Slide 6

Price Escalation refers to INCREASE IN THE CONTRACT PRICE DURING THE CONTRACT'S PERFORMANCE
BASED ON THE EXISTENCE OF "EXTRAORDINARY CIRCUMSTANCES."
According to the definition of simplicable.com, Price escalation, is a contractual phrase that permits
price increases when the cost of an input exceeds a predetermined threshold.
According to bizfluent.com, price escalation can be caused by the five following factors: poor
management, changes in the cost of raw materials, increases in employee wages or benefits, compliance
with industry standards, or changes in the supply chain.

Slide 7
This is the importance of price escalation.
For contractor’s perspective. In summary
Contractors are protected by including price escalation and reduces the impact of price fluctuations in
contracts.
And lastly, predicting material cost fluctuations early is critical to avoiding contract conflicts with clients.

For Owner’s perspective. In summary again,

Contract price escalation guarantees that the project stays within budget.
Another, Contractor will not have any reason for delay in procurement.
Also, with price escalation, client can INSTANTLY replace materials that are unavailable or unreasonably
priced

Slide 8
There are 6 different types of contracts,
EPC, Design and Build, Build Only, PM Only, EPCM, and CM only
Some of these are self explanatory naman, the confusing part lang is the EPC and EPCM, PM and CM.
In EPC contractor completes the project from start to finish. The owner provides the plans. In The EPCM
contractor is responsible for the design and overall administration of the project on behalf of the owner.

For PM and CM naman, CM will manage only the construction portion of the project. Essentially, a CM is
a project manager with a specific area of knowledge. on the other hand, A PM runs all aspects of the real
estate project. The main difference is the level of authority.

Slide 9
Extraordinary Circumstances is an event or sequence of events that causes price escalation.
EXTRAORDINARY INFLATION is The change in the purchasing power of the Philippine peso that was
unexpected.
on the other hand, FORTUITOUS EVENT is an unforeseeable event or incident that is unavoidable

Slide 10
This is according to the GPPB Revised Guidelines for Contract Price Escalation.
In here, GPPB established the Price escalation guidelines and defined reasons that may cause price
escalations. According to GPPB, there are 3 events that can be considered for Price Escalation.

Slide 11
The first step of price escalation process is the endorsement. The procuring entity shall submit the
following documents to NEDA.
1. Price Escalation Certification as per RA 9184.
 2. Description of the requested price increase
3. Certified copy of original contract
4. Cost estimates of the items affected by the price escalation request
5. Original construction schedule
6. Contractor's original price increase request
7. Material and Goods Price Indices
8. Other NEDA/GPPB data requirements

Stage 2
Once NEDA has accepted the request's completeness, the evaluation process will begin.
In here, the request will undergo 2 stages. Legal and Technical.
In legal, checking if there is an actual extraordinary circumstance that occur.
In technical, we will discuss further on the next slide.

Slide 12
There are 2 options for technical parameters review.
First is standard deviation.
It should be at least two standard deviations from the mean of the historical data for the first thirty (30)
months after the bid opening date.
In case of no historical data available, then we shall use 10%.

In here, the computation will be based on these price indices.

WPI, CPI, and PPI.

Slide 13
In here.
K represents fluctuation factor and K varies for item of work.
a – represents contractor’s profit
b,c,d– refers to the factors relating each pay item to the total
xi,yi,zi,- refers to current price index of labor, materials,etc
xo, yo, zo – price index of labor materials, etc during bid date.

Slide 14

For infrastructure projects, the following given shall be used.

Tuwing kalian ba tayo magrerequest for price escalation?
Should only be made for cost items already incurred by the contractor or supplier and only upon
request.
And price escalation shall be submitted within 6 months from contractor’s official start date.

Slide 15
In case of misinterpretation, price escalation request will be automatically denied.
Once NEDA is done with the checking, NEDA will now recommend to GPPB the said request. GPPB will
be the one to approve such claims for price escalation.
Slide 16.
An escalation fee is calculated after the contract is completed, taking into account also price reductions
during contract execution.
In case of price escalation is less than the amount already paid, the excess will be DEDUCTED to the
retention or on the Bonds.

Only once the GPPB approved the claim, the contractor can only apply the price escalation.
In case of irregularities, the approval of GPPB does not serves as validation to the said irregularities.

Slide 17
In case If the project is delayed, and the activity subjected for price escalation is not yet completed, the
price index on the target schedule shall be followed.
In case of advance payments, No price escalation shall be made for the ff.
1. Work completed within the period equivalent to the amount of recoupment
2. Amount of materials paid in advance

For transitory clause naman. Contracts completed after the effective date of these Guidelines must be
claimed within TWO (2) YEARS of completion. And 2 standard deviations shall be computed for 30
months historical data.

Slide 18
In here, We made a flow chart to represent the process of Price Escalation approval.
In summary, it starts with the contractor. The procuring entity to review and gather all necessary
documents for price escalation. Neda to receive and check completeness. If complete, first stage and
second stage will now process as discussed earlier. Once all necessary steps has been completed, Then
NEDA to recommend to GPPB. GPPB to approve the price escalation claims, then procuring entity to
apply the price escalation. Malinaw po? If yes, I will now turnover the virtual floor to Ms. Angela
Sabularse. Thank you.