What it measures
The index measures movements in prices, excluding value added tax, of works carried out in residential construction.
It is compiled excluding the cost of land.
It is expressed on a base of one hundred in nineteen seventy, which explains values above one thousand and disconcerts readers used to recent base years.
Indices are calculated for construction as a whole, but also by trade and by group of works, which allows finer tracking than a single composite index.
| Notion | What it measures | Use |
|---|---|---|
| Index | A change over time | Revising a dated price |
| Price | What is invoiced | Comparing offers |
| Cost | What the firm bears | Analysing a breakdown |
The essential distinction between price and cost
This is the most misunderstood point, and it has practical consequences. The index measures a change, not a price level.
The index takes into account movements in material and labour prices, which follows a cost logic.
But it also incorporates changes in productivity and in contractors' margins.
In other words, it measures prices charged, not cost of production. A rise may therefore reflect market tightness as much as dearer inputs.
Practical consequence: a rise in the index does not mechanically mean firms face higher charges, and cannot be negotiated as though it did.
The publication rhythm
The index appears twice a year, in January for the preceding October's data, and in July for April's data.
Each publication follows the meeting of a consultative technical commission convened for that purpose.
The lag between the period measured and its publication is around three months, which must be built into any use.
The reader must therefore always check which period the latest published value describes, and not assume it describes the current month.
Contractual uses
Three official uses, going beyond mere information. It serves for revision, updating and indexation.
Indexation of almost all fire insurance contracts, which gives the index a very broad reach.
Updating quotations, allowing an offer prepared at an earlier date to be brought up to date.
Off-plan sale contracts, where it serves as a revision reference.
These uses give the index contractual weight, distinguishing its status from that of a simple observational statistic.
Precautions in use
Four precautions, to be respected in any contractual or budgetary use. They concern the version, the base date and the formula.
Check which index is referred to. The general composite index and the trade indices do not give the same movements.
Check the reference period of the figure used, given the publication lag.
Do not apply it to land, which it does not measure.
Check the drafting of the clause where a contract provides for revision, the formula and the index referred to determining the outcome.
A poorly drafted revision clause produces disputes, and its drafting belongs to the guide on contracts and participants.
What this means for a professional
Four rules.
Cite the index with its period, never on its own.
Distinguish price from cost when commenting on a movement to a client.
Use the trade indices where a particular item is at issue, rather than the general index.
Check the contractual clause before applying a revision, rather than defaulting to the general index.
This article reflects the state of the data at the date of checking and serves professional orientation. It does not replace consultation of the official publications or examination of contractual clauses.