Why a price goes stale
Three distinct mechanisms, often confused. They concern the index, revision and updating.
Movement in material and labour costs, which feeds through to the prices charged.
Movement in contractors' margins, which varies with order books and has nothing to do with costs.
Movement in the land market, which follows an entirely different logic, that of supply and demand for land.
These three mechanisms are not measured by the same instrument, and that is the main source of confusion.
The two series to follow
| Series | What it measures | Rhythm |
|---|---|---|
| Construction price index | prices of works, excluding land | half-yearly |
| Land market data | land prices | as published |
The official construction price index is published twice a year, in January for the previous October's data, and in July for April's data.
That lag of around three months is structural. The most recent index always describes a situation already past, which must be built into any estimate.
The detail of this index is covered in the article on index and price revision. Its method of calculation is explained there.
What the index does not measure
The most important point in this article. A dated price does not transpose without revision.
The construction price index is compiled excluding the cost of land.
It therefore does not measure the item that dominates the budget, as the article on why land dominates the budget explains.
Following the index without following the land market means watching the secondary variable. The two series move independently, and they can diverge sharply, one rising steadily while the other corrects.
The sources available for each series are covered in the article on official sources.
The tracking method
Four points, suited to a live project.
Date every figure used. A price without a date is unusable, and this applies to an estimate as much as to a quotation.
Check the publication at each half-yearly point, in January and July, rather than continuously.
Follow the two series separately, without aggregating them, since they do not measure the same thing.
Update the estimate at project milestones, at sketch stage, before tendering and before commitment, rather than keeping an initial figure.
The articles in this branch
The article on official sources covers where to look. Their scope is set out there.
The article on index and price revision covers the official instrument and its contractual uses. The mechanism is detailed there.
The article on estimating before a design exists covers the early stage. The method is given there.
The article on developments to watch covers the subjects in motion. The trends are followed there.
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.