A Refined Basket of Goods Approach for Comparing Construction Costs between Countries

Most comparisons of construction industry performance requirethat construction costs be converted to a common base. Existingmechanisms for such conversions produce unreliable results.A proposed method for producing industry-specifi c conversionfactors was tested using a single building type. A baske...

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Main Author: Rick Best
Format: Article
Language:English
Published: UTS ePRESS 2012-11-01
Series:Australasian Journal of Construction Economics and Building
Online Access:https://epress.lib.uts.edu.au/journals/index.php/AJCEB/article/view/3019
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spelling doaj-85a486d8cab44adb9bc301e82c7cfc972020-11-25T00:12:38ZengUTS ePRESSAustralasian Journal of Construction Economics and Building1835-63541837-91332012-11-0192293810.5130/ajceb.v9i2.30191983A Refined Basket of Goods Approach for Comparing Construction Costs between CountriesRick Best0Bond UniversityMost comparisons of construction industry performance requirethat construction costs be converted to a common base. Existingmechanisms for such conversions produce unreliable results.A proposed method for producing industry-specifi c conversionfactors was tested using a single building type. A basket ofmaterials and labour was identifi ed and weighted to refl ect the costshare of each item in a completed project. Prices for the basketwere gathered in three cities and simple construction specifi cconversion indices were calculated based on the constructionpurchasing power of each currency. The construction purchasingpower parities (CPPPs) showed marked differences from otheravailable conversion mechanisms such as exchange rates andgeneral purchasing power parities (PPPs) that have been used inprevious international comparison studies. While the study waslimited in scope, and is only the fi rst stage of a longer process, thesubstantial differences in comparative costs based on purchasingpower illustrate the problems inherent in international costcomparisons. For example, comparing Singapore and Sydney,Singapore costs appear to be only 40% of those in Sydney (basedon exchange rates) about two-thirds the cost of Sydney (usinggeneral PPPs) or almost the same (using the preliminary CPPPs).These results illustrate the problems of converting costs fromlocal currencies to a single base currency and suggest that furtherdevelopment is needed to improve the reliability of outcomes.https://epress.lib.uts.edu.au/journals/index.php/AJCEB/article/view/3019
collection DOAJ
language English
format Article
sources DOAJ
author Rick Best
spellingShingle Rick Best
A Refined Basket of Goods Approach for Comparing Construction Costs between Countries
Australasian Journal of Construction Economics and Building
author_facet Rick Best
author_sort Rick Best
title A Refined Basket of Goods Approach for Comparing Construction Costs between Countries
title_short A Refined Basket of Goods Approach for Comparing Construction Costs between Countries
title_full A Refined Basket of Goods Approach for Comparing Construction Costs between Countries
title_fullStr A Refined Basket of Goods Approach for Comparing Construction Costs between Countries
title_full_unstemmed A Refined Basket of Goods Approach for Comparing Construction Costs between Countries
title_sort refined basket of goods approach for comparing construction costs between countries
publisher UTS ePRESS
series Australasian Journal of Construction Economics and Building
issn 1835-6354
1837-9133
publishDate 2012-11-01
description Most comparisons of construction industry performance requirethat construction costs be converted to a common base. Existingmechanisms for such conversions produce unreliable results.A proposed method for producing industry-specifi c conversionfactors was tested using a single building type. A basket ofmaterials and labour was identifi ed and weighted to refl ect the costshare of each item in a completed project. Prices for the basketwere gathered in three cities and simple construction specifi cconversion indices were calculated based on the constructionpurchasing power of each currency. The construction purchasingpower parities (CPPPs) showed marked differences from otheravailable conversion mechanisms such as exchange rates andgeneral purchasing power parities (PPPs) that have been used inprevious international comparison studies. While the study waslimited in scope, and is only the fi rst stage of a longer process, thesubstantial differences in comparative costs based on purchasingpower illustrate the problems inherent in international costcomparisons. For example, comparing Singapore and Sydney,Singapore costs appear to be only 40% of those in Sydney (basedon exchange rates) about two-thirds the cost of Sydney (usinggeneral PPPs) or almost the same (using the preliminary CPPPs).These results illustrate the problems of converting costs fromlocal currencies to a single base currency and suggest that furtherdevelopment is needed to improve the reliability of outcomes.
url https://epress.lib.uts.edu.au/journals/index.php/AJCEB/article/view/3019
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