Abstract
The construction industry always faces problems on price fluctuation and adjustment of the price to compensate the cost fluctuation becomes necessary. There is dilemma on which formula of price adjustment to use in construction contracts. Price adjustment affects all the stakeholders i.e. client, consultant and contractor. This research has revealed about the trend of the cost of components of construction i.e. labor, material, fuel, equipment, etc. and compare the different formulas of price adjustment Ten contracts commencing within 2010 A.D to 2019 A.D have been chosen. The formula used in the contracts has been compared with other formulas under same circumstance that original formula was used. The cost of fuel and bitumen cannot be predicted as it is fluctuating with respect to time. PPMO formula for Price Adjustment use NRB index of labor, material and equipment or fuel. Labor index has increased by 44.86 % during June 2015 to June 2019. Material index is fluctuating and has increased by 20.66% and Equipment index by 31.54%. Comparing the price adjustment factor using different formulas it is seen that the value of price adjustment factor using different formulas are different and change with course of time. Thus, it cannot be generalized that which formula could give minimum value of price adjustment. It depends upon condition such as time, index and cost.
Highlights
Price fluctuations are the outcome of different forces i.e. both national and international bazzar forces, along with components of the development sector that mainly causes it vulnerable to average cost fluctuation and bank economic report (Riggs, 2006) [1]
It cannot be generalized that which formula could give minimum value of price adjustment
In contracts using FIDIC formula, the cost of labor is increasing with respect to time and it is more predictable that labor cost will increase in future
Summary
Price fluctuations are the outcome of different forces i.e. both national and international bazzar forces, along with components of the development sector that mainly causes it vulnerable to average cost fluctuation and bank economic report (Riggs, 2006) [1]. It is a major concern to know how the price of different components of construction is fluctuating during various time of a construction project and know the trend so that we can predict the risk in a more accurate way. General things normal to all pieces of the works might be gathered as a different segment in the bill of amounts For such contracts, a different price adjustment formula with different cost components and weights may be required for each group or section. A different price adjustment formula with different cost components and weights may be required for each group or section It is of concern in construction industry to compare the different results that come by applying different price adjustment formulas and choose the one that minimizes the risk. There is dilemma among project personnel whether to deduct mobilization advance from IPC and calculate the price adjustment value or not to deduct mobilization advance for calculation of price adjustment
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