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Vol. 1, No. 4, 2020

Corresponding author:
1 “Construction – Modern Technologies”, Ukraine.
E-mail: Sichnyi.S@gmail.com
ORCID: https://orcid.org/0000-0002-8340-7521

DOI: https://doi.org/10.30525/2661-5150/2020-4-19

ECONOMIC EFFICIENCY OF DETERMINING  
THE MARKET PRICE OF CONSTRUCTION RESOURCES  

WITHIN THE LIMITED BUDGET
Serhii Sichnyi1

Abstract. The article examines the analysis of current prices in the market of building materials, products, structures, 
machines, and mechanisms (construction resources), which is performed by construction participants. The aim of 
the article is to study the possibility of achieving the maximum economic effect of the analysis of current prices 
in the market of construction resources within a limited budget. A universal mathematical approach is proposed 
to calculate the economic effect of the analysis of current prices in the market of construction resources, which is 
based on a selective method of the research of the market value of construction resources. The calculations take 
into account the difference between the real resources presented on the market and the estimated construction 
resources (resource position of the estimate), between the market price and the estimated market price of the 
construction resource. While performing the analysis of current prices on the market of construction resources in 
the given conditions of the limited budget the option to reduce the general list of resources by a selection of the 
optimum list with an application of methods of discrete optimization is offered. The condition for the formation of 
an abbreviated list of resources is the maximum economic effect that can be obtained from the analysis of current 
prices for selected resources. Method of heuristic rules is proposed, which allow to significantly reducing the initial 
list of resources by a simple analysis of input data. The application of these rules allows to reduce the variability 
of input data for discrete optimization or not to carry it out at all, because the amount of resources selected with 
their help satisfies the condition of the budget constraint. Recommendations on the composition of the source 
data are given – this is the project documentation and/or the market price of construction resources as a basis for 
comparison and information on the range of market prices (scope of sample variation) for the resources included 
in the study. In the article there are given examples of the practical application of the technique in the conditions 
of the construction industry in Ukraine. In general, the proposed approach can be used at all stages of variant BIM-
design, when it is necessary to determine the most optimal composition of structures and resources that meet the 
requirements for the life cycle of the object. Including under the condition of gradual detailing of constructs (an 
increase of LOD of the project), during designing, up to resources at a stage “Working project”. The main advantages 
of the proposed method are universality – it does not depend on the ultimate goal of the results of the customer 
and / or contractor and scalability – it can be applied to the structure, its individual design, or several resources.

Key words: cost of resources in construction, cost of construction, market research, determination of market value 
of construction resources, analysis of current prices in the market of construction materials, estimated price of 
resources.

JEL Classification: C81, D81, L74

1. Introduction
A typical financial and economic goal during 

construction is to make a profit for the builder 
and save money for the customer (investor). Both 
are achieved by reducing the cost of construction 
resources, which is impossible without a study of 
the construction resources market within a highly 
competitive market.

The analysis of current prices on the market of 
construction materials, products, constructions, 
machines, and mechanisms (construction resources) 
envisaged by National Standards of Ukraine 
(Minrehion, DSTU B D.1.1-1:2013, 2013) aims to 
save public funds. For the contractor, such market 
research is necessary to obtain maximum profit 
when performing construction work. The ultimate 



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goal is different, but the local goal of market analysis 
is the same – to determine the real market prices of 
construction resources for informed decision-making 
related to the activities of the enterprise.

At first glance, it seems that we are dealing with 
a “standard” marketing or statistical market research. 
Moreover, the modern methodological developments 
and technical capabilities allow to conduct a market 
research with high accuracy (low error), even for 
very complex systems. But there are several reasons 
that require a separate analysis of the market of 
construction resources:
– investigation of the market value of construction 
resources, in addition to the accuracy, are subject to 
strict restrictions on their duration;
– the list of construction resources for which it is 
necessary to carry out the analysis, is dynamic. Its size 
and structure depends on the construction site and the 
composition of the construction work on it. During 
construction, this list changes monthly;
– the names of resources in the project documentation 
are generalized with information about the purpose 
and main technical characteristics of the construction 
resource. They do not contain the names of specific 
brands and often do not take into account the 
terminology of manufacturers and/or suppliers. 
Therefore, the formation of the list of suppliers to 
determine the market price of the construction resource 
can be carried out only after determining the list of 
real market names that most accurately correspond 
to the generalized name of the resource in the project 
documentation;
– for projects implemented using BIM-technologies, 
the resource can be a construct that is gradually detailed 
into smaller constructs up to individual resources (from 
LOD 100 to LOD 500).

