Information sheet 49 bitre BITRE Road Construction and Maintenance Price Index and Sub-Indexes—2013 update At a glance • This information sheet presents the 2013 re-calibrated BITRE Road Construction and Maintenance Price Index (RCMPI).The revised index is an indicator of the change in input costs faced by the road construction and maintenance industry in Australia. • The RCMPI monitors price changes in the following eight major inputs: (1) site-based labour; (2) office-based labour; (3) bituminous materials; (4) cement and concrete; (5) quarry products; (6) other materials; (7) plant hire/ depreciation; and (8) fuel. • The re-calibrated RCMPI is now presented on a quarterly basis. In addition, the RCMPI is now calculated on an index reference period of 2011–12 = 100.0. Prior to the 2013 re-calibration, the RCMPI was referenced on 1998-99 = 100.0.This change simplifies comparison of price movements between the RCMPI and the Australian Bureau of Statistics’ producer price indexes. • The input per cent shares for road construction and maintenance were re-estimated using survey data collected from 8 state/ territory road authorities, 233 local governments and 36 private sector contractors. • The input per cent shares have changed over the 16 years since the last review: º Labour costs have increased to 33.9 per cent of total costs in 2013, from 25.8 per cent of total costs in 1997; º Materials costs have decreased to 37.1 per cent in 2013, from 47.7 per cent in 1997; and º Equipment costs have increased to 29.0 per cent in 2013, from 26.5 in 1997. • The role of the private sector in road construction and maintenance projects within Australia has increased to 56.4 per cent, compared to 40.4 per cent in 1997. • On the basis of the re-calibrated RCMPI, the cost of road construction and maintenance have increased by 1.42 percentage points between 2011–12 and 2012–13.The most significant contributors to the index increase were rises in ‘site-based labour’ and ‘bituminous materials’ costs.They were counterbalanced, to a limited extent, by falls in ‘plant hire/ depreciation’, ‘other materials’ and ‘fuel’ costs over the same period. • This Information sheet introduces two new sub-indexes by major activity: construction and maintenance, and three new sub-indexes by road type: arterial, sealed local and unsealed local roads. • Figure S1 shows that between 2011–12 and 2012–13, the costs for road works changed at different rates depending on the type of works activity and type of road.
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bitreBITRE Road Construction and Maintenance Price Index and Sub-Indexes—2013 update
At a glance• Thisinformationsheetpresentsthe2013re-calibratedBITRERoadConstructionandMaintenancePriceIndex
However,thequarterlyupdatesdonotaccountforchangesintherelativequantitiesofinputsused.Overtimechanges to industrypractice, inputprices and technological advanceswill inevitably alter the inputmix, andhencetherelativitiesinthequantitiesusedforbothmaterialandnon-materialinputs.Thechangesresultintheindex gradually deviating from the actual prices for roadworks experienced by government and industry.Theinputpercentshareschangeataslowpaceanddonotrequirefrequentre-calibration.
Box 1 Comparing the BITRE RCMPI with the ABS Road and bridge construction output price indexFrom2002,theABShaspublishedanoutputproducerpriceindexforthegeneralconstructionindustryintheAustralianandNewZealandStandardIndustrialClassification1993(ANZSIC93subdivision41).Thisindexincludesacomponentfor‘Roadandbridgeconstruction’(ANZSIC93subdivision4121).Since2005thisindexhasbeenpublishedatboththenationalandstate/territorylevels.TheABSindexandtheBITREindexareconceptuallydifferentbecausethe‘Roadandbridge’indexisanoutputpriceindexwhereastheRCMPIisaninputpriceindex.TheABS‘Roadandbridge’indextakesintoaccountthesellingpricesandincludeschangesinprofitmarginsreceivedbysuppliersofroadconstructionproducts.DespitethedifferencesinscopebetweentheABSandRCMPIindexes,thetwoindexesdonotdivergesignificantlywhencompared.Thedifferencesbetweenthetwoindexesareasfollows:
2 History of the RCMPIOneoftheearliestCommonwealthcontributionsinthisareawasbytheCommonwealthBureauofRoads(CBR).AftertheamalgamationoftheCBRandtheBureauofTransportEconomics(BTE)in1976,theBTEanditssuccessorscontinuedtopublishroadconstructionpriceindexes(BTE(1978),BTCE(1997),BITRE(2012,2011a)).
