Article #440 Capturing and Reporting Construction Material Price Index

Organizations who are involved in delivering capital construction projects always need to know the current prices of key construction materials and other related commodities. Whether those organizations were project owners, contractors, consultants among others need those prices to assess the project viability, price to bid, etc. In most countries, those prices will be captured and reported by a public sector entity that will be assigned by the local government to do so. It should be noted that the construction material unit prices could differ between states or regions within the same country.

As a minimum, the construction material categories that are reported on include aggregate and sands, cement blocks, cement, concrete ready mix, steel bars, and steel BRC mesh. Of course, additional construction material categories and items can be added if the related cost data will be available to be captured and reported on.

For each category, there will be different types of construction material to be reported on. Most countries will have those prices updated every quarter although it could vary. The total of the construction material prices will become the basis for creating the construction material inflation index.

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Project Management Information Systems (PMIS) like PMWeb that are used to manage the business processes for capital construction projects’ cost estimate, budget, budget adjustments, procurement bids, awarding contracts, managing changes, claims, and other processes that could be affected by the fluctuation in construction material prices, need also to capture this vital information. This data will be also needed for Artificial Intelligence (AI) solutions where there is a need to keep track of the fluctuation and inflation in construction material prices within a country or across multiple countries and regions.

To start with, each construction material category and item will be added to the PMWeb cost database module. For each item, PMWeb allows defining all needed details to better describe the construction material as well as attaching pictures, specifications, and other relevant details. For each construction material item, the organization managing the database needs to provide the unit price to be used in the PMWeb cost estimate module. Of course, they also need to provide the pricing currency as well as the unit rate.

It is recommended to have separate construction material items for each country and even a region with a country as those could differ. On the other hand, having this data captured in PMWeb will enable reporting and benchmarking the construction material prices across different regions within the country as well as across different countries.

A project will be created in PMWeb to capture the construction material prices for which a contract will be created for the construction material prices. The same project can be also used to capture the construction material prices in different regions within the same country or in different countries. The line items for this contract will be automatically created by importing the cost items created in the PMWeb cost database. The import function will bring the needed details for those construction material items including defined unit price, the unit of measure, and other details.

A new copy of the created contract at the end of each quarter or when there is an update to the construction material prices. It is recommended to attach all supportive documents for the provided new prices and provide the hyperlink to the website or portal where those prices were posted. A workflow can be assigned to the contract to formalize the approval of the captured construction material prices. In case there is a need to provide more details for the reported prices including any notes that might explain the reasons behind the reported price like for example on why there was a major increase or drop in the reported unit price.

PMWeb cost database will be automatically updated to reflect the updated prices for the construction material. The purchase history tab for each construction material item will display the prices reported for each period. The highest price will be colored in red while the lowest price will be colored in green. The average price will be colored in yellow. Those entries can be ordered and grouped by date or other fields so it can indicate the material price trend.

Of course, if the construction material item cost was used in PMWeb contacts and purchase orders with seller entities, the rates given by those sellers will be automatically captured by PMWeb and displayed on the purchase history tab along with the rates that are captured every quarter.

Those rates will be summarized on the item main page where it will display the highest, lowest, median, and average unit price rates. This will enable the organization if there is a need to adjust the current unit price set for the cost item which will be used when creating new cost estimates.

The data captured in the quarterly updated contracts for the construction material unit prices can be reported in detail to display the unit prices for each quarter. In addition, a bar chart can be added to display the inflation index for each construction material category.

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About the Authorfounder

Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with 40-year service record providing project management, project controls services, and project management information systems to over 200 projects with a total value over the US $100 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment, Hospitality, and Shopping Malls, Oil and Gas Plants and Refineries, Telecommunication, and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training, and business development.

Bassam is a frequent speaker on topics relating to Project Management, Strategic Project Management, and Project Management Personal Skills. Over the past 40 years, he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe, and South America. He has written more than 300 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP), and Earned Value Professional (EVP) from the American Association of Cost Engineers (AACE) and Green Project Management (GPM).

Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA, and London Business School, London, UK.


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