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What are indices?

What are indices?

  • Indices measure inflation. These indices can be applied to your own projects.
  • ‘Price’ and ‘cost’ are two ways of describing the same thing, a seller’s price is a buyer’s cost.
  • BCIS convention is to use price to mean what a contractor charges a client and cost to mean what a contractor pays for their materials, labour and plant.

What are BCIS inflation indices?

BCIS calculate three types of inflation indices for construction :

1. Tender Price Indices (TPI)

They measure the movement in prices agreed between clients and contractors at ‘commit to construct’ normally when the tender is accepted.

These indices are typically used for adjusting estimates and budgets to different dates.

The BCIS All-in TPI is the most widely used example.

2. Output Price Indices (OPI)

They provide a measure of the average price of construction projects currently on site, i.e. the movement in prices paid by clients when the work is carried out.

They normally reflect accepted tender prices in previous periods.

These indices are typically used to convert construction output volume figures from current to constant prices, either for national statistics or construction programmes.

The BCIS All-in OPI is a typical example of an OPI

3. Resource Cost Indices (RCI)

They measure the movement in the cost of labour, material and plant to a contractor.

These are generally the factory gate prices for materials and plant and nationally agreed wage awards and statutory employment costs for labour. Any difference between these costs and contractors site costs brought about by market conditions are reflected in the TPI. 

These indices are typically used for understanding inflationary pressures when preparing estimates and budgets and in inflation adjustment clauses in contracts.

Examples of RCI include the General Building Cost Index, The General Civil Engineering Cost Index and the Price Adjustment Formulae indices.