1981In1981, theBureauofTransportEconomics (BTE) introducedanew input-price index (withnoadjustmentfor productivity) and it was based on inputs purchased by the industry (for example, labour, materialsand plant). Itwaswhen the RCMPIwas created and the basicmethodology has remained the same eversince. Up to 1997 the RCMPI included six components to represent the inputs used in constructing andmaintaining roads.The six inputswere: (1) salaried labour (2)other labour (3)bitumen (4)othermaterials(5)plantacquisitionordepreciationand(6)fuel.Theinputpercentsharesforthesixfactorswerethesamefrom1981to1997.Surveydatatoestimateinputpercentshareswerecollectedfromstate/territoryroadauthoritiesandlocalgovernments,butnotcontractors.
1997In1997,afterconsultationwithanumberofstate/territoryroadauthoritiesandlocalgovernments,andtakinginto consideration data availability, two additional input components were added to the previous index:(7)concrete;and(8)quarryproducts.Theiradditionprovidedabetterrepresentationofmaterialsusedinroadconstructionandmaintenance.Togethertheycontributedabout52percentofthetotalmaterialscomponent.Furthermore,in1997itwasacknowledgedthattheproportionofroadconstructionandmaintenanceworksthatlocalgovernmentsandstate/territoryroadauthoritieswerecontractingouttoprivatesectorcontractorswasincreasing.Thereforeprivatesectorcontractorswereexplicitlyincludedinthesurveyoftheindustrytoestablishtheinputpercentsharesapplicableintheroadconstructionandmaintenancesector.
3.1 Review of the RCMPIAspartoftheRCMPIre-calibration,BITREreviewedthecomponentinputsoftheindexusedinthe16yearsto2013.BITREalsoexaminedtheextenttowhichtheinputswerealignedwiththecorrespondingproducerpriceindexes.Table1summarisestheresultsofthereviewandshowsthatthere-alignmentbetweeninputsandthevariablesusedtomeasurepricechangeisunchangedforfiveoftheeightvariablesinthere-calibratedBITRERCMPI,whichmeanstheyremainthesameasinthepre-2013BITRERCMPI.
Table 1 Description of inputs in the RCMPI and measures of change in the price of inputs
Aspect Input Input description Measures of price change used in 2013 re-calibration of the RCMPI
3.1.1 Distinguishing between labour input typesOneoftheissuesidentifiedbythereviewwasthatinrecentversionsoftheRCMPI,thetwodifferentlabourinputs‘salariedlabour’and‘otherlabour’usedthesameindicatorofpricechange.ThesolutiontotheissuewastoassigntwonewABSindexestomonitorpricechangesin‘site-basedlabour’(previously‘otherlabour’)and‘office-basedlabour’(previously‘salariedlabour’).
3.1.2 A new indicator for price changes in ‘other materials’ThesecondissueidentifiedbythereviewwasthatfollowingarecommendationbyBTCE(1997),recentversionsoftheRCMPIusedtheweightedaverageofsixAustraliancapitalsforthe‘Allgroups’indexformaterialsusedinhousebuildingasanapproximationtopricechangesfor‘othermaterials’.Thereviewnotedthattheaforementionedindexwasnotagoodapproximationof‘othermaterials’inroadconstructionandmaintenance.
Figure 3 Comparing the price indicators for ‘other materials’
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3.2 The surveysInstep2(Figure1)surveyswereusedtocollectinformationforre-calibratingtheRCMPI.ThequestionnairesusedwereverysimilartotheonesusedinBTCE(1997).Themajordifferencewasthattherespondentswereexplicitlyrequestedtoestimateinputpercentsharesbyactivitytype:constructionversusmaintenance,andbyroadtype:arterial,unsealedlocalroadsandsealedlocalroads.
