Construction Law/Price Adjustment


Dear sir,

In one of our Contract which is based on FIDIC MDB 2010 Conditions of Contract, the Contractor has submitted a Statement under Sub-Clause 14.3 GCC for a period of 3 months. The particular conditions of Contract relating to Sub-Clause 13.8 GCC states the period ‘n’ being the one month which will be applicable to Pn ‘Adjustment multiplier’. The Contractor has divided the work done of each month separately as pn is to be applied on monthly work done. My query relates to current cost indices Ln, En, Mn.  Sub-Clause 13.8 states,

““Ln”, “En”, “Mn”, … are the current cost indices or reference prices for period “n”, expressed in the relevant currency of payment, each of which is applicable to the relevant tabulated cost element on the date 49 days prior to the last day of the period (to which the particular Payment Certificate relates); and”

The Contractor has to compute three adjustment multiplier ‘pn’ to be applied separately for each month of workdone as ‘n’ being the one month as defined in particular conditions.

The problem is that what current cost indices (Ln, En, Mn) should be used?
(i)   The indices relevant to 49 days prior to last day of the period of IPC, meaning the same indices for each Pn, or
(ii)   Three different indices for each month relevant to 49 days prior to last day of each month of the period of workdone.

Your advices in this regard will be helpful to me.


Umer Shabbir

Dear Umer,

Thank you for your question.

While indeed, the Contractor can submit his statements monthly, that is not an obligation.

Moreover, regardless when the executed works were certified as accepted, i.e. they could be valuated and included in a statement for payment, it is important the moment when they actually get included in a statement and subsequently paid.

As that formula is aiming at reducing the effect of prices fluctuations (inflation, etc), the defining moment, in my opinion, is the one of the payment, or rather , when the value of executed works is included in a statement.

Hence, in my opinion, one should simply use a single set of indices, the latest one applicable at the time when the statement is issued.

Trust that answer your question.

Construction Law

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Over 20 years of experience in the field of design, works supervision, construction, management of aid funds and technical assistance for various types of contracts implementation, including severe conflictual contractual situations leading to Claims and disputes. Claims/ Contract management, Disputes adjudication, Arbitration.

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