Appropriateness of using single construction cost index for Sri Lanka

Abstract

ICTAD monthly bulletin comes with the indices for cost fluctuation in construction works. These indices are used in the adjustment for the time factor in cost estimates and in calculating price fluctuations in contracts as well. The single set of adjustment indices are used in all places in the country. This study finds how appropriate it is to use a single index island-wide. The research was designed as an exploratory simulation study with data for specific cost parameters obtained from the market. A model project was simulated for 10 different regions for the estimated price index for 24 months. The simulation was followed by a correlation study using the data generated through simulation to quantitatively test for relationships and patterns. The study finds low correlations between the ICTAD Indices and the regional indices and between Colombo regional index with the other regions suggesting that a single index is not suited for whole country. Though, the parallelism is less among other regions too, they at least showed comparatively better correlation with each other. However, the lack of parallelism between the fluctuation patterns between the regions suggests that the use of a single coefficient multiplier location adjustment for regions is also not accurate. Keywords: Construction Price Index, Regional Index, Estimating, Price Fluctuation, Location Cost Factor.