Issues of Government Pricing and Budget Normalization in Construction

Abstract

There are many issues associated with the government pricing of construction products, the main of which are addressed in the presented study. With the government playing a key role in determining the budgeted cost of construction, the Ministry of Construction, Industry, Housing and Utilities of the Russian Federation has been radically reforming pricing and budget normalization in construction since 2016. The author of this study briefly analyzes the results of these reforms and formulates proposals for addressing the issues of improving pricing in construction. Aim . The study aims to examine the current state of government pricing and budget normalization in construction, to determine the ways of shifting from the base index method for making estimates according to state standards and prices to the development of budget documentation using the input method based on real (market) standards for construction resources with participation in construction competitions. Tasks. Based on the results of the study, the author determines the ways for the construction industry to shift from the base index method for making estimates to the input method for determining the budgeted cost of construction according to market norms and prices of construction resources. The author also identifies ways of improving methods for determining overhead costs and estimated profit for local cost estimates. Methods . This study uses general scientific research methods to examine the problems of pricing of construction products according to state standards for resource consumption and unit costs of work measurement. Results . The major drawbacks of the 2001 budget-normative base are identified, and the main objective of construction pricing reforms in a competitive market economy is formulated. The shortcomings of the state estimate standards and federal unit costs introduced by the Russian Ministry of Construction are shown. It is established that the government pricing system causes problems in the assessment of the real cost of construction projects, budget implementation, and timely commissioning of projects. Basic methods for the pricing of construction products are provided. Conclusions. In government pricing, the budgeted cost of construction is not determined by real (market) standards, technologies, and prices of construction resources. Following the example of other industries and developed countries, it is necessary to shift to the market (input) method for competitive pricing of construction products in a market economy.