houses. About 15 000 houses areincluded in the sample annually.


The price index is derived using the hedonicmethod. Five separate models are used, one fordetached houses for each of four regions, and onefor attached houses in the country as a whole.

Each of these models is designed to measurechanges over time in the sales price of new one-family houses which are the same with respect tomany important physical characteristics. Sevencharacteristics are common to all these models:floor area, geographic division within region,whether inside a metropolitan statistical area,number of fireplaces, number of bathrooms, type ofparking facility, and type of foundation. Inaddition, some further characteristics are used thatare specific to individual models.

For each model the index is calculated by making aregression estimate of the logarithm of the salesprice against the relevant characteristics, each ofthe characteristics except floor area being expressedin terms of one or more binary variables.

To give the index for the United States as a wholethe indices calculated from the five models areweighted together using as weights the shares ofthe house types among total houses sold in 1992.


For most purposes a Paasche version of the index isused, but results calculated according to theLaspeyres formula are also available.

Reference base 1992=100.

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The index is calculated monthly, though thepublished results focus largely on quarterly figures.

Use(s) of index

The indices calculated by Federal agencies are usedas deflators of monthly data on the value ofconstruction work done, for the purposes of theBureau of the Census publication Value of NewConstruction Put in Place.

Publications

The index results are published each month inBureau of the Census reports C25, New One-familyHouses Sold, and C30 , Value of New ConstructionPut in Place. As well as aggregate figures, resultsare published by region, by sold/underconstruction, and by with/without land.

Detailed information on the computation of theindex is given in the fourth quarter 1990 issue ofC27, Price Index of New One-Family Houses Sold.

Regional data are available primarily for fourregions.

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SECTION 4. COUNTRY SUMMARY TABLES

Table 1. Construction Price Indices, OECD and European Union Member Countries

Main Data Sources Used

Table 1A. INPUT PRICE IndicesCountry Index Title Main Data Sources Used

Australia Civil Engineering PPIs; foreign trade indices; pay awards

Austria Housing and estate building costs index Industrial wholesale price index; wages survey;collective agreements

Cost index for road construction as aboveCost index for bridge construction as above

Belgium Composite construction price index National index of prices of domestic industrialproduction

Canada Residential/Non-residential building input costs PPIs; collective wage agreementsElectric utility construction price index Electric utility company purchase data; labour cost

survey of employersTelecommunications plant Purchase records of telecommunication companiesConstruction union wage rates Details of signed wage agreements from

construction association

Denmark Regulating price index for residential buildingconstruction

Cost surveyors; manufacturers

Regulating price indices for civil engineeringworks

PPIs; labour agreements; haulage contractors union

Finland Index of building costs Construction enterprises; PPIs; manufacturers;employer associations

Building renovation costs index as above

France Building construction sector indices (BT indices) Professional associations; manufacturers’ pricelists; government authorities

Price indices for civil engineering sector (TPindices)

as above


Materials suppliers; industry associations;construction contractors

Iceland Index for privately built apartments Building materials suppliers; price lists; collectivewage agreements; wage surveys

Ireland Housebuilding cost index Surveys of construction enterprisesWholesale prices index of materials Surveys of wholesalersCapital goods price index as above

Italy Costs index for a residential building Construction contractors associationsCost index for a building for industrial use Construction contractors associations; government

organisationsCost index for stretches of road Government organisations responsible for road

construction

Japan Construction price index Price lists of building materials, input-outputtables; collective wage agreements; employersurveys

Mexico Price index for social housing Survey of construction enterprises

New Zealand Input indices for the construction sector Construction enterprises; PPIs for materials, andregional estimated prices published by NewZealand. Building Economist

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Country Index Title Main Data Sources Used

Norway Cost indices for residential buildings Materials suppliersConstruction cost indices for civil engineeringworks

Existing indices; government agencies

Portugal Construction cost indices PPIs; Indices compiled by the Ministry ofQualification and Employment

Spain Construction cost index PPIs; provincial collective wage agreements

Sweden Factor price index for residential buildings Surveys of construction materials suppliers; currentcollective wage agreements

Factor price indices for repair and maintenance ofmulti-dwelling, and agricultural buildings

