Towards the establishment of a relevant tender price index for the South African building industry

Abstract

Different types of building cost-related indices are used on a regular basis by quantity surveyors, developers, contractors, etc. in the South African building industry. Currently there is only one tender price index that is being published on a regular basis in the country, namely the Stellenbosch’s Bureau of Economic Research Building Cost Index. As this index was already developed in the early 1960’s, this research was prompted by the question whether the relative “age” of the index plays a role in the accuracy thereof. Another question flowed from the above, namely whether a new tender price index (TPI), based on a basket of indicator items derived from recently completed building projects, would yield different results that reflect a more accurate movement of tender prices. The research findings suggest firstly that by following accepted practices related to the compilation of indices, a new TPT can be developed for use in the South African building industry. Secondly, it was found that the perception of quantity surveyors in South Africa is that a TPI is a useful tool that can and is used on a daily basis by South African quantity surveyors. They would also welcome the regular publication of a new TPI, even if only used as a checking mechanism against the current BER index. It was also found in the research that a number of selected overseas countries that was investigated make use of TPI’s that are similar in nature to that examined in this study. Although the approach towards the construction of such indices may differ in some aspects from country to country, the major issues related to index theory remain largely consistent. The study resulted in a model for a new TPI for the South African building industry that in future may be published. If sufficient information can be gathered on a regular basis from quantity surveyors, the index can be expanded in the form of separate indices for different building types.