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Construction Law/Regarding the Change in Base date of price Index

Question
Dear sir
We are using FIDIC yellow book for our contract and  as a consultant Engineer i want to know that how the calculation for price adjustment is done in case of the base date published by the Index(Indices) provider is subjected to change.

for example we have  index for labor with base 2005=100 at the tendering time but now for the same items we have the base 2010=100 instead of base 2005=100 from the Index provider. The index provider has updated his base from 2005 to 2010 now we can not find the index with the tendering time base. In this case how & which value should be used for accurate calculation either the value with same base date or with different base date?

Dear Ashok,

Thank you for this question.

In short you must try to recalculate the 2010 indices back to the 2005 baseline.

I presume that when the base date of 2005 was used there was a copy of the indices available. If that is so you can compare the 2005 indices with those immediately before the change in 2010.

For example if the base india was 100 in 2005 and the same index in 2010 (before the change) was 180 the following would apply:

Base index in 2010 (180) = 100
Index in 2013 say 110 is equivalent to 180 x110/100 = 198

You would need to perform this calculation for each of the indices used on the project.

If you do not have any data before the 2010 index change you will have to renegotiate the prices with the contractor based upon the 2010 index base date; however there is a potential problem with this. If the bid is so dated that there is a need to renegotiate it is (strongly) arguable that the project should be retendered.

I hope that this assists you.

Kind regards,
John Dowse

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Questioner's Rating
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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister