Agarwal, A. L.
Price adjustment clauses of the construction projects - Vol.26(3), Jul-Sep - Pune NICMAR 2011 - 35-45p.
The biggest driver of Indian economy is the infrastructure sector. To strengthen the infrastructure the investments in the 12th plan are expected to be roughly double the investments in the 11th plan. The quantum of construction works has increased multifold that has to be completed in a short span of time, inviting a lot of complexities, uncertainties, risks and unforeseen problems during executions. A major chunk of these risks are mainly due to sudden variations in the price of various resources used during the course of construction project. Rates of Cement, Steel and POL (Petrol, Oil and Lubricant) are varying frequently. Hence it needs compensation to avoid speculation in tender. Thus a price adjustment clause is used in the contract to protect the interest of both the contractor and the client. In this paper efforts are made to highlight the importance of price adjustment clause, escalations and its correlation with inflation. The various flaws in the current system of calculating price escalation have been cited, these have been then compared with clauses of various different countries and the differences have been pointed out. Finally a new system of calculating escalation has been conceptualized which entails all the major discrepancies in the present system.
Construction Engineering and Management (CEM)
Price adjustment clauses of the construction projects - Vol.26(3), Jul-Sep - Pune NICMAR 2011 - 35-45p.
The biggest driver of Indian economy is the infrastructure sector. To strengthen the infrastructure the investments in the 12th plan are expected to be roughly double the investments in the 11th plan. The quantum of construction works has increased multifold that has to be completed in a short span of time, inviting a lot of complexities, uncertainties, risks and unforeseen problems during executions. A major chunk of these risks are mainly due to sudden variations in the price of various resources used during the course of construction project. Rates of Cement, Steel and POL (Petrol, Oil and Lubricant) are varying frequently. Hence it needs compensation to avoid speculation in tender. Thus a price adjustment clause is used in the contract to protect the interest of both the contractor and the client. In this paper efforts are made to highlight the importance of price adjustment clause, escalations and its correlation with inflation. The various flaws in the current system of calculating price escalation have been cited, these have been then compared with clauses of various different countries and the differences have been pointed out. Finally a new system of calculating escalation has been conceptualized which entails all the major discrepancies in the present system.
Construction Engineering and Management (CEM)