3.3 Road expenditure and the roles played in road works projectsAkeyelementinre-calibratingtheRCMPIwastodeterminetheinputmixesusedbytheagenciesthatconstructandmaintainroadsinAustralia.Step3(Figure1)identifiedtherolesamongthethreemajorsuppliersofroadworksservices.Therolesaredifferentfromthoserelatedtofundingofroadworks.Forexample,theprivatesector’scontributionrepresentsasmallpercentageofthetotalroadexpenditure,however,thesectorplaysamajorroleasasupplierofroadconstructionandroadmaintenanceservices.Incontrast,Table3showsthattheAustralian(commonwealth)governmentdoesnotprovideroadworksservices,despitebeingasignificantcontributortototalroadexpenditure(seeBITRE2013).
3.5 Computing the re-calibrated RCMPIStep9a(Figure1)isthecomputationofthere-calibratedRCMPIusingthenationalinputpercentsharesinAppendixB.Eachinputisassociatedwithapriceindicator.Theindexvalueforapointintime(inthiscaseaquarter)iscalculatedasthesumoftheproductoftheinputs’priceindicatormultipliedbyitsinputpercentshare.
4.1 Sub-indexes by type of activityStep9b(Figure1)classifiedthemainactivitiesintotwocategories:constructionandmaintenance.Roadconstructionincludesconstructionofanewroad,bridge,ortunnelwherenonepreviouslyexisted;majorwideningorreplacement,e.g.replacementofatwo-laneroadwithafour-laneroad;upgradestointersections,e.g.changestointersectionlayoutorinstallationofnewtrafficsignals;large-scaleheavypatchingorpavementrehabilitation,andminorimprovementsinalignment;andreplacementofanunsealedroadwithasealedroad.
Roadmaintenance includes restoring edgewear, repairing potholes and small-scale pavement rehabilitation;re-sheetingofgravelroadsandresealingofbitumen-surfacedroads;line-marking;minorbridgeandtunnelrepairs;repairstoguardrailsortrafficsignsandsignals;cleaningofroaddrainsandculverts;androad-sidelandscaping.
Figure4 shows that for the roadconstruction sub-index, the inputper cent share formaterials ishigherby3.7percentagepointsthaninthere-calibratedRCMPI.Thisiscounter-balancedbythevalueoftheinputpercentshareforlabour,whichintheconstructionindexislowerbyabout2.1percentagepointsthaninthere-calibratedRCMPI.
4.2 Sub-indexes by type of roadStep9c(Figure1)computesthesub-indexesbyroadtype.
Figure 5 summarises data on the input per cent shares in the sub-indexes and the re-calibrated RCMPI.Thesub-indexes forarterial roads, sealed local roads,andunsealed local roadsencompass thecostsofbothconstructionandmaintenanceworks.
b. Thepercentagefigurerepresentsthepercentageoflocalgovernmentsinthestateorterritorythatrespondedtothesurvey.Atotalof233outof558localgovernmentsresponded,givinganoverallresponserateof41.8%foralllocalgovernmentswithinAustralia.
c. 36privatesectorcompaniesrespondedtothesurvey.Ofthese16haveanationalpresenceinAustraliaand,in2011–12,hadroadprojectsinallstatesandterritories.Theyareshownas‘Private-National’onthemap.Therestwerelocalcompaniesoperatinginonlyonestateorterritory,andtheyareshownas‘Private-Local’.
Source: BITREsurveys.
5.2 Role of the private sector has increasedThe2013surveydatashowthattheroleoftheprivatesectorinroadconstructionandmaintenanceprojectsinAustraliahasincreasedto56percentfrom40percentin1997.Therolesofstate/territoryroadauthoritiesandoflocalgovernments,assuppliersofroadworksservices,areestimatedtohavedecreasedto16percent(from26percentin1997)and27percent(from34percentin1997)respectively.Theroleoftheprivatesectorisestimatedbythevalueofprojectsthesectorundertakesforprivatesectorclients,plusthevalueofprojectsoutsourcedtotheprivatesectorcontractorsbyeitherstate/territorygovernmentsorbylocalgovernmentsasapercentageofthetotalroadexpenditure.Thispercentagedoesnotrelatetowhopaysforroadprojects,ratheritrelatestowhophysicallyundertakestheroadconstructionandmaintenanceactivities.
