Construction Law/Price adjustment
QUESTION: Good Time!
My question is about Pn formula.Pn=A+bLn/Lo+cMn/Mo+dEn/Eo+.....
Could you tell me the reason of having A factor in that formula.
In the Table of Adjustment Data an amount of 6 647 503 688 KZT are non adjustable amount. Does it mean that Pn formula to that portion of contract amount is not applicable?
Thank you in advance.
ANSWER: Dear Aslan,
Thank you for your question.
I have following to say on two points raised by you.
(1)Factor 'A' represents fixed portion of the tender value breakup such as overhead and profit and sometimes we add smaller items which are not in the list of specified items/materials and are also convenient to keep their record of variation in price etc.like sand and no body monitor its price variation atleast in our scenerio.I hope you agree that escalation on profit etc. can not be paid.
(2)Your understanding is correct
---------- FOLLOW-UP ----------
QUESTION: Dear Liaqat!
Thank very much for your quick and important response.
Could you kindly verify further following details:
a)Accepted Contract Amount is 10Bn.KZT
b)nonadjustable amount given in table of Adjustment Data is 6.6 Bn.KZT
1)Does it mean that only 10-6.6=3.4 Bn.KZT is subjected to Pn,
2)we have to stop apllying Price Adjustment when Contract Price reach 3.4 Bn.KZT,
May I respond as follows to your 2 questions.
1. Yes please.
2. No you don't have to stop at 3.8 Bn KZT as escalation is time related and the increases in prices for the later period (when it reaches 3.4 Bn KZT ) the claimable escalation will be much more for the specified items. Please note that escalation cost is payable on specified items and their enhancement in rates is reflected by published indices and if you stop at 3.4, you will get less amount overall.