PPR - 2007, Rule 119

119. Price Adjustment:

(1) The Public Entity has to provide a statement in the procurement contract that price adjustment can be carried out.

(2) The price adjustment provision in the procurement contract shall contain the following matters as well:-

(a) Condition of price adjustment,
(b) Formula to determine,

In determining formula pursuant to this clause, formula shall be so formulated as to adjust the price only of the labor, materials and equipment used on the works completed,

(c) Maximum amount of price adjustment,
(d) Composition of price to be used in the formula under clause (b), (the price of labor, equipment, materials, fuel etc.),
(e) The relevant price indices to be used to adjust the price of each component,
(f) the method of measuring fluctuation of exchange rate between the currency used for the indices and the currency to be used for making payment,

(g) Baseline date to be used for application of price adjustment formula,
(h) Interval of time for application of price adjustment formula, and
(i) Minimum price escalation to be determined by the use of price adjustment formula and other terms and conditions and restrictions to be fulfilled for application of the provision relating to price adjustment.

(3) The maximum amount of price adjustment to be made pursuant to this Rule shall not generally be more than twenty five percent of the initial contract prices. The procurement contract may provide that if the amount of price adjustment exceeds to that price, the Public Entity may terminate the procurement contract or negotiate with the construction entrepreneur, supplier, service provider or consultant in order to limit the contract price within the approved budget or may pursue other measures or arrange for additional budget.

SBD (for medium contract for construction of bridge) Section IV GCC: clause 46 Price Adjustment

46. Price Adjustment

46.1 Prices shall be adjusted for fluctuations in the cost of inputs only if provided for in the SCC. If so provided, the amounts certified in each payment certificate, after deducting for Advance Payment, shall be adjusted by applying the respective price adjustment factor to the payment amounts due in each currency. A separate formula of the type indicated below applies to each Contract currency:

P_c = A_c + B_c Imc/Ioc

where:

P_c is the adjustment factor for the portion of the Contract Price payable in a specific currency “c”.
A_c and B_c are coefficients³² specified in the SCC, representing the nonadjustable and adjustable portions, respectively, of the Contract Price payable in that specific currency “c”; and

Imc is the index prevailing at the end of the month being invoiced and Ioc is the index prevailing 30 days before bid opening for inputs payable; both in the specific currency “c”.

46.2 If the value of the index is changed after it has been used in a calculation, the calculation shall be corrected and an adjustment made in the next payment certificate. The index value shall be deemed to take account of all changes in cost due to fluctuations in costs.

46.3 If, price adjustment provision is not applicable pursuant to Sub-clause 46.1 then the Contract is subject to price adjustment only for construction material in accordance with this clause. If the Contract Agreement is concluded following the Invitation for National Level Bidding and after the signing of the Contract Agreement, if the price of the construction materials stated in the SCC increase or decrease in an unexpected manner in excess of ten (10%) percent in comparison to the base price stated in the SCC, then the price adjustment for the increase or decrease of price of the construction material beyond 10% shall be made by applying the following formulas:

For unexpected increase in price

P =[R₁ –(R₀ ×1,10)]× Q

For unexpected decrease in price

P =[R₁ –(R₀ ×0.90)]× Q

Where: “ P” is price adjustment amount “ R₁” is the present price of the construction material “ R₀” is the base price of the construction material “ Q“ is quantity of the construction material consumed in construction during the period of price adjustment consideration

46.4 The Price Adjustment amount shall be limited to a maximum `of 25% of the initial Contract Amount unless otherwise is specified in the SCC.

46.5 The Price Adjustment provision shall not be applicable if the contract is not completed in time due to the delay caused by the contractor or the contract is a Lump sum Contract or a Fixed Budget Contract.

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³² The sum of the two coefficients Ac and Bc should be 1 (one) in the formula for each currency. Normally, both coefficients will be the same in the formulae for all currencies, since coefficient A, for the nonadjustable portion of the payments, is a very approximate figure (usually 0.15) to take account of fixed cost elements or other nonadjustable components. The sum of the adjustments for each currency are added to the Contract Price.