A cost engineer will typically calculate the cost of a building project based on prices available at the time the estimate is prepared. Through the cost planning process, the project is then placed in the assumed future time frame of project implementation. Based on forecasts of future trends in building costs, the estimate is multiplied by an appropriate inflation factor to allow for the time shift. Building cost inflation does not necessarily follow more general consumer price inflation nor is it always the same for different trades within the building industry. Building inflation forecasts are typically derived from averaging projections from different construction indices for all building trades and are also influenced by location.
Inflation is considered synonymous with escalation in trade publications.
Failure to account for the length of the project schedule and associated cost of time shift in the budgeting or funding process will result in underfunding a project. This underfunding will translate into an actual loss of project quality, either in materials or ability to satisfy the user space needs. Changes in the project schedule can be accommodated easily by applying a different multiplier to the original estimate. Agencies should first determine building project costs based on today s present value. Present value is an estimate of the project cost for June 15, 1997.