Construction Inflation Calculator: NRM1, Indices and NEC4 X1
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How to use the construction inflation calculator
The ProQS construction inflation calculator brings the main inflation methods a quantity surveyor needs into one free tool. Use it to update a historic cost to today’s prices, forecast a cost plan to tender and completion, apply different rates to different elements, or calculate an NEC4 Option X1 price adjustment. Calculations run in your browser, and nothing you enter is sent to ProQS.
Each tab answers a different question.
| Tab | Question it answers | Typical use |
|---|---|---|
| Historic inflation | What would this past cost be at a later date? | Updating benchmark costs, old tender rates or a previous cost plan |
| Forecast inflation | What will this cost be in the future? | NRM1 tender and construction inflation, budget forecasts |
| Weighted inflation | What is the overall rate when elements inflate differently? | Cost plans where services, frame and finishes move at different rates |
| NEC4 Option X1 | What is the price adjustment for this assessment? | Contracts with secondary Option X1 |
| Index library | Where do I keep my index data? | Storing BCIS, ONS or other series on your own device |
Choosing the right index
The most common mistake in updating construction costs is using the wrong type of index. Before you enter any values, decide what you are updating.
- Tender price indices track what clients pay contractors. They include market conditions, competition and margins. Use them to update cost plan rates, benchmark costs and past tender prices.
- Building cost indices track what contractors pay for labour, plant and materials. Use them to understand contractor input costs, for example when reviewing a fluctuations claim or a contractor’s cost forecast.
- Price adjustment formula indices track specific work categories and resources. BCIS price adjustment formula indices are often used with NEC4 Option X1 and JCT fluctuations Option C.
- Output price indices estimate inflation across construction output as a whole and are useful for wider market analysis.
Always take both index values from the same series and the same base year. A ratio between a 1985 = 100 series and a 2015 = 100 series is meaningless.
Where to find index data
- BCIS publishes the All-in Tender Price Index, the General Building Cost Index and price adjustment formula indices. They are licensed to subscribers, so keep BCIS values to your own calculations.
- The Office for National Statistics publishes free construction output price indices. Monthly values are released each quarter. They are built from input costs for materials, labour and plant, with a profit mark-up added, as a proxy for output prices.
- The Department for Business and Trade publishes free building materials and components statistics each month. These are useful for tracking material price movements.
Worked examples
The examples below were checked against the calculator. Use them to test your understanding or to check a spreadsheet.
Example 1. Updating a past cost
A benchmark project cost £100,000 when the tender price index stood at 300. The index now stands at 360.
- Index ratio = 360 ÷ 300 = 1.20
- Updated cost = £100,000 × 1.20 = £120,000
- Inflation = 20%, or £20,000
Example 2. NRM1 tender and construction inflation
A cost plan has a cost limit, excluding inflation, of £10,000,000 at a base date of 1 January 2026. Tenders return on 1 January 2027. Work starts on 1 March 2027 and finishes on 1 March 2028. Both tender and construction inflation are forecast at 4% a year.
| Step | Calculation | Result |
|---|---|---|
| Tender inflation period | 1 January 2026 to 1 January 2027 | 365 days, 1.0 year |
| Tender inflation | £10,000,000 × (1.04 − 1) | £400,000 |
| Construction inflation period | Tender return to mid-point of construction (59 + 183 days) | 242 days |
| Construction factor | 1.04 ^ (242 ÷ 365) | 1.026345 |
| Construction inflation | £10,400,000 × (1.026345 − 1) | £273,987 |
| Forecast outturn | £10,000,000 + £400,000 + £273,987 | £10,673,987 |
Two points are worth noting. First, NRM1 applies inflation to the cost limit after risk allowances, so enter that figure, not the works cost alone. Second, construction inflation is applied to the tender-inflated figure, because the price at tender already includes tender inflation. Our NRM 1 cost planning guide explains where inflation sits in the cost plan.
Example 3. NEC4 Option X1 price adjustment
The Contract Data states a non-adjustable proportion of 0.15. Labour has a proportion of 0.50, with a base index of 100 and a latest index of 110. Materials have a proportion of 0.35, with a base index of 200 and a latest index of 210. The change in the Price for Work Done to Date since the last assessment is £1,000,000.
- Price Adjustment Factor = 0.50 × (110 − 100) ÷ 100 + 0.35 × (210 − 200) ÷ 200 = 0.0675
- Options A and B: £1,000,000 × 0.0675 = £67,500
- Options C and D: £1,000,000 × 0.0675 ÷ 1.0675 = £63,231.85
The Options C and D figure is lower because Defined Cost is already paid at current prices. The adjustment moves the target, so the pain and gain share is not distorted by inflation. You can test the effect on the Contractor’s share with our NEC4 pain and gain share calculator. For the wider contract, see NEC4 explained.
The current outlook
BCIS’s June 2026 five-year forecast expects tender prices to rise by 15.5% over the five years to the second quarter of 2031, and building costs by 13.1% over the forecast period. In the second quarter of 2026, tender prices were 3.2% higher than a year earlier and building costs 3.8% higher. BCIS noted that weak demand remains the dominant force in the market, while energy and material prices have been volatile because of the conflict in the Middle East.
Forecasts change every quarter, so check the latest figures before using them in a cost plan. For the wider economic picture, see our guide to construction economics.
Inflation in other ProQS tools
- The construction cash flow calculator applies an annual inflation rate to work not yet done, so you can see how inflation changes a monthly cash flow.
- Our life cycle costing guide explains the difference between inflation and discounting. In a Green Book appraisal, future costs are kept in real terms and discounted, rather than inflated.
- The Excel for quantity surveyors guide shows how to build inflation into your own spreadsheets.
More questions about construction inflation
What is the difference between inflation and escalation?
The terms are often used interchangeably. In cost planning, inflation usually means the general rise in construction prices over time. Escalation is sometimes used for the specific allowance added to a cost plan or contract to cover that rise.
Should I use a tender price index or a building cost index?
Use a tender price index to update cost plan rates, benchmarks and past tender prices, because those are prices clients pay. Use a building cost index to look at contractor input costs, such as labour and materials.
Why does NRM1 use the mid-point of construction?
Spend during construction is spread across the programme. The mid-point is a simple proxy for when the money is spent on average. For long or unevenly profiled projects, a cash flow-based calculation gives a more accurate result.
Can I use ONS data instead of BCIS?
Yes, for many purposes. ONS construction output price indices are free and official. They are built from input costs with a profit mark-up, as a proxy for output prices, so they are not a direct tender price index. Check that the series suits your task and state the source in your report.
Does Option X1 apply to compensation events?
Compensation events priced using Defined Cost at current prices must be brought back to base date levels, so they do not attract price adjustment twice. The calculator flags this. Always check the exact treatment against your contract wording.
Is inflation the same in every region?
No. Regional markets move at different rates. The historic tab includes an optional location adjustment, so you can move a cost between regions as well as through time using location factors.