1 / 27

L ECTURE:

L ECTURE:. PRICE ADJUSTMENT IN CONSTRUCTION & CONSULTANCY CONTRACT By Engr. M. Mazhar-ul-Islam Convener PEC Act & Byelaws Committee. Introduction. Terms – Escalation, Price Adjustments & Increase / Decrease.

keanu
Download Presentation

L ECTURE:

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. LECTURE: PRICE ADJUSTMENT IN CONSTRUCTION & CONSULTANCY CONTRACT ByEngr. M. Mazhar-ul-Islam Convener PEC Act & Byelaws Committee

  2. Introduction • Terms – Escalation, Price Adjustments & Increase / Decrease. • Meaning – Adjustment of Contract Price for increase or decrease of prices of adjustable materials / services. • It is compensation and not extra benefit to Contractor. • Adjusted periodically during contract period. • Basic formula: Price Adjustment = Quantity x (current rate – base rate). • FIDIC formula: Pn=A+bLn + c Mn + d En + …… Lo Mo Eo • To be built in the Bidding Documents.

  3. Why Price Adjustment? • Bidders quote price on prevailing market rates. • Cost of basic construction materials fluctuate unpredictably in Pakistan. • Unlimited cost increase not foreseeable & cannot be built in competitive bidding process. • Contractors can execute work only at right costs. • Legal contract not necessarily be executable unless conductive mechanism equitable to the parties are included.

  4. Why Price Adjustment? • Results of non-adjustments: Project delay, disputes, cancellation of contracts – resulting more cost for the Employer. • Exclusions: • Variation Orders • Claims • Subsequent Legislation • Measurement of Quantities

  5. Provision in PEC Documents • Standard Bidding Documents for Civil Works: Clause 70.1 of PCC. • Standard Bidding Documents for E&M Works: Clause 47.1 of PCC. • Standard Form of Bidding Documents (Smaller Contractor): Preamble. • Standard Contract for Consultancy (Time Based): Clause 6.2(a) SC. • Standard Procedure & Formula for Price Adjustments.

  6. Miscellaneous Issues • 6 months contract not covered in notified documents. • Procedure for Price Adjustments deemed to be notified. • Mistakes in formulating contract specific formula.

  7. Formula for Escalation

  8. DETERMINATION OF WEIGHTAGES • Undertake rate analysis of rightly prepared BOQ’s • Consider all members of a family of escalatable items • Consider 5% & more weightages as escalatable elements • POL & labor shall always be considered even below 5% • Maximum adjustable portion shall not exceed 65% and fixed portion not less than 35% • Sum of all weightages plus fixed portion must be unity

  9. Appendix – C to Bid

  10. Notes on Appendix – C / Foot Note Employers using this price adjustment provisions may add or delete any elements as deemed appropriate to the project.

  11. Note 1 Indices for “(ii)” to “(vii)” are taken from FBS. The base cost indices or prices shall be those applying 28 days prior to the latest day for submission of bids. Current indices or prices shall be those applying 28 days prior to the last day of the billing period.

  12. Note 2 Any fluctuation in the indices or prices of materials other than those given above shall not be subject to adjustment of the Contract Price.

  13. Note 3 Fixed portion shown here is for typical road project, Employer to determine the weightage of Fixed Portion considering only those cost elements having cost impact of seven (7) percent or more on his specific project.

  14. Price Adjustment Formula Pn = A + b Ln + c Mn + d En + …… Lo Mo Eo

  15. Price Adjustment Formula • Pn is Price Adjustment Factor • A is constant, representing the nonadjustable portion • b, c, d, etc. are coefficients / weightages representing portion of each cost element • Ln, Mn, En, etc. are the current cost indices of cost elements for month “n” • Lo, Mo, Eo, etc. are base cost indices corresponding to above cost elements

  16. Sources of Indices & Weightages • Source of indices shall be those listed in Appendix-C as approved by Engineer. • As the basis of Price adjustment, Contractor shall have submitted the tabulation of Weightages & Source of Indices if different than Appendix – C.

  17. Base, Current & Provisional Indices • Base cost indices or prices shall be those prevailing on the day 28 days prior to the latest date of bid submission. • Current indices or prices shall be those prevailing on the day 28 days prior to the last day of the period to which a particular monthly statement is related.

  18. Base, Current & Provisional Indices • If at any time, current indices are not available, provisional indices are determined by the Engineer will be used subject to subsequent adjustments. • If an element is not used, ratio between base and current rates should be considered unity

  19. Adjustment after Completion • Clause 43 GC: Time for Completion – within Schedule or extended Schedule pursuant to Clause 44 GC. • Clause 44 GC: Extension of Time for Completion – not for fault of Contractor. • Clause 48GC: Taking over Certificate – by the Engineer.

  20. Adjustment after Completion • Price adjustments admissible even for the extended completion period. • If extension due to Contractor's fault, PA will be using indices before or after the completion, favorable to the Employer. • If extension pursuant to Clause 44 (No fault of Contractor), PA as usual is allowed.

  21. Weightages • The Weightages of each of the cost factors shall be adjusted at any stage of the project, if it is found unreasonable, unbalanced or inapplicable in review of the Engineer. • Weightages change for Instruction under clause 51(v.o.). • Such adjustments shall have to be agreed in such v.o.

  22. Workshop on Price Adjustment “Price Adjustment in Consultancy Contract” BY: Engr. M. Mazhar-ul Islam Convener PEC Act & Bye-laws Committee

  23. Introduction: • Applicable to Time Based assignment Contract only. • Generally increase in cost for services. • Exclusions: • Increase in ceiling • Cost of Additional work • Subsequent Legislation for other provisions • Modification of Contract under Clause 2.5 SC • Payment to be adjusted under Clause 6.2(a) SC. • Applicable for both Foreign & Local currency adjustments.

  24. Local Currency Adjustment: Option – 1 • Billing rates for each person shall be adjusted in each July. • First adjustment in July following submission of final proposal. • Revision Elements: • Annual increment • Increase due to promotion • Salary revision to Clause 5.3 SC or otherwise

  25. Local Currency Adjustment: Option – 2 • Using the formula: RI = RIo x II/IIo Where: • RI is the adjusted billing rate • RIo is the billing rate payable • II is the combined consumer Price Index (CPI) General for Govt. employees • IIo is CPI in July of the year Consultant submitted its proposal

  26. Foreign Currency Adjustment: • To be adjusted every 12 months using formula: Rf = Rfo x If / Ifo Where: • Rf is adjusted remuneration • Rfo is the remuneration payable • If is the official salary index in foreign country for the first month for which adjustment is suppose to have effect • Ifo is the official salary index for the monthly date of contract

  27. Thank you

More Related