Investors; government aid application forms

Turkey Building construction cost index Surveys of construction enterprises and materialssuppliers

UnitedKingdom

Construction materials cost index Professional associations; PPIs

Construction industry price index of averageearnings

as above

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Table 1B. OUTPUT PRICE IndicesCountry Index Title Main Data Sources Used

Australia Construction and renovation of privately builthouses

Survey of project home builders; real estateorganisations


Materials suppliers; pay awards; government costindices

Austria Residential buildings price indices Building companiesOther building price indices Building companiesOutput price index for road construction Provincial construction departments; construction

companiesOutput price index for bridge construction as aboveOther civil engineering work as above

Canada Apartment building construction Survey of construction enterprises; PPIsNon-residential building construction price index as above

France Construction price indices for residential buildings(ICC)

Building permits; client financial and technicaldocuments

Germany Conventional construction price indices Surveys of construction contractorsStandard house price indices as above

Greece Work categories for the construction of newresidential buildings

Surveys of construction enterprises and contractors

Luxembourg Price index for the construction of residential andsemi residential building

Survey of construction enterprises

Netherlands Price indices for social rented housing Housing ministriesHedonic price index for the low rent residentialbuilding sector

as above

New Zealand Output index for the construction sector Construction enterprises; PPIs for materials andregional estimated prices published by N.Z.Building Economist

Capital goods price index for the constructionsector

as above

Norway Construction price index for detached houses Surveys of investors

Sweden Output price indices for houses and apartments Regression coefficients

Turkey Building construction cost index Surveys of construction enterprises and materialssuppliers

UnitedKingdom

Public sector housebuilding price index Local authorities; relevant ministries

Public sector non-housing price index as aboveRoad construction tender price index as aboveCommercial and industrial building tender priceindex

Professional associations

United States Price index for highway construction State highway agenciesCost index for large projects Surveys of construction enterprises; PPIs;

government agencies

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Table 1C. SELLER’S PRICE IndicesCountry Index Title Main Data Sources Used

Canada New housing price index Survey of residential building contractors

Spain Average prices of dwellings per square meters Local government agencies; financingorganisations

United States Price index for new one family houses Surveys of house builders and owners of newhouses

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Table 2. Construction Price Indices, OECD and European Union Member CountriesMethods for Deriving Weights

Table 2A. INPUT PRICE IndicesCountry Index Title Derivation of Weights

Australia Civil Engineering Information from government agencies on expenditure onmost significant expenditure items.

Austria Housing and estate building costs index Expenditure components of a number of representativeconstruction projects.

Cost index for road construction as aboveCost index for bridge construction as above

Belgium Composite construction price index Selection of items weighted on percentage of constructionsectors total inputs in 1980.

Canada Residential/Non-residential building inputcosts

Residential buildings based on survey of inputs forbuilding contractors. Non-residential buildings based onanalysis of input-output tables.

Electric utility construction price index Based on expenditure on utility construction over eightyear period.

Telecommunications plant Input expenditures based on annual surveys of carriers.

Denmark Regulating price index for residentialbuilding construction

Cost analysis of model residential building.

Regulating price indices for civilengineering works

Based on standard civil engineering projects.

Finland Index of building costs Derived from proportion of expenditure on five buildingtypes.

France Building construction sector indices (BTindices)

Weights of inputs based on proportion of total expenditureon building projects in base year.

Price indices for civil engineering sector(TP indices)

as above


Weights based on analysis of the accounts of a smallsample of building enterprises.

Iceland Index for privately built apartments Weights derived from cost analyses of finished residentialbuilding constructions in base year.

Ireland Housebuilding cost index Weights based on model house construction in base year.Wholesale prices index of materials Weights based on analysis of costs reported by building

enterprises in construction census.

Italy Costs index for a residential building Weights based on the value of housing investmentsredistributed by products using the shares in totalconstruction of a region in the base year

Cost index for a building for industrial use As above with investments in the non - residential buildingsector

Cost index for stretches of road Weights based on cost analysis in the base year

Japan Construction price index Weights based on analysis of input-output tables in baseyear.

Mexico Price index for social housing Weights based on cost analysis of model apartmentbuilding.

New Zealand Input index for the construction sector Weights based on a small number of construction modelsand on the census of building construction.