However, the cost of such work is limited. At 
a minimum, it may not exceed the savings of the 
construction customer or the contractor’s profit from 
such an analysis of current prices. Therefore, the 
question of the maximum effectiveness arises in terms 
of research within a limited budget.

2. Analysis of recent research and publications
In post-Soviet countries, data collection and 

processing techniques for determining weighted 
average current prices are based on information 
about construction work that was already 
performed. It means that data is collected about past 
events – deliveries that have already taken place. With 
the resource method, which operates in Ukraine, 
the current prices must be determined before the 
start of work – before the supply of resources to the 
object. Domestic research states the need for work to 
determine current prices (Berkuta, 2000), however, 
there are no appropriate methods.

The need to use in the estimated current market 
(regional) prices for construction resources is noted 
in the works of specialists in various fields from 
the standpoint of pricing, setting, and regulating 
the price of construction products (Matveychuk, 
2009; Reznichenko, 2006), from the standpoint of 
efficiency (profitability) of investment activities 
(Nikolayev, 2011), planning and cost reduction of 
the customer, from the standpoint of design and 
construction (Berkuta, 2000). The complexity of the 
problem is determined. In the works by Reznichenko 
(Reznichenko, 2006), approaches to the formation of 
the structure of data banks of current market prices 
and some methods of indirect determination of the 
price of resources are formulated.

Theoretical bases for determining the market 
price of construction resources were proposed in 
2013 (Sichniy, 2013). They became the basis for 
the development of SOU-N D 1.1-34623477-001: 
2015 “Procedure for the analysis of prices for material 
and technical resources used for construction work”, 
which is implemented in practice and used by Analytic 
Center “Construction – Modern Technologies” LLC, 
Ivano-Frankivsk, in providing services to construction 
market participants.

Separate attempts to study the economic efficiency 
of work to determine market prices of construction 
resources (Sichniy, 2013; Sichnyi, 2017) are not 
enough.

The aim of the article is to investigate the 
possibilities of achieving the maximum economic 
effect of the analysis of current prices in the market of 
construction resources within a limited budget.

3. Analysis of the current prices  
in the market  
of construction resources

To solve these problems, we can use methods of 
marketing research, which are based on the system of 
marketing information (Kotler, 2020): “Analysis of 
current prices in the market of construction resources 
is a systematic determination of the list of resources 
needed to perform the work, collecting data on their 
cost, analysis of the collected data and a report on the 
result.” The scheme of research (Kotler, 2020) will 
look like the image below.

Without delving into the types of data (primary, 
secondary) and methods of their collection, we are 
going to consider the problem of optimal allocation 
of funds for work to determine the market price of 
construction resources.

Let the project provide for the use of H estimated 
resources with a total estimated value of B. Set as well 
the amount of funds R, which can be spent on the 
analysis of current prices in the market of construction 
resources by structure.



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The cost of determining the market price of the 
i resource depending on the sample size can be 
represented as
S a bni i i i= +                  (1)
where: 
ai is the fixed costs (which do not depend on the 

sample size),
bni i is the variable costs proportional to the sample 

size.
ni �  is the sample size in the i-th estimated resource.
Estimated resource (resource position according 

to (Minrehion, DSTU-N B D.1.1-6:2013, 2013)) is 
a general name of a group of materials, products or 
machines. Therefore, in fact:
n n n n ni р= + + +…+1 2 3
where:
p is the number of products or machines with equal 

characteristics; however, produced by different brands 
or manufacturers which correspond to the design 
characteristics of the estimated resource (resource 
position).

Fixed costs include organizational costs, 
transportation costs, training, and so on.

Variable costs include payment for the working time 
of specialists who perform the work (working time, 
of course, in proportion to the sample size), travel 
expenses, etc.

The total estimated cost of all resources consists of the 
average market estimated values of all resources of the 
project:

В В
Н

і= ∑
1

                 (2)

В Ц Кі і і= ×                  (3)
where:
Ві  is an average market estimated value of one 

estimated resource;
Кі  is the estimated amount of the resource.
Ці  is the average market estimated price of the 

estimated resource;
Average market estimated price of the estimated 

resource:

Ц
ц

k
і

k

і
=
∑1                  (4)

where:
ці  is the estimated price in the i market supply of the 

estimated resource;
k is the total number of market offers of the estimated 

resource.

