Construction Law/Price Adjustment Fixed Indices
Assalam o Alaikum
Can the Fixed Non Adjustment Index for Price Adjustment of A Mechanical Project and Civil Project be same. If a Mechanical Project involves procurement of Mechanical Plant as major cost item and its rate has been taken from the supplier's Quotation which will remain valid during the project duration. The Fixed Non-Adjustable index shouldn't be more ? May be around 0.8 (80%)?
Dear Abdul Waheed,
Indexes in price adjustment formula represents different inputs of a Project, such as Labor, Fuel, Steel, etc. and in accordance with the requirements of project, it is established by the Employer/Engineer during tender documentation. The fixed portion of the formula represents non-adjustable portion such as; Contractor's overhead, site general expenses, profit, etc. Therefore, the fixed portion may be between 15 to 35 % of the total depends on nature of a project and Employer requirements. Regarding your issue based on supplier's quotation, which will remain valid during course of project will not bring any increase to price adjustment formula in case the same used as index. However, getting a supplier's quotation which the price will be fixed during course of project is success of the Contractor regardless of price fluctuations in the market and he may still get increase on same if the index representing material increases.