Presentation on:

Price Adjustment and Computation

Methodology

22.04.2016

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Price Adjustment Due to Change in Cost
 Terms – Escalation/De-Escalation, Price Adjustments and
Increase / Decrease in cost.
 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 on monthly IPCs/Running Bills during contract period.

 FIDIC formula: Pn = A + b Ln + c Mn + d En + ……
Lo

Mo

Eo
 To be built in the Bidding Documents 2
⚫

Ln Mn
p n  A  ba  cb  dc E n
Lo E o  et c .
Mo
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Determination of Weitages

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 Consumption of Cement and Steel
Under- Consumption in Ton
Main Sub Overhead
Sr.Nr. Description Unit Total
Building Station Tank Cement Steel G-60 Steel G-40
ground
Tank
IPC Nr.1 (28-08-2007)
1 PCC 1:4:8 CM 148.49 16.37 164.86 27.175
2 RCC 1:1½:3 CM 653.81 85.57 739.38 288.070
3 Brick work 1:4 CM 0.00 0.000
4 Steel ref. G-60 Kg 68179.23 12531.00 80710.23 80.710
5 Steel ref. G-40 Kg 25132.38 25132.38 25.132
315.245 80.710 25.132
IPC Nr.2 (30-09-2007)
1 PCC 1:4:8 CM 118.76 8.39 127.15 20.959
2 RCC 1:1½:3 CM 538.83 50.71 589.54 229.691
3 Brick work 1:4 CM 84.48 84.48 8.060
4 Steel ref. G-60 Kg 58852.74 58852.74 58.853
5 Steel ref. G-40 Kg 20570.55 3990.59 24561.14 24.561
258.710 58.853 24.561
IPC Nr.3 (08-10-2007)
1 PCC 1:4:8 CM 41.30 41.30 6.808
2 RCC 1:1½:3 CM 307.55 307.55 119.825
3 Brick work 1:4 CM 0.00 0.000
4 Steel ref. G-60 Kg 36410.28 36410.28 3
5 Steel ref. G-40 Kg 33785.62 33785.62 6 33.786
126.632 36.410
. 33.786
IPC Nr.4 (05-12-2007) 4
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1 PCC 1:4:8 CM 11.52 13.61 25.13 4.142 0
2 RCC 1:1½:3 CM 644.57 9.96 64.45 718.98 280.122
3 Brick work 1:4 CM 182.36 182.36 17.399
4 Steel ref. G-60 Kg 43551.61 705.13 9057.25 53313.99 5
5 Steel ref. G-40 Kg 49515.93 1268.26 50784.19 3 50.784
301.663 53.314
. 50.784
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Appendix-C to Bid: (PEC Bidding Document)

Cost Description Weightings Unit Base Rates Rs Applicable Index

Elemen
t
A Fixed Portion 0.350 - - -

b Labour Day-hour FBS

c Cement Bag FBS

d Reinforcing Steel Ton FBS

e High Speed Diesel Ltr. FBS

(HSD)
f Bricks 1000 No FBS

g Bitumen Kg FBS

Total 1.000
Notes on Appendix – C
 Employers using this price adjustment provisions may add or
delete any elements as deemed appropriate to the project.
 Indices are taken from FBS or Source of indices shall be those
listed in Appendix to Bid as approved by Engineer.
 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.
 Any fluctuation in the indices or prices of materials other than
those given above shall not be subject to adjustment of the
Contract Price.

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Notes on Appendix – C
 Fixed portion shown here is for typical road project, Employer
to determine the weighting of Fixed Portion considering only
those cost elements having cost impact of five (5) percent or
more on his specific project.
Supporting Guidelines
 If at any time, current indices are not available, provisional
indices are determined by the Engineer will be used subject
to subsequent adjustments.
 As the basis of Price adjustment, Contractor may submit the
tabulation of Weightings & Source of Indices different from
Appendix to Bid, subject to mutually agreed by the parties.
 Price adjustments admissible even for the extended
completion period.

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Notes on Appendix – C
 If the Contractor fails to complete the Works within the Time
for Completion under Clause 43, adjustment of prices shall be
made using either the indices or prices relating to the
prescribed time for completion, or the current indices or
prices, whichever is more favorable to the Employer.
 If extension pursuant to Clause 44 (No fault of Contractor),
Price adjustments will be made as usual.
 The Weightings of each of the cost factors shall be adjusted
at any stage of the project, if it is found unreasonable,
unbalanced or inapplicable as a result of varied or additional
work.
 In determining the amount of any adjustment to the Contract
Price pursuant to this Sub-Clause no account shall be taken of
any overheads or profits.

