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National Highway Construction Cost Index

National Highway Construction Cost Index. Vincent Fang, Ph.D. MacroSys , LLC May 9, 2013. Presentation Outline. What is the National Highway Construction Cost Index (NHCCI)? How was the NHCCI developed? What is the usage of the NHCCI?. What is the NHCCI ?.

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National Highway Construction Cost Index

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  1. National Highway Construction Cost Index Vincent Fang, Ph.D. MacroSys, LLC May 9, 2013

  2. Presentation Outline • What is the National Highway Construction Cost Index (NHCCI)? • How was the NHCCI developed? • What is the usage of the NHCCI? 2

  3. What is the NHCCI? • Quarterly national price index that tracks trend of construction costs • A price index that aggregates all cost items according to their relative importance • Cover from 2003-Q1 to the present time 3

  4. What is the NHCCI? (cont’d) • Developed by MacroSysfor FHWA • Released by FHWA in April 2007 • FHWA’s continuous effort to track construction costs since 1920s 4

  5. How was the NHCCI developed? • Data source • Data preparation • Index formula used 5

  6. Data Source (Distribution of Construction Cost by Major Category in 2011-Q1)

  7. Data Source (cont’d) • Pay-item data from states’ winning contracts • Pay-items: • Defined by states • Vary from state to state 7

  8. Data Preparation • Data cleaning and statistical editing • Regular cleaning to discover pay-items: • With problems in units • Non-standard • In suspect categories 8

  9. Data Preparation(cont’d) • Time Series checking for pay-items: • Without lagged values (i.e., t-1) • Without eight quarters of data • Statistical Editing using three criteria: • Adjusted R2 • Coefficient of variation • Maximum to minimum price ratio 9

  10. Index Formula Used • The Fisher Ideal Index formula • Chain-type indexing methodology • No need for base revision 10

  11. More about Fisher Index • Good approximation to the theoretical or “exact” index • Capturing the substitution effects • “Dual” property: AFisher Ideal Price Index implies a Fisher Ideal Quantity Index, and vice versa 11

  12. NHCCI: 2003-Q1to 2012-Q3

  13. What is the usage of the NHCCI? • A national price index to track highway construction costs • Comparison over time • Comparison across sectors • An index to convert highway construction expenditures from current-dollar to constant-dollar 13

  14. Improvements • Sample of representative and comparable cost items • Imputations of new and retired cost items • Functionally-based sub-index 14

  15. Questions? Thank You! 15

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