Introduction

Prices vary in every industry due to which unexpected conflicts are created between the Client and the
Manufacturers. Therefore both parties enter into a contract under which this variation of price is
calculated by a formula so that adequate compensation is made to manufacturers and inflation does not
hamper the profit aspects for the company. The Price Variation Clauses are based on robust allocation &
analysis of prices of various raw materials become not only the most reliable but also the only source of
realistic solution for variation matters. PVC helps in settling claims between purchaser and supplier for
variation in the basic price of raw materials from the period of tendering till the date of delivery. Under
this prices of raw materials are substituted in the given formulae to capture the percentage variation
over quoted price that is calculated mathematically. This transparent procedure helps to reduce the lead
time as the prices are calculated beforehand and so remuneration is done in time.

Project Scope
This project will thus look at the current Government and Private companies’ procedure with the TATA
Steel and see what the variation is with the PVC mechanism followed by the company. Alternatively
analysis of Steel Industry will also be done along with analysing global best practices and then comparing
what factors are considered by TATA Steel. Change in nominal prices for each of the factors such as
labour, materials, fuel, non-reusable temporary works, overheads and plant will be undertaken in this
project and change in both Global and India will be considered. As total of the percentages must equal
100 the percentage change will be adjusted with same base year price. Indices and Weightings for
Materials and Fuel, allocates a nominal weighting to a range of material and fuel items that may be used
on the project and for calculating this index industry standards will be used. In PVC mainly these
practices are followed traditionally

For materials and fuel: Index figures published monthly by the Central Statistics Office (CSO) is used;

For non-reusable temporary works: The Consumer Price Index is used; and

For labour: Figures under Social Partnership Agreements is used.

If the CSO or relevant index is not available then CPI Index will be used.

After doing this analysis then case of Increase in prices for raw materials or other components within the
contract period has to be considered. For increase outside contract period case of hyperinflation is
checked and then it is adjusted to calculate final change in prices. These changes then will be discussed
with mentor and any changes if required will be made. After the approval and updating, final report with
predictive modelling will be submitted.

The Timeline for the project is presented below

References:

PV clauses & prices/Indices. (2019, October 24). IEEMA. https://ieema.org/about-ieema/services/pv-

clauses-prices-indices/

Office of Government Procurement. (2016). Cost Control: Price Variation Clauses. Office of Government
Procurement Department of Public Expenditure and
Reform. https://constructionprocurement.gov.ie/wp-content/uploads/GN-1.5.2v1.0-22-01-2016.pdf