The compilation methods of building price indices in Britain: a critical review

Abstract

The major message that I will be trying to convey is that we often misinterpret the available data because of inadequate attention to how they are produced … (Griliches, 1994, p. 2) The importance of accurate measurement and pertinent modelling of the general level of construction prices cannot be overemphasized. Uses range from macroeconomic statistics such as real value of investment to micro-level budgeting like construction project price forecasts. Numerous research studies posit that the measured productivity growth rates of the construction sector are distorted and that an inaccurate general construction price index is a main villain of the piece. The academic research published in this arena has primarily focused on models to forecast or predict changes in the general construction price level, whereas this research scrutinizes the compilation methods of the general construction price index in Britain and finds that the indices measure the price movement of more traditional building trades but almost completely ignore the mechanical and electrical services. The existing indices also do not gauge the tender price movements of new building work that is not procured through the conventional lump sum BQs route, such as many projects in private housing and PFI markets. These make out a case for allowing resources to the project of developing alternative methodologies: (1) a revised version of the present method; and (2) hedonic price index.Tender price index, construction output deflator, index compilation methodology, construction statistics,

A festschrift for Graham Ive

“…Second, in collaboration with Andrew Edkins, Kai Rintala (PhD awarded in 2004) and Alex Murray, Graham maintained momentum on public-private partnership research (Rintala et al, 2008). Third, Graham worked with his PhD student, Marco Yu, on construction statistics (Yu and Ive, 2008;Ive and Yu, 2011). Fourth, Graham published two government-commissioned reports, on construction productivity (Ive et al, 2004) and on trade credit (Ive and Murray, 2013).…”

Measuring Construction

“…Around 100 different items were priced for five building types and each of five types had its own index. A recent analysis of British building price indices by Yu and Ive (2008) found that these indices measure the price movement of the traditional building trades but almost completely ignore mechanical and electrical services. Cannon (1994) questioned the accuracy of contractor statistics and Briscoe (2006) asked: "How useful and reliable are construction statistics?"…”

Factor cost indices practices in the building industry for Nairobi, Kenya

“…An example of this is the published prices by JBC listing.Factor indices for measuring the cost of resources to a contractor. These are useful for contracts where there are fluctuations in prices.Laspeyres index which is applied where an index uses the base year weightings for each calculation (Yu and Ive, 2008). Paasche index which is applied where index uses weightings obtained from the current year or point in time that is under consideration (Yu and Ive, 2008).…”

“…These are useful for contracts where there are fluctuations in prices.Laspeyres index which is applied where an index uses the base year weightings for each calculation (Yu and Ive, 2008). Paasche index which is applied where index uses weightings obtained from the current year or point in time that is under consideration (Yu and Ive, 2008). Divisia index which takes into account prices and quantities in a multi‐period trend analysis (Balk, 2005).…”

“…Laspeyres index which is applied where an index uses the base year weightings for each calculation (Yu and Ive, 2008).…”