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Country Index Title Derivation of Weights

Norway Cost indices for residential buildings Weights based on cost analysis of sample of completedbuildings.

Construction cost indices for civilengineering works

Weights based on specifications from national roadauthority.

Portugal Construction Cost Indices Fixed weights established by financial authorities.

Spain Construction cost index Weights based on structural data enquiry conducted inbase year.

Sweden Factor price index for residential buildings Weights are derived from housing cost studies conductedin base year.

Factor price indices for repair andmaintenance of multi-dwelling, andagricultural buildings

as above

Turkey Building construction cost index Weights based on analysis of bills of quantities of arepresentative sample of construction projects.

UnitedKingdom

Construction materials cost index Weights based on a cost analysis of construction work inprogress in the base year.

Construction industry price index ofaverage earnings

as above

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Table 2B. OUTPUT PRICE IndicesCountry Index Title Derivation of Weights

Australia Construction and renovation of privatelybuilt houses

Matched models are equi-weighted.


Based on bills of quantities for model projects.

Austria Residential buildings price indices Expenditure components of a number of representativeconstruction projects.

Other building price indices as aboveOutput price index for road construction as aboveOutput price index for bridge construction as aboveOther civil engineering work as above

Canada Apartment building construction Cost analysis of model apartment buildingNon-residential building construction priceindex

Cost analysis of model non-residential buildings

France Construction price indices for residentialbuildings (ICC)

Current weights are based on size and type of residentialbuilding.

Germany Conventional construction price indices Weights derived on analysis of billing and invoices forgiven structures built in base year.

Greece Work categories for the construction of newbuildings

Weights based on analysis of the accounts of a smallsample of building enterprises.

Luxembourg Price index for the construction ofresidential and semi residential building

Weights based on cost analysis of standard model building.

Netherlands Price indices for social rented housing Weights based on several characteristics observed in thebase year: volume, type of building, number of dwellingsand region

Hedonic price index for the low rentresidential building sector

Regression coefficients based on long time series thatrelate the price components to characteristics of thebuilding constructed..

New Zealand Output index for the construction sector Weights based on a small number of construction models.Capital goods price index for theconstruction sector

as above

Norway Construction price index for detachedhouses

Regression parameters estimated from 6 600 observationsover a two year reference period.

Sweden Output price indices for houses andapartments

Regression co-efficients estimated from the calculation ofmortgage values.

UnitedKingdom

Public sector housebuilding price index Separate exhaustive study of tender prices carried out inthe base year.

Public sector non-housing price index as aboveRoad construction tender price index as aboveCommercial and industrial building tenderprice index

as above

United States Price index for highway construction Weights are derived from an analysis of costs of a samplehighway construction projects in base year.

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Table 2C. SELLER’S PRICE IndicesCountry Index Title Derivation of Weights

Canada New housing price index Houses priced are equi-weighted.

Spain Average prices of dwellings per squaremeters

Weights based on the number of inhabitants of the townarea where the building is constructed. Information basedon the last population census.

United States Cost index for large projects Weights are derived from an analysis of costs of a sampleof projects in base year.

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SECTION 5. INTERNATIONAL CLASSIFICATIONS RELEVANT TO THE COMPILATIONOF CONSTRUCTION PRICE INDICES

A. International Standard Industrial Classification (ISIC), Rev. 3

ISIC is a classification of productive economicactivities. Its main use is to classify economicentities according to the type of economic activity

they carry out. The activity carried out by an entityis the type of production in which it engages.

TabulationCategory

Division Group Class

F. Construction 45. Construction 451. Site preparation 4510. Site preparation

452. Building of completeconstructions or parts thereof;civil engineering

4520. Building of complete constructionsor parts thereof; civil engineering

453. Building installation 4530. Building installation

454. Building completion 4540. Building completion

455. Renting of construction ordemolition equipment withoperator

4550. Renting of construction ordemolition equipment with operator

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B. Statistical Classification of Economic Activities in the European Community (NACE) Rev.1