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5.3 Input per cent shares for labour, materials and equipment have changedSurveydatashowthatoverthe16yearsto2013,therehavebeenchangesinthethreecategoriesofinputsusedinroadconstructionandmaintenance:
5.4 A re-calibrated Road Construction and Maintenance Price Index (RCMPI)The2013re-calibratedBITRERoadConstructionandMaintenancePriceIndex(RCMPI)takesintoaccountthefollowingeightmajorinputsusedinroadconstructionandmaintenance:(1)site-basedlabour(2)office-basedlabour(3)bituminousmaterials(4)cementandconcrete(5)quarryproducts(6)othermaterials(7)planthire/depreciationand(8)fuel.
Figure 6 Re-calibrated RCMPI (2013 data, 2013 input per cent shares), RCMPI (2013 data, 1997 input per cent shares), discontinued RCMPI and ABS output price index for Road and Bridges Construction (2011–12 = 100)
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ABS Producer Price Index – Road and Bridge ConstructionRCMPI (2013 data, 1997 input per cent shares)Re-calibrated RCMPI 2013
a. There-calibratedRCMPIandtheRCMPI(2013data,1997inputpercentshares)(Figure7and8);
b. There-calibratedRCMPIandthenewsub-indicesonRoadConstructionandMaintenance(Figures9and10);
c. There-calibratedRCMPIagainstthediscontinuedRCMPI.
5.5 The change in the Indices between 2011–12 and 2012–13Figure7comparesthequarter-on-quarterpercentagechangebetweenthere-calibratedRCMPI(2013data,2013inputpercentshares),RCMPI(2013data,1997inputpercentshares)andthediscontinuedRCMPI.
Figure 7 Quarter-on-Quarter percentage changes: the re-calibrated RCMPI (2013 input per cent shares) compared to RCMPI (2013 data, 1997 input per cent shares) and average quarterly changes in the discontinued RCMPI
Figure 9 Contributions by inputs to the change in the BITRE RCMPI (2013 data, 2013 input per cent shares) between 2011–12 and 2012–13.
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5.6 Five new RCMPI sub-indexesThecomputationofthesub-indexesreliesonthesamemethodologyastheRCMPI.However,thecorrespondinginputpercentshareswerecollectedexplicitlyandseparatelybysurveysonmajorsuppliersofroadworksservicesinAustralia,andtheyaredifferentfromthoseintheRCMPI.
6. ConclusionsThisinformationsheetpresentsthe2013re-calibratedBITRERoadConstructionandMaintenancePriceIndex(RCMPI).The revised indexmonitorspricechanges in theeightmajor inputsused in roadconstructionandmaintenance.Thisisthemostrecentre-calibrationoftheRCMPI.Re-calibrationshavebeenundertakenevery16yearsinthelast32years.
Appendix A: Input mix by supplier of road works servicesThefiguresinTableA1areweightedaveragesoftheinputpercentshares,reportedbystate/territoryroadauthoritiesthatprovideddataintheirsurveyresponsesonsubstantialroadworksundertakenin-house.TheweightsusedarebasedontheroaddistancesinTableA2.
Thispublicationshouldbeattributedinthefollowingway;BureauofInfrastructure,TransportandRegionalEconomics(BITRE),2013,BITRE Road Construction and Maintenance Price Index and Sub-Index—2013 update,InformationSheet49,BITRE,Canberra.
Use of the Coat of ArmsTheDepartmentofthePrimeMinisterandCabinetsetsthetermsunderwhichtheCoatofArmsisused.PleaserefertotheDepartment’sCommonwealthCoatofArmsandGovernmentBrandingwebpagehttp://www.dpmc.gov.au/guidelines/index.cfm#brandandinparticular,theGuidelinesontheuseoftheCommonwealthCoatofArmspublication.
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