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 Ln Mn En
p n  0.35
A  0.11
b  0.16
c d  e tc .
Lo M o 0 0.1
Eo
 Calculation of Net Adjustment

⚫
 PRICE
ADJUSTMENT
Contract Amount (Local 3,630,710,889
Currency) = Rs.
A = Fixed Portion B = Adjustable Portion = ∑(Coef.)i x (Current/Base Price)i
Coefficient = (a)
Escala
a b c d e f g Net
Adj. ted
0.25 0.11 0.10 0.06 0.22 0.10 0.16 Factor Escalated
Amount
Base Rates (Rs) 120.00 117.05 100.95 131.67 103.63 116.60 P = Amount
n P = Po
Misc. (P - Po)
Base Labour Fuel Cement Steel Equipment (A+B) x Pn
IPC. # Month Steel (Rs)
Amou (Rs)
nt Po Current Price (Rs)
(Rs)
1 Feb-06 20,695,052 150.00 141.86 124.41 158.81 131.23 140.82 1.2160 25,164,598 4,469,546
2 Mar-06 41,390,104 150.00 141.41 128.41 157.15 131.23 141.25 1.2183 50,425,767 9,035,663
3 Apr-06 21,421,194 150.00 141.49 132.28 164.89 131.25 146.73 1.2421 26,606,749 5,185,555
4 May-06 21,421,194 150.00 142.90 136.30 164.31 131.25 147.50 1.2472 26,716,221 5,295,027
5 Jun-06 21,421,194 150.00 142.41 134.55 163.43 131.25 146.89 1.2453 26,674,948 5,253,754
6 Jul-06 85,321,706 150.00 147.39 134.55 166.15 131.18 148.50 1.2582 107,351,607 22,029,901
7 Aug-06 85,321,706 170.00 148.50 134.32 165.15 131.18 147.99 1.2766 108,922,490 23,600,784
8 Sep-06 85,321,706 170.00 148.74 133.44 163.70 131.25 147.04 1.2763 108,894,280 23,572,574
9 Oct-06 51,193,024 170.00 148.12 134.34 164.22 131.61 147.19 1.2798 65,515,904 14,322,880
10 Nov-06 51,193,024 170.00 147.26 131.70 168.05 131.61 148.78 1.2894 66,006,869 14,813,845
 The South African Federation of Civil
Engineering Contractors
No. Work Category Labour Plant Materials Fuel
1 Bulk Earthworks 0.10 0.65 0.05 0.20
2 Earthworks (with culverts and drainage) 0.15 0.50 0.20 0.15
3 New Road
3.1 Construction: National
(a) Provincial Roads: Including 0.15 0.35 0.35 0.15
(b) bitumen Excluding bitumen 0.20 0.40 0.25 0.15
3.2 Urban Roads:
(a) Including bitumen 0.25 0.15 0.55 0.05
(b) Excluding 0.30 0.30 0.35 0.05
bitumen
4 Township Roads and Services
(a) Including bitumen 0.20 0.25 0.45 0.10
(b) Excluding 0.21 0.27 0.42 0.10
bitumen
5 Rehabilitation/Resurfacing Works
(a) Including bitumen 0.15 0.25 0.50 0.10
(b) Excluding bitumen 0.20 0.35 0.35 0.10
6 Routine Maintenance Works
(a) Including bitumen 0.45 0.30 0.15 0.10
(b) Excluding 0.48 0.37 0.05 0.10
bitumen
7 Water and Sewer Reticulation 0.15 0.20 0.55 0.10
8 Concrete Works (reservoirs and other general civil
0.25 0.15 0.55 0.05
 SCHEDULE OF ADJUSTMENT DATA
Table I. Local Currency (LC)
[In the Table below, the Bidder shall (a) indicate amount of local currency payment, and
the Employer shall (b) enter the source and base values of indices for the different
elements of cost, and (c) derive weightings for local currency payment including
nonadjustable fixed portion.
The source of indices and weightings or coefficients is for use in the adjustment formula
under Sub Clause-13.8.]

