Time and Location Adjustments

Costs vary with time and location, and it is, therefore, necessary to adjust the conceptual estimate
for the differences of time and location from the historical base.

Cost Indexing

A cost index is a dimensionless number associated with a point in time and/or location that
illustrates the cost at that time or location relative to a base point in time or base location. The
cost index provides a comparison of cost or cost change from year to year and/or location to
location for a fixed quantity of services and commodities.

If the cost index is developed correctly, the following simple relationship will exist:

New cost/ New index = Historical cost/ Historical index

Application of Cost Indices

These cost indices can have several uses:

 Comparing costs from city to city (construction cost indices)

 Comparing costs from time to time (historical cost indices)
 Modifying costs for various cities and times (both)

The cost index is only a tool and must be applied with sound judgment and common sense.

Comparing Costs from City to City

The cost difference between cities for identical buildings or projects in a different city can be
found by using the appropriate construction cost indices (CCI). The procedure is as follows:

Comparing Costs from Time to Time

The cost indices can be used to compare costs for the same facility at different points in time.
Using the historical cost indices of two points in time, one can calculate the difference in costs
between the two points in time. It is necessary to know the cost and the historical index for time
B and the historical cost index for time A.
Modifying Costs for Various Cities and Times

The two prior uses can be accomplished simultaneously, when it is desired to use cost
information from another city and time for a second city and time estimate. Care must be
exercised to establish the correct relationships. The following example illustrates the principle.

Example

A building cost $2,000,000 in 2000 in South Bend. How much will it cost to build in Boston in
2002?

Solution

Practice question:

Q.1: Prepare approximate estimate of a building having Plinth Area of 1700 sqm using following
data: Plinth Area Rate @ 245,000Fcfa/per sqm; Contingencies @ 5%; Work Charged Estb
@ 2%; Water Supply & Sanitary Arrangement @ 15% on cost of building; Electrification @ 8%
on building cost; Architectural Fee @ 1.5% on cost of building.