City Cost Index: Everything You Need to Know

If you’re a contractor, estimator, engineer, architect, apprentice or general tradesperson, chances are you’ve had to use the City Cost Index (CCI) to compare and contrast costs based on the location of your project. If you find yourself unsure of how to use the City Cost Index or what a City Cost Index even is, you’ve come to the right place.

What is a City Cost Index?

The City Cost Index is a way of comparing the national average cost of a standardized construction project to the cost of the same project in a specific location. In other words, if you know what it costs to construct a standard hospital using standard building materials in “Anytown, USA,” then you can take those costs and apply them to the construction of a new children’s hospital in Washington, D.C. within the same time period.

This information helps you answer an important question: Are construction costs in my city higher or lower than the national average?

What Costs Are in the City Cost Index?

A City Cost Index gives you a number that takes into account the costs of materials, labor and equipment and compares it to a national average of 30 major U.S. cities. Once you establish the CCI, you can compare the cost of construction from city to city within the United States and even convert U.S. dollars to Canadian dollars for projects that take place in the Great White North.

How is the City Cost Index Produced?

The Gordian data team researches material, labor and equipment prices and quantities in cities across the U.S. and Canada to create a composite cost model, which is weighted to reflect actual usage in the building construction industry. To capture the types of construction activity typically performed across North America, researchers merged nine building types from the Square Foot Models found in Gordian’s RSMeans Data Online. The nine building types represent those most commonly found across America and Canada.

To ensure the timeliness of the City Cost Index, the cost model was streamlined to include 66 materials, 21 trades and six pieces of equipment (plus fuel and maintenance costs). Unlike the Square Foot models, which can be adjusted and augmented, this CCI model is fixed and helps to limit the amount of research necessary since these quantities represent those most commonly used in the construction industry.

Click here to get more info about Gordian’s RSMeans data, North America’s most trusted construction costs.

How to Use the City Cost Index

Because the CCI localizes national average construction costs to a specific city, Gordian establishes a baseline to which to compare costs and determine a cost relationship to the national average. The City Cost Index model base is July of the previous year and the national average equals 100. You can compare costs between a U.S. city and the national average by using the following equation:

Here’s how the City Cost Index works in practice. Let’s say an engineer has built an estimate for an upcoming construction project and his final cost totals $1,000,000 based on national average data. Since he works in New York City he wants to index the cost to that location, and the current Total Weighted Average (index number) for New York City is 129.1. Using the above equation, we can determine what his construction project will cost in New York City.

The engineer’s construction project will cost $1,291,000 to build in New York City, which is higher than the national average.

Common Mistakes When Using the City Cost Index

The City Cost Index is a useful tool when employed properly. But when misused, however, it can lead to wildly inaccurate results.

Use the City Cost Index to:

• Adjust for cost differences when compared to the national average
• Show cost differences between cities
• Compare cost differences between quarters of the same year
• Adjust costs to Canadian cities

Do not use the City Cost Index for any of the following applications:

• To compare construction prices across different years
• To predict price trends over time and for a specific location
• To adjust for local requirements, union practices, and building codes
• To use an exchange factor for Canadian cities

Budget Confidently with the City Cost Index

The City Cost Index will never replace a detailed, comprehensive estimate, but it is a tried-and-true method of comparing costs between two cities or to the national average. When you want to know whether costs in your city are higher or lower than another city, you can budget accordingly and plan with confidence.