Chapter 5: Cost Indices in the Construction Industry

This chapter considers the principles of cost indices in developing countries, using Nigeria as a case study. Cost indices in the construction industry are statistical measures that reflect the relative change in the cost of construction inputs over time. These indices are essential tools for professionals within the construction sector, including contractors, developers, engineers, architects and project managers, as they provide a way to adjust the cost estimates of construction projects to account for inflation, regional variations in cost and changes in market conditions. A cost index shows how building costs change over time. The relevance of cost indices in the building industry is discussed and significant types of cost indices are identified. The factors to consider when constructing an index are examined, including the purpose of the index, item selection, choice of weights and base year. The chapter concludes with the issues that make the use of indices difficult.