Cost Indices

Revised

Are you faced with estimating capital and operating costs? 

I know I often am. A key to this work is using cost indices.  Unfortunately, accessing the best estimating data is expensive. Often It costs thousands of dollars. This article discusses the easiest to access free sources.

Bureau of Labor Statistics (BLS)

The United States Bureau of Labor Statistics compiles the following statistics pertaining to cost estimating:

  • Inflation and prices – consumer and producer prices
  • Labor compensation – wages and benefits
  • Productivity
  • International prices and labor comparisons

The Producer Price indices and the Labor Compensation rates are useful for adjusting engineering and business estimates.  You can find the data at: http://www.bls.gov/data/.

The BLS Handbook of Methods is helpful understanding and accessing the data.

Producer Prices Indices (PPI)

Producer Price indices measure changes in prices received by producers of most products and services generated by the US economy.  It may take some exploring to find the indices that best suit your purpose—being that the BLS has compiled more than 8,000 Producer Price indices—but your patience will be rewarded by finding representative data.  And the price is right—free.  Go to: http://www.bls.gov/data/, and under the major heading “Inflation & Prices,” select either “Industry Data” or “Commodity Data” by clicking on the green icon.

From the popup data retrieval wizard, select an Industry and a Product.

Chapter 14 of the BLS Handbook of Methods explains the Producer Price indices.

Labor Costs

The BLS compiles much useful information on labor costs.  You also can find this on the data page: http://www.bls.gov/data/, under the major heading “Pay & Benefits.” There select “Employer Cost for Employee Compensation Total Compensation” by clicking on the green icon.

From the popup data retrieval wizard, select the Ownership, Compensation Component, and Occupation.  The Compensation Component “01 Total compensation” is good if you are estimating total labor costs for a project.

Chapter 8 of the BLS Handbook of Methods provides more information on the labor compensation statistics.

Chapter 12 of the BLS Handbook of Methods provides information on non-US labor compensation statistics.

Consumer Price Index (CPI)

The BLS compiles the often reported Consumer Price Index.  The home page is at: https://www.bls.gov/cpi/.  The CPI is a measure of what it costs for an average person to live in the United States.  The CPI generally is not used for engineering estimates.  The various PPIs, labor cost indices, and productivity indices better represent industrial costs.

RSMeans

RSMeans is a leading North American source of construction cost information.  RSMeans was a pioneer in developing localized cost information for the US and Canada.  RSMeans is owned by Gordon, which in turn is owned by Fortive Corporation.

You can find annual indices for 2006 to the present at: https://www.rsmeansonline.com/references/unit/refpdf/hci.pdf.

Detailed information is by subscription, with datasets annually costing $700-$3,500 each.

Engineering and News Record (ENR)

The Engineering and News Record (ENR), a popular construction magazine, maintains three widely-used cost indices.  These include:

  • Construction Cost Index (CCI)
  • Building Cost Index (CCI)
  • Materials Cost Index (MCI)

The MCI consists of the price for 2,500 pounds of fabricated structural steel, 1.128 short tons of Portland cement, and 1,088 board feet of 2×4 lumber.  The CCI and BCI include both labor and material costs from the Material Cost Index.  For labor, the CCI uses 200 hours of common labor, while the BCI uses 68.38 hours of skilled labor averaged from three trades—bricklayers, carpenters, and ironworkers.

Data, prepared for 20 US metropolitan regions, are only available by subscription to the magazine.  The subscription cost varies by country of origin, delivery means, and length of subscription, but typical is more than $100 per year. ENR is owned by BNP Media.

Chemical Engineering Plant Cost Index (CEPCI)

Chemical Engineering magazine publishes the Chemical Engineering Plant Cost Index, which is widely used to quickly evaluate equipment and plant costs for the chemical and process industries.  As of 2002, the index consisted of the weighted average of 41 PPIs (industry and commodity indices) and 12 labor cost indices, all reported by the BLS.  Major categories of the CEPCI and their weighting include:

Category%
Heat exchangers and tanks17.1%
Process machinery6.5%
Pipes, values, fittings9.6%
Process instruments5.3%
Pumps and compressors3.2%
Electrical equipment3.5%
Structural supports and misc.5.3%
Construction labor29.0%
Engineering and supervision15.8%
Buildings (materials and contractors)4.6%
Total100.0%

You can find a lengthy article on the makeup of the CEPCI by William M. Vatavuk, “Updating the CE Plant Cost Index,” which appeared in Chemical Engineering in January 2002 (page 62-70) at: https://www.chemengonline.com/Assets/File/CEPCI_2002.pdf

Web access to the CEPCI is a pricey $699 per year (as of May 2020).  However, many professionals can qualify for a free subscription to Chemical Engineering magazine.  The index is published monthly with indices being 3 months behind the publishing date.

Cost professionals recommend only using the index back 5 years due to changes in technology, construction practices, labor efficiency, and formulation of the index.  Recent values are:

earCEPCI
2019607.5
2018603.1
2017567.5
2016541.7
2015556.8
2014576.1
2013567.3
2012584.6
2011585.7
2010550.8
1957-1959100.00

Marshall & Swift (M&S)

Another source of cost data—which once was popular for industry, but today is focused on commercial and residential real estate building data—is Marshall & Swift.  Marshall & Swift is owned by CoreLogic.

Summary

Cost indices are an essential engineering tool.  The basic RSMeans and CEPCI indices are useful tools for developing quick, scoping estimates.  BLS indices are helpful for estimating capital and operating costs.  More detailed cost estimates require detailed estimating techniques and subscription to expensive cost databases, such as those provided by RSMeans. 

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