Revaluation of the usual price of construction works from one date to another

Abstract

This article is related to the valuation of construction materials and works at the usual price. In practice, these costs are often determined by calculating costs using indicative prices.

This article deals with revaluation methodology of the usual price of construction works from one date to another. It means price recalculation due to changes in prices of construction works over time. It also focuses on price inidices and an example of a revaluation of budget for building is given. 

The price revaluation is carried out by recalculation of the item budget with indicative prices in the new price level and four methods of indexation. Since the indicative prices in the expert opinions are considered by experts to be the usual prices in the construction industry in the Czech Republic, the budget in the indicative prices in the amount of the usual price is considered as a verification value for the indexed budget prices.

A review of literature was conducted to determine the current state of knowledge on the given topic. A conducted review of literature revealed several related researches, however, none of them discussed the questions central to this paper.

The results of the research, dealing with the analysis of the change in the usual price of construction works over time, show that the indexation of the prices of construction works is applicable under optimal conditions on the market. Indexation can be used if market conditions do not change significantly in the monitored period. If market conditions do change significantly, price indexation is not applicable for revaluation; in this case, when revaluating the price to the new price level, it is necessary to recalculate the costs of construction works too. The average difference of the indexed prices as compared to the itemized budget price at the new price level was calculated at 15% of the itemized budget price.

The author sees the practical application of this article in providing deeper knowledge of how various ways of price indexation can be used. Experts can apply these findings, for example, when determining the usual price of construction works while determining the costs of repairs or determining additional or cancelled works.