Construction Price Forecasting Models in the Construction Industry: A Comparative Analysis

Abstract

Construction prices rose rapidly during 2020 and 2021, making it almost impossible for contractors to adhere to agreed contract prices. For this reason, there was a request from contractors to adjust the contract price after signing a contract for work. During the implementation of the construction contracts, they were unable to comply with the fixed contract price. Forecasting the development of price indices could solve this problem by creating a reserve that would limit the adjustment of the contract price and the contractors’ withdrawal from the contracts. The forecast could be enshrined in the contractual conditions before the start of construction, which would eliminate the risk of changing the agreed contract price for the investor and the possible occurrence of additional work. Data from statistical offices were used to create the price index forecast. In this article, four methods were used in the search for a more accurate forecast: regression analysis, exponential smoothing, the naïve method, and the Autoregressive Integrated Moving Average (ARIMA) model. From these methods, the most appropriate method was selected by multi-criteria decision-making, which was subsequently verified with actual published price index data. The main goals of this study are to determine the most suitable prognostic method for forecasting the development of the prices of construction materials and work and then comparing the forecasted data with the actual published data of statistical offices in the countries of Central Europe.