Level 3 - Inflation Flashcards
What is TPI and BCI?
Tender Price Indices represent the price for which the contractor offers to carry out the project, i.e. cost to client.
Building Costs Indices are the costs incurred by the contractor in the course of his business, the principal ones being those for labour and materials, i.e. cost to contractor
What is the purpose of TPI?
They measure the movement in prices agreed between clients and contractors in tender prices agreed
These indices are typically used for adjusting estimates and budgets to different dates
Are you aware of any market trends at the moment?
Massive inflation on Energy up by circa 55% by April 2022
Inflation is rising due to energy and material costs
Shortage in labour across the industry (due to brexit / covid)
On Bank OSD what was the new proposed construction date and what was the cost movement?
April 2021 - £79m
January 2022 - £85m
Increase £6m circa 8%
What is TPI?
TPI: Tender Price Inflation
Measures the movement in tender prices
Cost to client
Measured from base date to tender return date
What is BCI?
BCI: Building Cost Inflation
Measures the movement in building cost prices.
Cost to contractor
Measured from tender return date to mid-point construction
Why is BCI measured to mid point construction?
Assumption that all packages have probably been procured by mid point construction
What adjustments might need to be made when using cost data?
Location Time Specification Economy *Building Regs
When cost planning, do you apply TPI and BCI?
YES
Where do TPI and BCI go in the structure of your cost plan?
NRM says you should state TPI and BCI separately after risks
BUT in practice = TPI stated separately but BCI normally included in rates
How exactly do you adjust for TPI?
Current Rate TPI / Historical Rate TPI = %
% applied to historical rate
How does your internal economist calculate TPI?
Conversations with partners about contractor tendering market
What is construction inflation?
An allowance included in the order of cost estimate or cost plan for fluctuations in the basic prices of labour, plant and equipment, and materials during the period from the date of tender return to the mid-point of the construction period.
What is inflation?
Sustained increase in the general price level of resources
It is included as an allowance in the order of cost estimate or cost plan for fluctuations in the basic prices of labour, plant and equipment and materials
What is tender inflation?
Tender inflation is the sustained increase in prices paid for tenders over a period of time
Tender inflation in cost estimating / planning relates to the increase from the base cate to the date of the tender return
NRM - Tender Inflation in cost estimates or cost plans:
An allowance included in the order of cost estimate or cost plan for fluctuations in the basic prices of labour, plant and equipment, and materials during the period from the estimate base date to the date of tender return