The estimated price of material resources 
according to (Minrehion, DSTU-N B D.1.1-2:2013, 
2013) is determined by the on-site composition 
of the construction site and the established unit of 
measurement that takes into account the following 
elements of value:
– selling price (including the cost of containers, 
packaging and props and the cost of cargo work);
– cost of transportation;
– procurement and warehousing costs.

Since the full set of suppliers (sellers) for most 
construction resources in a particular region is always 
unknown – their complete list does not exist, it is obvious 
that for most construction resources it is impossible 
to cover and collect all the proposals. Therefore, to 
determine the average market estimated price, it is most 
appropriate to use the sampling method.

Each estimated resource will have its own sample size 
(Sichniy, 2013) and the average market estimated price 
of the resource will be defined as:
Ц ці і і= ± ∆

where: ці  is the average price in the sample of the i-th 
market supply of the resource;
∅i  is sampling error.

Guaranteed estimated price at which we will be able 
to purchase an estimated resource in the construction 
region:
Ц ці
гар

і і= + ∆                  (5)
Denote зі  is the change in the price of the resource in 

comparison with the design estimated price of the i as 
estimated resource.

Then the economic effect (total savings of the 
customer or the contractor’s profit) can be calculated by 
the formula:

ЕЕ К ц з
НN

і і і і= × +( )×∑
1

∆                (6)

Sampling error:

∆і
і

і

t

n
=

×σ

where:
t is a tabular value, for a sample of more than 30 t = 2.58;
σi  is general variance of price proposals of the i as 

estimated resource.

4. Ways to achieve maximum economic effect
Within a limited budget R, it may be impossible 

to determine the market prices of all estimated H 

Forming a list 
of resources 

Selection of 
sources of 

information. 

Collection of 
information 

Analysis of 
the collected 
information 

Presentation 
of the 

obtained 
results 

Figure 1. The scheme of analysis of current prices in the market of construction resources



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Vol. 1, No. 4, 2020
resources provided by the project. Then it is necessary 
to solve the problem of optimal distribution of 
funds for the work to analyse the market price of 
construction resources for the project: to determine 
the list of resources provided by the project and the 
sample size ni  for these resources so that the value:

ЕЕ К ц
t

n
з

НN

і і
і

і

і= × +
×










×∑

1

σ
               (7)

was the maximum at a given limit:

1

НN

i i ia bn R∑ +( ) ≤                 (8)
where:
R is the amount of money that can be spent on work 

to determine the market price of resources for the 
structure.

If you analyze all the resources included in the 
project, then the task is to allocate variable costs so as 
to minimize

1

Н
i

i

q

n
Σ  ; where: q t з Кi i i i= Ã                (9)

with restriction:

1 1

Н

i i

Н

ibn R a R Н∑ ∑≤ − = ( )              (10)
This problem is solved using the method of Lagrange 

multipliers.
Its optimal solution:

n

q
b

q b
R Нi

i

i

Н

j j

=









( )
∑

2
3

1

2
3

1
3

             (11)

The value (7) will be equal to:

1

2
3

1
3

3
2 1

2
Н

j jq b R Н∑








 ( )

−
*              (12)

and the expected economic effect will be

ЕЕ К з *= +








 ( )∑ ∑

−

1 1

2
3

1
3

3
2 1

2
Н

i i i

Н

j jx q b R Н            (13)

It is known that the list of resources includes price 
making part wherein the total cost makes a significant 
role and there are resources where the total cost is within 
the statistical error. Therefore, the task of efficient use of 
funds can be complicated by selecting the most optimal 
list of resources for the analysis of market prices from 
their general list. The task of selecting the optimal list of 
resources is to determine the set Н, for which (13) takes 
the maximum value. This task belongs to the type of 
discrete optimization tasks (Akimov, 2005). Heuristic 
rules can be applied to simplify the problem.

For Example
1. We assume that the analysis of the market price 

of estimated resources with the highest estimated 
value will bring the greatest economic effect and sort 

resources by decreasing estimated value. We accept 
the limit of pricing resources (80%-95%) of the total 
estimated cost. We obtain a significantly reduced list of 
resources (Sichnyi, 2017) for which the task of finding 
the extremum for (13) is simplified.

2. We assume that the largest variance of the sample 
will be in the resources with the largest range of market 
prices (scope of sample variation) and for them, the 
economic effect of the analysis will be greater. We sort 
resources by decreasing the estimated value and, in 
addition, taking into account the market price range.

