Construction costs inflation: Part 2: Calculating inflation, the indices way

摘要

From my last article we established that the various indices used for calculating inflation are not really helpful when it comes to actually calculating inflation at project or site level. Already the gaps have been established between the actual inflation incurred by the contractor and that calculated by using indices. But what are these indices? General terminology and basic definitions are provided below (readers interested in finding more about these will find lot of information online). The three main construction price indices widely used are: Input price indices: These measure changes in the prices of the various construction inputs and hence are based on factory gate prices of materials and national labour wages. For obvious reasons these can not be used by contractors for valuing inflation of completed works.