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Construction and Civil Engineering

The purpose of the International Comparison Program (ICP) is to produce PPPs for major components of the economy. Construction, as part of Gross Fixed Capital Formation, is one component. Construction PPPs are currency convertors that permit comparisons of construction volumes across countries to be made. The intention is to compare quantities -not values- of construction output each year. The rationale is that market exchange rates do not accurately represent relative price levels. PPPs for construction represent prices paid by end users, the customers for construction works.

Historically, three methods have been used to calculate PPPs for Construction goods.

The first method, called the "Method of Technical Resource Models" (MTRM) and used by the CIS countries, is input-based. Participating countries are required to collect statistics on wages and salaries in the construction industry, as well as statistics on building materials and energy products. Once collected, the inputs’ prices are entered into linear equations called the "Technical Resource Models" thus allowing for the pricing of 100 different residential buildings, non-residential buildings and civil engineering works.

The second method, called the "Standard Project Method" (SPM) and used by OECD-Eurostat group, is based on standard models for different types of construction projects. Participating countries are required to price each standard construction project by specifying a "Bill of Quantity" covering all the costs that constitute the purchaser’s price.

Finally, the third method-called the "Basket of Construction Components" (BOCC) - lies in between the input- and the model-based approach (i.e. the MTRM and the SPM methods). It was developed and used for the 2005 ICP. Under this method, participating countries collect the direct costs of a basket of construction components (direct costs include building materials, labor costs and hire of construction equipment).

In addition to the three methods for Construction PPPs described above, a new approach was proposed for the 2011 round of the ICP. The approach adopted by the Technical Advisory Group (TAG) is based on a selection of some 50-60 basic and common inputs to construction work weighted in each country to correspond with national construction output.