The correctness (accuracy) of the calculation of the 
possible economic effect largely depends on the basis 
of comparison – the design estimated price of the i 
estimated resource and the sampling error. This is clearly 
seen in (6) which may look different:

ЕЕ К ц ц
Н

і і і і
кошт= × + −( )∑

1

∆              (14)

where: ці
кошт  is the design estimated price of the i as 

estimated resource.

5. Practical implementation
An example of practical application is the analysis of 

current prices in the market of construction resources 
for the project: “Overhaul of the superstructure of 
the berth №9”, which was performed by Analytic 
Center “Construction – Modern Technologies” LLC, 
Ivano-Frankivsk, in 2016. The customer set the task to 
determine the lowest cost of construction resources 
in the project before the examination of the project 
documentation and in connection with the preparation 
for the procurement procedure.

The initial data for the work was a statement 
of resources for the project, specifications and 
drawings of reinforced concrete products of special 
construction.

Due to time constraints and budget, the customer 
was asked to analyze the current selling prices of 
suppliers for pricing materials, products and structures 
that are at least 90% of the total cost of section IV 
“Building materials, products and structures“ resource 
information to project. The results of the analysis of 
current prices in the market of construction resources 
are shown in Table 1.

Here are a few more problems where the proposed 
mathematical apparatus can already be used:
– The investor wants to increase the market price of 
the object by using more expensive, more prestigious 
materials on its construction. The new, possible, market 
price of the object is known from the study of the price 
of competitors. But to assess how sales revenue will 
change, it is necessary to determine how the cost of 
purchasing new materials will change.
– The construction company decides to take part in the 
tender for the construction of facilities in another region. 
The company has experience, qualified personnel, 



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and had done similar projects. For the well balanced 
decision making, you need to know how direct costs 
will change, the main component of which is the cost 
of construction resources in a new, for the company, the 
construction region.
– The investor needs to assess their financial capabilities 
before starting the construction of the facility for which 
the project documentation was developed several 
years ago. To make a decision, it is not necessary to list 
all the estimate documentation; it is enough to assess 
how the estimated cost of construction resources has 
changed.
– The investor needs to “tie” a typical project to a 
construction site in another region. A list of all estimated 
resources is known from the previously implemented 
project. It is possible to determine the economic 
feasibility (financial feasibility) of construction by 
examining the market value of resources in the region 
of “binding”.

6. Conclusions
The proposed approach can be used:

– in BIM-design when in the early stages there is no 
list of resources, but there is a list of constructs, which 
gradually, during the design, is detailed, up to the 
resources at the stage of “Working project”;

– for variant design, when it is necessary to determine 
the most optimal composition of structures and 
resources for the longest or cheapest life cycle of the 
object.

The main advantages of this approach are that:
– it is scalable: it can be applied to a structure, its separate 
construct, or several resources.
– it is universal: regardless of the purpose of application 
of results it can be used by all participants of the 
construction market – the investor (customer), the 
contractor, the designer, the engineer-consultant, the 
monitoring (controlling) organizations.

For the maximum efficiency of use of the offered 
mathematical apparatus the enterprises need qualitative 
initial data:
– Design documentation and/or market price of 
construction resources as a basis for comparison;
– Market price range (scope of sample variation) for 
resources;

Such data can be collected at our own facilities and 
obtained as a service from specialized organizations.

The state, as the largest customer of construction 
works, is interested in forming and supporting the 
market of such information services. Competition 
in this area will contribute to the transparency of 
calculations and ultimately to the establishment of 
a civilized construction market. 

Table 1
The results of the analysis of current prices in the market  
of construction resources for the project: “Overhaul of the upper structure of the moorage № 9”

Indicator According to the project According to the analysis
The number of items in the resource statement 222 222
Number of resource items for analyze 130 90
Total selling price of resources for analysis, UAH 8,354,360 8,166,127
The limit for pricing resources of the total cost of material 
resources in the statement of resources,%

90 98

The total average selling price of resources for which the 
analysis was actually conducted, UAH

8,166,127 7,748,646

The total minimum cost of resources for which the analysis 
was actually conducted, UAH

– 7,114,956

Economic effect, calculated from the total cost of average 
resource prices for which the analysis was performed, %

5.1

Total average selling price of resources in the statement  

of resources ( В В
Н

і= ∑
1

), UAH 8,354,360 7,936,879

The total minimum cost of resources in the statement  
of resources, UAH

– 7,303,189

Economic effect of the analysis, calculated from the total cost 
of average prices on the statement of resources (EE),%

5.0

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