How to calculate escalation in construction?
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There are several methods for calculating escalation in construction, but the most common approach is to use a cost index. This involves tracking the past and present inflation costs of materials and labor associated with the project, and then projecting those costs over the life cycle of the project to determine an accurate escalation rate.
Additionally, other variables such as regional economic conditions, type of contract (fixed-price versus time and material), type of materials used, and labor force availability should all be taken into consideration when calculating an escalation rate.