FACTORS INFLUENCING THE COMPOSITION OF AN INDEX

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INTRODUCTION AND BACKGROUND

According to Marx (2005), an index measures the changes in the cost of an item or a group of items, as time passes; it is a statistical aid for determining cost trends and forecasting any possible future costs. In the building industry, two kinds of indices are generally used. The first are the so called input indices based on the costs incurred by contractors and they are used mainly to determine contract-price adjustments on contracts, after a tender has been awarded. The second kind of indices is output indices, based on the accepted tender prices of contracts; and they are called contract-price indices, or more accurately, tender-price indices.

Research problem

As mentioned before, the BER Building Cost Index is currently the only tender-price index (TPI) available for the South African building industry. This index will be discussed in detail in Chapter 3; but in terms of identifying a problem statement for the study, the following guiding questions can be asked regarding the BER index in particular and the availability of indices in general in South Africa:
• Are the 22 items that are used to make up the BER index still representative of the current building industry to determine the index accurately?
• Is the relative “age” of the index playing a role in the accuracy of the index?
• What are the perceptions of South African quantity surveyors regarding the current relevance of the index?
• Are quantity surveyors reluctant to provide information in the form of priced bills of quantities to the BER?

PRIMARY PROPOSITION

The primary proposition states that it would be possible to establish a new tender price index with a wider range of indicator items, based on buildings that represent current building methods.

ASSUMPTIONS

It may be assumed that most registered quantity surveyors in South Africa are familiar with the BER index. Another assumption is that most quantity surveying firms procure most, or all of their projects, via the traditional procurement route viz. through the use of bills of quantities. This is important because the success of a TPI is dependent on one having access to a large number of priced bills of quantities on a regular basis, from across the country.

