Comparing project costs internationally: Methodology and data issues

It is not uncommon to see or hear statements that suggest that the cost of a project in one country is some
multiple of the cost in another. Whether the claim is that it is more or less costly is irrelevant – the fact is that
such statements are often meaningless yet governments and clients are all too ready to accept such claims and
act on them in their decision-making. In some cases relative cost, however poorly calculated, is used as the basis for conclusions regarding relative productivity in industries such as construction. Arriving at truly comparable costs between countries is a complex problem and one that is not yet fully resolved. If costs for any sort of project are compared between countries, even where the countries share a common currency such as the Euro there are still differences in purchasing power and thus conversions based on purchasing power parity (PPP) are more desirable than those based on money market exchange rates. There are, however, still methodological problems to be resolved in the creation of PPPs and professionals handling projects and managing cost across national borders should be aware of the care that is required if valid comparisons are to be made and clients are to be properly advised. This paper presents ongoing research into the production of PPPs and their application to the conversion of project costs to a common base. It also explores some of the difficulties associated with gathering reliable cost data.