Section Division Group Class

F. Construction 45. Construction 451. Site preparation 4511. Demolition and wrecking ofbuildings; earth moving

4512. Test drilling and boring

452. Building of completeconstructions or parts thereof;civil engineering

4521. General construction of buildingsand civil engineering works

4522. Erection of roof coverings andframes

4523. Construction of highways, roads,airfields and sports facilities

4524. Construction of water projects

4525. Other construction work involvingspecial trades

453. Building installation 4531. Installation of electrical wiring andfittings

4532. Insulation work activities

4533. Plumbing

4534. Other building installation

454. Building completion 4541. Plastering

4542. Joinery installation

4543. Floor and wall covering

4544. Painting and glazing

4545. Other building completion

455. Renting of construction ordemolition equipment withoperator

4550. Renting of construction ordemolition equipment with operator

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C. Provisional Central Product Classification (CPC)

The CPC is a product classification covering goodsand services. The main purpose of theclassification is to provide a general framework forinternational comparisons of data from varioustypes of statistics that present data by kinds ofproduct.

The classification comprises Sections, Divisions,Groups , Classes, and Sub-classes. The first fourlevels are provided below.


5. ConstructionWork andConstructions:Land

51. Constructionwork

511. Pre-erection work atconstruction sites

5111. Site investigation work

5112. Demolition work

5113. Site formation and clearance work

5114. Excavating and earthmoving work

5115. Site preparation work for mining

5116. Scaffolding work

512. Construction work forbuildings

5121. For one and two dwelling buildings

5122. For multi dwelling buildings

5123. For warehouses and industrialbuildings

5124. For commercial buildings

5125. For public entertainment buildings

5126. For hotel, restaurant and similarbuildings

5127. For educational buildings

5128. For health buildings

5129. For other buildings

513. Construction work for civilengineering

5131. For highways, streets, roads,railways, and airfield runways

5132. For bridges, elevated highways,tunnels and subways

5133. For waterways, harbours, dams andother water works

5134. For long distance pipelines,communication and power lines

5135. For local pipelines and cables;ancillary works

5136. For constructions for mining andmanufacturing

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5137. For constructions for sport andrecreation

5139. For engineering works n.e.c.

514. Assembly and erection ofprefabricated constructions

5140. Assembly and erection ofprefabricated constructions

515. Special trade constructionwork

5151. Foundation work

5152. Water well drilling

5153. Roofing and water proofing

5154. Concrete work

5155. Steel bending and erection

5156. Masonry work

5159. Other special trade constructionwork

516. Installation work 5161. Heating, ventilation and airconditioning work

5162. Water plumbing and drain layingwork

5163. Gas fitting construction work

5164. Electrical work

5165. Insulation work

5166. Fencing and railing constructionwork n.e.c.

5169. Other installation work

517. Building completion andfinishing work

5171. Glazing work and window glassinstallation work

5172. Plastering work

5173. Painting work

5174. Floor and wall tiling work

5175. Other floor laying, wall coveringand wall papering work

5176. Wood and metal joinery andcarpentry work

5177. Interior fitting decoration work

5178. Ornamentation fitting work

5179. Other building completion andfinishing work

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518. Renting services related toequipment for construction ordemolition of buildings or civilengineering works, with operator

5180. Renting services related toequipment for construction or demolitionof buildings or civil engineering works,with operator

52. Constructions 521. Buildings 5211. Residential buildings

5212. Non-residential buildings

522. Civil engineering works 5221. Highways, streets, roads, railways,airfield runways

5222. Bridges, elevated highways, tunnelsand subways

5223. Waterways, harbours, dams, andother waterworks

5224. Long distance pipelines,communication and power lines

5225. Local pipelines and cables;ancillary works

5226. Constructions for mining andmanufacture

5227. Constructions for sport andrecreation

5229. Other civil engineering works

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D. Classification of Types of Constructions

The draft classification, developed by EUROSTATconsists of 2 Sections, 6 Divisions, 20 Groups, and47 Classes. The first three levels are listed below.

The classification has been developed on the basisof the CPC published in 1991 by the UnitedNations.