CHAPTER 1 INTRODUCTION, BACKGROUND AND PROBLEM STATEMENT TO THE STUDY
1.1 INTRODUCTION AND BACKGROUND
1.2 RESEARCH PROBLEM, OBJECTIVES AND QUESTIONS
1.2.1 Research problem
1.2.2 Research aim and objectives
1.2.3 Research questions
1.3 PRIMARY PROPOSITION
1.4 SECONDARY PROPOSITIONS
1.5 LIMITATIONS
1.6 ASSUMPTIONS
1.7 DEFINITIONS
1.8 EXPECTED CONTRIBUTION/IMPORTANCE OF THE STUDY
1.9 RESEARCH DESIGN
1.10 OUTLINE OF THE STUDY
CHAPTER 2 LITERATURE REVIEW: INDICES IN GENERAL
2.1 INTRODUCTION
2.2 TYPES OF INDICES
2.3 INDICES IN THE BUILDING INDUSTRY
2.3.1 Background
2.3.2 Input-price indices
2.3.3 Tender price/output-price indices
2.3.4 Seller’s price index
2.4 FACTORS INFLUENCING THE COMPOSITION OF AN INDEX
2.4.1 Introduction
2.4.2 Purpose of the index
2.4.3 Availability of data
2.4.4 Selection of items
2.4.5 Base period
2.4.6 Choice of weights
2.4.7 Method of construction
2.4.8 Rates
2.5 USE OF INDICES
2.5.1 Cost planning
2.5.2 Forecasting
2.5.3 Updating of cost estimates
2.5.4 Updating of tenders
2.5.5 Monitoring of price movements
2.5.6 Replacement cost of buildings
2.5.7 Monitoring the national economy
2.5.8 Negotiation of contracts
2.6 PROBLEMS WITH INDICES
2.6.1 Accuracy of the index
2.6.2 Sample size
2.6.3 Changes in quality
2.6.4 Unit rates
2.7 SUMMARY
2.8 CONCLUSION
CHAPTER 3 LITERATURE REVIEW: DEVELOPMENT OF BUILDING COST INDICES IN SOUTH AFRICA
3.1 INTRODUCTION
3.2 THE UNIVERSITY OF STELLENBOSCH BER BUILDING COST INDEX
3.2.1 History of the index
3.2.2 Composition of the index
3.2.3 Discussion of BER index weights
3.2.4 Use and publication of the index
3.2.5 Refinements of the index through time
3.3 THE CONTRACT-PRICE INDEX FOR BUILDINGS
3.3.1 Background
3.3.2 Methodology
3.3.3 Publication of the index
3.4 CHAPTER OF SOUTH AFRICAN QUANTITY SURVEYORS
3.4.1 Background
3.4.2 The results of the survey
3.5 CONTRACT PRICE PROVISIONS INDEX
3.5.1 Background
3.5.2 The methodology
3.6 STEEL AND ENGINEERING INDUSTRIES FEDERATION OF SOUTH AFRICA (SEIFSA) PRICE AND INDEX PAGES
3.6.1 Background
3.6.2 Published indices
3.7 SUMMARY
3.8 CONCLUSION
CHAPTER 4 TENDER-PRICE INDICES IN SELECTED OTHER COUNTRIES
4.1 INTRODUCTION
4.2 SOURCES
4.3 COUNTRIES WITH TENDER-PRICE INDICES
4.3.1 Hong Kong
4.3.2 Ireland
4.3.3 Finland
4.3.4 United Kingdom
4.3.5 Australia
4.3.6 Canada
4.3.7 Singapore
4.3.8 France
4.3.9 Norway
4.3.10 India
4.4 SUMMARY AND CONCLUSION
4.4.1 Weighting and re-basing
4.4.2 Index type
4.4.3 Rate sources
4.4.4 Publication of indices
CHAPTER 5 SURVEY AMONG QUANTITY SURVEYING FIRMS IN SOUTH AFRICA
5.1 INTRODUCTION
5.2 THE RESEARCH METHODOLOGY
5.3 SURVEY QUESTIONNAIRE
5.4 SAMPLING METHOD AND SAMPLE SIZE
5.5 THE SURVEY PROCESS
5.6 SAMPLING OBSERVATION ERRORS
5.7 RESPONSE
5.8 THE RESULTS DATA ANALYSIS
5.8.1 Section1: Background information
5.8.2 Section 2: Level of use and knowledge of the BER index
5.8.3 Section 3: Your perception regarding tender price indices in general and the BER index in particular (to what extent do you agree/disagree with the following?)
5.8.4 Section 4: Please indicate what other information, apart from a national TPI would be useful you/your practice
5.9 SUMMARY
CHAPTER 6 DETERMINATION OF A NEW BASKET OF RATES
6.1 INTRODUCTION
6.2 USE OF WEIGHTS
6.2.1 Reasons for assigning weights
6.2.2 Source of information
6.2.3 Selection of items
tions of weights
6.3 THE CONSUMER-PRICE INDEX
6.4 WEIGHTS IN A NEW TENDER-PRICE INDEX: CONSIDERATIONS
6.4.1 Introduction
6.4.2 Considerations
6.4.2.1 Starting cost or end-cost
6.4.2.2 Trade or elemental basis
6.4.2.3 Contract sum
6.4.2.4 Preliminaries
6.4.2.5 Provisional sums
6.4.2.6 Influence of region and nature of the site
6.5 METHODOLOGY IN DETERMINING NEW WEIGHTS
6.5.1 Choice of buildings
6.5.1.1 Weights for separate types of buildings
6.5.1.2 Weights based on a selection of building types
6.5.2 Collection method
6.5.3 Base period
6.6 NEW WEIGHTS
6.6.1 Trades in bills of quantities
6.6.2 Detail analysis of trades
6.6.3 Indicator items
6.6.4 Breakdown into categories and groups
6.6.4.1 Earthworks
6.6.4.2 Concrete, formwork and reinforcement
6.6.4.3 Masonry
6.6.4.4 Waterproofing
6.6.4.5 Roof coverings
6.6.4.6 Carpentry and joinery
6.6.4.7 Ceilings, partitions and access flooring
6.6.4.8 Floor coverings, wall linings, etc.
6.6.4.9 Ironmongery
6.6.4.10 Structural steelwork
6.6.4.11 Metalwork
6.6.4.12 Plastering
6.6.4.13 Tiling
6.6.4.14 Plumbing and drainage
6.6.4.15 Glazing
6.6.4.16 Paintwork
6.6.4.17 Provisional sums
6.6.5 Final weights according to groups and indicator items
6.7 SUMMARY
6.8 CONCLUSION
CHAPTER 7 UNIT RATES IN A NEW TENDER-PRICE INDEX
7.1 INTRODUCTION
7.2 SOURCE
7.3 SAMPLE SIZE
7.4 OTHER DIFFERENCES
7.5 THE VALIDITY OF RATES
7.6 THE DIFFERENT UNITS
7.7 ANALYSING BILLS OF QUANTITIES FOR USE IN AN INDEX
7.7.1 Base year
7.7.2 Variations in unit rates
7.8 SUMMARY AND CONCLUSION
CHAPTER 8 CALCULATION OF THE INDEX
8.1 INTRODUCTION
8.2 SOURCE AND SAMPLE SIZE
8.3 THE METHODOLOGY
8.3.1 Analysing bills of quantities
8.3.2 Variations in unit rates
8.3.3 Discussion of indicator items
8.4 CALCULATION OF THE INDEX
.4.1 Determination of the index base
8.4.2 Calculation of the complete index
8.4.3 Discussion
8.5 SUMMARY
8.6 CONCLUSION
CHAPTER 9 THE RESEARCH FINDINGS
9.1 INTRODUCTION
9.2 THE RESEARCH FINDINGS
9.2.1 The findings: question 1
9.2.2 The findings: question 2
9.2.2.1 The purpose of the index
9.2.2.2 Availability of data
9.2.2.3 Selection of items to be included
9.2.2.4 Choice of base period
9.2.2.5 Choice of weights
9.2.2.6 Method of construction
9.2.3 The findings: question 3
9.2.4 The findings: question 4
9.2.5 Construction of the index
9.2.5.1 Calculation of the index
9.2.5.2 Comparison with other indices
9.2.5.2.1 BER and UP 2006 252
9.2.5.2.2 BER and UP 2006 combined with CPAP workgroup 181 and CPI P0
9.3 SHORTCOMINGS OF THE INDEX
9.3.1 Number of projects
9.3.2 Multiple procurement
9.3.3 Individual indicator items
9.3.4 Electrical and mechanical installations
9.4 SUMMARY
CHAPTER 10 CONCLUSION AND RECOMMENDATIONS
10.1 INTRODUCTION
10.2 ACCEPTING THE PROPOSITIONS
10.3 CONCLUSION
10.4 PRACTICAL IMPLICATIONS
10.5 SUGGESTIONS FOR FURTHER RESEARCH
REFERENCES