Costs construction cost indexes

Table 9-42 presents information on some cost indices for the United States. Engineering News-Record updates its construction-cost index in March, June, September, and December. The Oil and Gas Journal gives the Nelson-Farrar refinery indices in the first issue of each quarter. The Chemical Engineering plant-cost index and Marshall and Swift equipment-cost index are given in each issue of the pubhcation Chemical Engineering. Derivation of the base values is referred to in the respective publications. 

The usual estimating technique is to collect equipment pricing information from other projects and correlate this data by size, weight, pressure rating, and/or materials of construction. Each piece must be adjusted for inflation to bring all costs to one base time. Adjusting costs for inflation is discussed later under the heading, " Construction Cost Indexes. ... 

Several sources (References 19. 20, 21, and 22) are available for estimating pumps and drivers to check in-house coiTelations or to fill in w here data is not available. Care must be exercised in using construction cost indexes to update the literature data. It would be w ise to calibrate the indexes and literature data by getting vendor prices on a few of the larger, more expensive pumps, and 5% or 10% of the common types of pumps in the project being estimated. 

Once the cost of each piece of major equipment is known, it must be adjusted by construction cost indexes. Due to inflation and changing competitive situations, the price of equipment changes from year to year (Reference 26). Fortunately, there are several indexes that help in estimating today s costs based on historical data. Some of these indexes are Nelson Refinery Construction Cost... 

Source U.S. ACE, Civil Works Construction Cost Index System Manual—Index for Utilities, 110-2-1304, U.S. Army Corps of Engineers, Washington, 2007, p. 44. With permission. 

Overtime is especially costly because after laboring eight hours a man s efficiency is less. He is naturally tired. Some employers have claimed that when a worker puts in two hours of overtime they get only about one hour of services. This means a company may pay for twelve hours of work at the base pay rate and effectively get only nine hours of work per day. This could increase the cost of construction labor by one-third or the total cost of constructing the plant by over 8%. The average construction costs index by state is given annually in the Plant Sites issue of Chemical Week and by the Federal Department of Labor. 

ENR Building Construction Cost Index Histories, En neering News Record, Mar. 22, 1973,p. 79 (history in March issue each year). 

The power plant construction cost index (PCCI) tracks the costs of building coal, gas, wind, and nuclear power plants, indexed to the year 2000 — registered 231 index points in the third quarter of 2007 ending in October — indicating that a power plant that in 2000 cost 1 billion in 2007 would have cost 2.31 billion. 

The Engineering Netvs-Record construction cost index appears weekly in the Engineering News-Record. For a complete description of this index and the revised basis, see Eng. News-Record, 143(9) 398 (1949) 178(10 87 (1967). History is in March issue each year, for example, see Eng. News-Record, 22000 54 (March 15, 1988). 

Figure A7.1 Plot of refinery construction cost index against fuel index (after H.W. Parker)...

Using this correlation we can impute crude oil price corresponding to a particular construction cost index. Using the 2007 value for the construction cost implies an equivalent oil price of 70 per barrel. This is used as the base price for oil and derivatives in the analysis. 

The journal Engineering News Record publishes a monthly construction cost index. This is based on civil engineering projects and is sometimes used for updating offsite costs. This index has been published since 1904 and is the oldest of all the indices. 

Sources. U. S. Department of Labor and Engineering News Record "Construction Cost Index"... 

The Nekon-Farrar (NF) Refinery Construction Cost Index... 

The. Xelsori refinery index ( 4) is a construction-cost index somc what similar to the b NH construction-cost index hut liased upon the cost of mal rials and lalM)r for the const ruel ion of pt troleuin refiiu ries. ... 

All costs converted to 1956 by Nelson Refinery Construction Cost Index, Oil Gas /., July 27, 1952, p. 106. The Index is published in the first issue each month of the Oil and Gas Journal.. . ... 

Cost Indices The value of money will change because of inflation and deflation. Hence cost data can be accurate only at the time when they are obtained and soon go out of date. Data from cost records of equipment and projects purchased in the past may be converted to present-day values by means of a cost index. The present cost of the item is found by multiplying the historical cost by the ratio of the present cost index divided oy the index applicable at the previous date. Ideally each cost item affected by inflation should be forecast separately. Labor costs, construction costs, raw-materials and energy prices, and product prices all change at different rates. Composite indices are derived by adding weighted fractions of the component indices. Most cost indices represent national averages, and local values may differ considerably. 

Nelson Construction and Operating Cost Indexes, Oil and Gas Journal, First issue each month. 

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