1. Buildings 11. Residential buildings 111. One-dwelling buildings112. Two-and more dwelling buildings113. Residences for communities

12. Non-residential buildings 121. Hotels and similar buildings122. Office buildings123. Wholesale and retail trade buildings124. Traffic and communication buildings125. Industrial buildings and warehouses126. Buildings for public entertainment, education orhospital and institutional care127. Other non-residential buildings

2. Civil EngineeringWorks

21. Transport infrastructure 211. Highways, streets and roads

212. Railways213. Airfield runways214. Bridges, elevated highways, tunnels and subways215. Harbours, waterways, dams and other waterworks

22. Pipelines, communication andelectricity lines

221. Long-distance pipelines, communication andelectricity lines222. Local pipelines and cables

23. Complex constructions onindustrial sites

230. Complex constructions on industrial sites (e.g.powerplants, chemical plants, mining constructions)

24. Other civil engineering works 241. Sport and recreation constructions242. Other civil engineering works

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BIBLIOGRAPHY

• • Australian Bureau of Statistics, Canberra -House Price Indices: Eight Capital Cities(ABS Cat. No. 6416.0)

• Austrian Central Statistical Office, Vienna,Statistische Nachrichten - Index of BuildingPrices

• Central Bureau of Statistics Netherlands,Voorburg - A Hedonic Approach to OutputIndices for Construction, George van Leeuwen,February 1995

• EUROSTAT, Luxembourg, StatisticalClassification of Economic Activities in theEuropean Community (NACE) Rev.1, 1996

• EUROSTAT, Luxembourg, draft Classificationof Types of Constructions, February 1996

• EUROSTAT, Luxembourg, Industrial Trends:National Methods, Supp. December 1995

• EUROSTAT, Luxembourg, MethodologicalAspects of Construction Price Indices, 1996.

• EUROSTAT, Luxembourg, Methodology ofIndustrial Short Term Indicators - Rules andRecommendations, 1996

• EUROSTAT, Luxembourg, Monalisa: Methodsof National Statistical Offices ConcerningIndustrial Short Term Indicators, electronicreference database on methodology - Unit D2.

• Federal Highway Administration, WashingtonD.C. - FHWA Bid Price Index - 1984 Base year,C.A. Leonin, 1989

• German Federal Statistical Office, Wiesbaden,Studies on Statistics, No. 10 - Comments on theRevision of Statistics on Construction Prices,November 1959

• German Federal Statistical Office, Wiesbaden,Detailed Indices for Construction Prices andConstructio Work, Series 4, May 1994

• International Labour Organisation, InternationalStandard Classifications of Occupations(ISCO), 1968-1990

• Institut National de la Statistique et des EtudesEconomiques (INSEE), Paris, Bloc-Notes

4/1990 - France’s Cost of Construction Index,Vincent le Calonnec, 1990

• OECD, Paris, Consumer Price Indices, Sourcesand Methods, 1994

• OECD, Paris, Main Economic Indicators,Sources and Methods, 1996

• OECD, Paris, Producer Price Indices, Sourcesand Methods, 1994

• Statistics Canada, Ottawa, Construction PriceStatistics, (Cat. No. 62-007), quarterly

• Statistics Canada, Ottawa, Guide to the Incomeand Expenditure Accounts, (Cat. No. 13-603E,No.1), occasional, 1990

• • United Nations Statistical Office, New York,UN Statistical Papers, Series M, No. 59 -Guidelines on Principles of a System of Priceand Quantity Statistics

• • United Nations Statistical Office, New York,UN Statistical Papers, Series M, No. 64 -Manual on National Accounts at ConstantPrices, 1979

• United Nations Statistical Office, New York,UN Statistical Papers, Series M, No. 66 -Manual on Producers’ Price Indices forIndustrial Goods, 1979

• United Nations Statistical Office, New York,UN Statistical Papers, Series M, No. 69 -Strategies for Price and Quantity Measurementin External Trade, 1981

• United Nations Statistical Office, New York,UN Statistical Papers, Series M. No. 77 -Provisional Central Product Classification(CPC), 1991

• United Nations Statistical Office, New York,UN Statistical Papers, Series M. No. 4 -International Standard Industrial Classificationof All Economic Activities (ISIC), Rev. 3, 1990

• University of Geneva, Laboratory of AppliedEconomics, Geneva - Indices of ConstructionPrices, A Methodological Inventory, LynnMackenzie, April 1994

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GLOSSARY

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Buildings

Buildings are permanently constructed roofed structures capable of being used independently, designed to offerprotection from the elements with a view to occupation by humans, or to provide shelter for animals, goods,equipment, or industrial activities.

