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21 JUN 2018

BCIS produces new series for PUBSEC

In recent quarters, the BIS Tender Price Index of Public Sector Building Non-Housing (PUBSEC) has been producing erratic results.

Although it is based on the same project indices, the calculation method for PUBSEC is different from the BCIS Tender Price Indices (TPI):

  • PUBSEC includes public sector non-housing projects only
  • PUBSEC excludes Northern Ireland and offshore islands
  • The project indices are normalised in different ways
  • PUBSEC uses a median to calculate the quarterly index while BCIS uses a geometric mean
  • PUBSEC is smoothed (25% previous quarter, 50% current quarter, 25% next quarter); the BCIS TPI forecast is used to estimate the smoothing for the latest quarter while the BCIS TPI is not smoothed
  • PUBSEC is updated quarterly while the BCIS TPI is updated fortnightly.

The indices are based on a declining sample of projects analysed for 2017. The BCIS Tender Price Index indicates a significant increase in prices of 14% (4Q16-4Q17). Based on a subset of the same data, PUBSEC has risen by 22% over the same period. However, the individual project indices do not indicate there should be such a difference.

It seems that there are insufficient projects to make the PUBSEC calculation method reliably reflect the underlying project indices.

New series

BCIS has produced a new series called 'Extension of PUBSEC Tender Price Index of Public Sector Building Non-Housing' which is a smoothed version of the BCIS All-in TPI for 2017 onwards.

 Comparing the original PUBSEC and Extension of PUBSEC indices:

Similarities

    • Both are smoothed (25% previous quarter, 50% current quarter; 25% next quarter).
    • Both are updated quarterly.

Differences

    • The extension series includes private sector and public housing projects.
    • The extension series includes Northern Ireland and offshore islands.
    • The series are normalised in different ways.
    • The extension series use the geometric mean of project indices while the original series used the median.

BCIS recommends that the series 'Extension of PUBSEC Tender Price Index of Public Sector Building Non-Housing' is used in place of 'PUBSEC Tender Price Index of Public Sector Building Non-Housing' where the index is written into procedures or contracts. However, users should consider whether the BCIS All-in TPI would be more appropriate in future or for other applications.

At the request of various public-sector organisations, BCIS has calculated and published PUBSEC since it was discontinued by the Department of Business Innovation and Skills (BIS) at the end of 2014.

BCIS is keen to investigate the existing use and needs of public sector bodies and is looking to set up a workshop. Any parties willing to participate can contact Richard Groom.