Index Index description Source of Base value Bidder’s related Weighting

code index and date currency
amount
(i) Non-adjustable — — — A: 0.25
(ii) Labour B:
(iii) Cement C:
(iv) Reinforcing Steel D:
(v) High Speed Diesel E:
(vi) Provision & Maintenance F:
of Contractor’s Equipment
& Plant
Miscellaneous Materials
(vii) G:

Total 1.00
SCHEDULE OF ADJUSTMENT DATA
Table I. Local Currency (LC)
Notes:
1)Indices, its source and base value are to be taken from
Pakistan Institute of Cost and Contract (PICC), or any other
reliable sources. The Base cost indices or reference prices,
each of which is applicable to the relevant tabulated cost
element, shall be for the month falling on the day 28 days
prior to the latest day for submission of bids. Current indices
or reference prices for period “n” is applicable to the relevant
tabulated cost element and shall be for the month falling on
the day 49 days prior to the last day of the period to which
the particular Payment Certificate relates.

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.

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SCHEDULE OF ADJUSTMENT DATA
Table I. Local Currency (LC)
3)The Employer shall determine the weightings of adjustable
portion considering only those cost elements having cost impact of
three (3) percent or more, specific to the cost estimate/BoQ of
the contract.

4)The non-adjustable portion indicated above must not be less

than twenty (20) percent or (0.20) considering unit cost
estimate/BoQ and shall be worked out by subtracting sum of all
adjustable weightings from (1.00) one.

[Employers using this price adjustment provisions may add or

delete any elements as deemed appropriate to the project.].

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 SCHEDULE OF ADJUSTMENT DATA
Table II. Foreign Currency (FC)
[In the Table below, the Bidder shall (a) indicate amount of
foreign currency payment, (b) indicate the source and base values
of indices for the different foreign currency elements of cost, (c)
derive its proposed weightings foreign currency payment, except
the non-adjustable portion which will be filled in by the Employer.

If the Bidder wishes to incur in more than one foreign currency

(up to two currencies permitted) then this table should be
repeated for each foreign currency.

In the case of very large and/or complex works contracts, it may

be necessary to specify several families of price adjustment
formulae corresponding to the different works involved.

The sources of indices and weightings or coefficients are for use in

the adjustment formula under Sub Clause-13.8.]

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 SCHEDULE OF ADJUSTMENT DATA
Table II. Foreign Currency (FC)
Index Index Source of Base value Bidder’s Equivalent Bidder’s
code description index and date related source in FC1 proposed
currency in weighting
type/amount
(i) Non-adjustable A:

(ii) B:

(iii) C:

(iv) D:

(v) E:

Total 1.00

[Note: If the Bidder failed to provide information regarding Weightings, Base Value
and Source of Index within three (3) months after signing the contract agreement,
then it shall be deemed that the Contractor has foregone his right to claim price
adjustment in Foreign Currency.]
 SCHEDULE OF ADJUSTMENT DATA
Table III. Foreign Currency Requirements
[With reference to Sub Clauses 14.3 and 13.8, the Bidder shall provide information below on
the proportion of various currencies in which he requires payment to be made. The Bidders
shall also indicate Factors (inputs) related to the requirement of respective currencies.]
Sr.No Currency Percentage Factors (inputs) to which the Requirements Refer
(name) payable in
currency
1. LC * General Expenses Manpower, Local Staff, Expatriate Staff, Spare
(Pakistan Parts, Fuel & Lubricants, Hydraulic Binder, Timber & Plywood, Additives
Rupee Rs) & Protective, Joints & Water stops, Explosives-Fuses-Detonators, Re-
Steel & Wire mesh, Metal Pipes & Fittings, Structural Steel,
Miscellaneous Metals, Concrete Pipes, PVC Pipes, Build Materials, Sub-
Contractor, Drilling & Grouting Sub-Contractor Third Party Supplies,
Import Charges, General Expenses, Plants.

2. FC1 * Expatriate Staff, Spare Parts, Hydraulic Binder, Timber & Plywood,
(US $ Dollar) Additives & Protective, Drilling Materials, Miscellaneous,
Sub- Contractor, Import Charges, General Expenses, Plants.

3. FC2 * Expatriate Staff, Spare Parts, Additives & Protective, Welding

(EUR € EURO) Materials, Miscellaneous, Electrical Sub-Contractor, Import
Charges, General Expenses, Equipment, Plants.
TOTAL 100.00

[*The above Factors (Inputs) related to the requirement of respective currencies, are for
guidance only, and shall be indicated specific to the project.]
Thank you

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