Building Sector

Comprises the subset of activities within Division 45 of the International Standard Industrial Classification of AllEconomic Activities, Rev. 3 (ISIC), and Division 45 of the NACE, Rev. 1 contributing to the construction ofbuildings. Includes building repair and maintenance works.

Civil engineering sector

Comprises the subset of activities within Division 45 of the International Standard Industrial Classification of AllEconomic Activities, Rev. 3 (ISIC), and Division 45 of the NACE, Rev. 1 contributing to the construction of civilengineering works includes building repair and maintenance of such works.

Civil engineering structures

All structures other than buildings: infrastructure works such as railways, highways, airport runways, tunnels, dams,bridges, canals, electricity transmission systems, drilling platforms, mine shafts, recreation installations, etc.

Client (Maitre d’ouvrage)

Natural or legal person for whom a structure is constructed, or alternatively the person or organisation that took theinitiative of the construction.

Contractor

A firm which undertakes works as part of a construction project by virtue of a contract with a client.

Construction

“Construction” is deemed to mean an item connected with the ground, made from construction materials andcomponents, and/or for which construction work is carried out. The classification of constructions [?] provides fortwo types of such structures: buildings and civil engineering structures.

Construction industry

Refers to all economic activities within Division 45 of the International Standard Industrial Classification of allEconomic Activities, Rev. 3 (ISIC), and Division 45 of the NACE, Rev. 1. These activities comprise sitepreparation, construction of building or civil engineering structures, installation and finishing works, and the hire ofconstruction plant and equipment with operator. It also comprises new works, as well as repair and maintenanceworks.

Dwellings

A dwelling is deemed to be one or more rooms plus annexes, within a building whose design and manner ofconstruction, reconstruction, alteration, etc. make it suitable for use as a private residence. It should possess its own

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entrance giving access, directly across a garden or land, to a road or to a thoroughfare within a building (staircase,corridor, gallery, etc.). Isolated rooms manifestly constructed, reconstructed, altered, etc. to form part of a dwellingare included within that dwelling.

Final owner

This is the person or organisation that pays the final seller’s price. In some instances, this person or organisation maybe the same as the client (refer above).

Habitable floor area

This is the total floor area of the rooms meeting the definition of “room” provided below.

Input price indices

Measure changes in the price of inputs to the construction process by monitoring separately the cost of each factor.This generally entails the compilation of a weighted index of the costs of wages and materials.

Non-residential buildings

Any building of which more than 50 per cent of the useful floor area is used for purposes other than residential.


Measure changes in the prices of what is produced by entities engaged in construction activity.

Project supervisor (Maitre d’oeuvre)

The person or organisation responsible for the supervision of a construction site after having drawn up the structureplans.

Purchaser

This is the person or organisation that pays the final seller’s price. In some instances, this person or organisation maybe the same as the client (refer above).

Quantity surveyor

Profession responsible for evaluating the progress of work in terms of quality and value, on the basis of the technicaldocuments relating to a given structure.

Residential buildings

Any building of which more than 50 per cent of the useful floor area is used for residential purposes.

Room

A room is an area within a dwelling formed by partition walls from floor to ceiling or roof. It must be large enoughto accommodate an adult’s bed (not less than 4 square metres) with not less than 2 metres headroom over half its

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floor area. This includes normal bedrooms, dining rooms, sitting rooms, attic rooms, kitchens, and other separaterooms whose purpose is residential. “Corner-kitchens”, corridors, verandas, hallways, etc. and bathrooms do notcount as rooms.

Seller’s price indices

Measure changes in the prices of construction output paid by the purchaser or final owner of the output ofconstruction activity.

Standard operations

The supply of a component of the structure defined in terms of its function in the structure and its constituentmaterials. Examples might include:

• Construction of 50 square metres of wall in 20 cm hollow breeze block

• Supply and setting of 60 square metres traditional pantile roofing

• Installation of an insulated 200-litre electric hot water tank

Useful floor area

This is the floor area of a building measured within the external walls, excluding cellars, non-habitable attics, and inmultiple dwellings, all communal areas.

cost index

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