Price Adjustment in Contract
Index of Price Adjustment
- pn = price adjustment factor
- A = coefficient. This is also fix coefficient. Generally its value is 0.15.
- b = labor coefficient or proposed weightage of labor in escalation. Shall be submitted by contractor while bidding.
- c = construction material coefficient. Shall be submitted by contracted while bidding.
- d = equipment coefficient. Shall be submitted while bidding.
- Ln = Current Labor index value
- Mn = Current Construction Material index value
- En = Current Equipment index value
- Lo = Base period Labor Index Value
- Mn = Base period Construction Material index value
- En = Base period Equipment index value
Base period is the time frame of 30 days before the bid is published. Example: if the bid is published in 16th of June 2020, the base period is 16th of May 2020 i.e May/June index will be effective.
Thus, Lo=495.97, Mo=103.45, Eo=107.74.
Lo index is listed in SWRI and Eo & Mo in WPI.
If the IPC is submitted in 4th May 2021, then the Ln, Mn, En shall be drawn from index of 4th April 2021, i.e March/April.
Thus, Ln=514.53 , Mo=108.21 , Eo=113.51
Assume the contractor had proposed coefficient as follow:
- A=0.15
- b=0.15
- c=0.4
- d=0.3
Then as per formula: pn=A+b x Ln/Lo + c x Mn/Mo + d x En/Eo = 0.04
Assume the IPC amount is 1000000 (excluding VAT & PS), then the price adjustment amount = 0.04 x 1000000 = 40000. In case the IPC includes mobilization deduction or insurance payment, the sum is not eligible for PA thus shall be deducted before multiplication.
I hope, you have well understood the price adjustment. Visit NRB website for indices.
*SCC - Special Condition of Contract
*GCC - General Condition of Contract
*PA - Price Adjustment
*ESC - Escalation
Pls write about the latest breakdown of E value by NRB and the value to be taken in construction contract .
ReplyDelete