👉𝑭𝒍𝒖𝒄𝒕𝒖𝒂𝒕𝒊𝒐𝒏𝒔
🏷Term describe a method of dealing with inflation in construction contracts.
🚧𝐈𝐧𝐟𝐥𝐚𝐭𝐢𝐨𝐧 is recognised as representing an increase in prices, converse can also apply (Deflation)
⏺Contracts use various descriptions for fluctuations clauses:
-Fluctuation
-Price Variation
-Price adjustment for inflation
▶️Traditional approach to project procurement is employer produce a set of specified requirements, following a formal tendering process to accept an offer from a contractor to carry out construction work to realise those requirements within an agreed contract period & contract sum
⭐️𝐂𝐨𝐧𝐭𝐫𝐚𝐜𝐭 𝐒𝐮𝐦 may be adjusted as necessary & within contract T&Cs to take account of variations but is normally regarded as a fixed (firm) price.
⏺Employers seek to add certainty to their financial commitment to demand fixed price contracts where contractor invariably assumes risk of increases (or decreases) in these items cost as a result of inflation.
⏺General rate at which prices of materials & goods varies, usually upwards & consequent purchasing power of money decreases.
⏺Alterations to items price can be caused by variations in taxation, ‘excise’ duties for domestic goods, ‘customs’ duties on imported goods
▶️Contracts of short duration, risk may not be great, for longer contract durations or where contract sum is of a size that makes impact of inflation more significant, consequences may be more difficult to anticipate.
📜Purpose of contract’s fluctuations provision to enable adjustment to take place by introducing a mechanism to be followed when circumstances are appropriate.
》Fluctuations in different types of contracts
⏺Common situation is where contract sum is described as ‘fixed’ or ‘firm’ price & it appear on first inspection that it isn't subject to adjustment for these items.
⏺However these contracts may include adjustment provision for changes in contractor’s input cost for reasons beyond their control.
》Fluctuating price contracts are used in a variety of circumstances:
•Lump sum contracts
•Term works contracts
•Term service contracts
•Supply contracts
•Reimbursement contracts
•Application to DBFO/ PFI contracts
•Calculation of increased costs due to delay & allocation of responsibility
•Changes in costs due to currency exchange rates
●Calculation methodologies on standard forms
》JCT lump sum contract
-Option A:Clause A.5 of Schedule 7
-Option B: labour & materials cost & tax fluctuations
States that contract sum is based on rules & decisions of the Construction Industry Joint Council or other wage fixing body
-Option C: JCT Formula rules, relies on a series of indices that were published by the National Economic Development Office (NEDO).
》NEC lump sum contracts
Doesn't use term fluctuations
ECC’s approach isxto use Secondary Option X1 – price adjustment for inflation.
》FIDIC Conditions of Contract for Construction (Red Book) contain a formula agreed by parties
@etconp
🏷Term describe a method of dealing with inflation in construction contracts.
🚧𝐈𝐧𝐟𝐥𝐚𝐭𝐢𝐨𝐧 is recognised as representing an increase in prices, converse can also apply (Deflation)
⏺Contracts use various descriptions for fluctuations clauses:
-Fluctuation
-Price Variation
-Price adjustment for inflation
▶️Traditional approach to project procurement is employer produce a set of specified requirements, following a formal tendering process to accept an offer from a contractor to carry out construction work to realise those requirements within an agreed contract period & contract sum
⭐️𝐂𝐨𝐧𝐭𝐫𝐚𝐜𝐭 𝐒𝐮𝐦 may be adjusted as necessary & within contract T&Cs to take account of variations but is normally regarded as a fixed (firm) price.
⏺Employers seek to add certainty to their financial commitment to demand fixed price contracts where contractor invariably assumes risk of increases (or decreases) in these items cost as a result of inflation.
⏺General rate at which prices of materials & goods varies, usually upwards & consequent purchasing power of money decreases.
⏺Alterations to items price can be caused by variations in taxation, ‘excise’ duties for domestic goods, ‘customs’ duties on imported goods
▶️Contracts of short duration, risk may not be great, for longer contract durations or where contract sum is of a size that makes impact of inflation more significant, consequences may be more difficult to anticipate.
📜Purpose of contract’s fluctuations provision to enable adjustment to take place by introducing a mechanism to be followed when circumstances are appropriate.
》Fluctuations in different types of contracts
⏺Common situation is where contract sum is described as ‘fixed’ or ‘firm’ price & it appear on first inspection that it isn't subject to adjustment for these items.
⏺However these contracts may include adjustment provision for changes in contractor’s input cost for reasons beyond their control.
》Fluctuating price contracts are used in a variety of circumstances:
•Lump sum contracts
•Term works contracts
•Term service contracts
•Supply contracts
•Reimbursement contracts
•Application to DBFO/ PFI contracts
•Calculation of increased costs due to delay & allocation of responsibility
•Changes in costs due to currency exchange rates
●Calculation methodologies on standard forms
》JCT lump sum contract
-Option A:Clause A.5 of Schedule 7
-Option B: labour & materials cost & tax fluctuations
States that contract sum is based on rules & decisions of the Construction Industry Joint Council or other wage fixing body
-Option C: JCT Formula rules, relies on a series of indices that were published by the National Economic Development Office (NEDO).
》NEC lump sum contracts
Doesn't use term fluctuations
ECC’s approach isxto use Secondary Option X1 – price adjustment for inflation.
》FIDIC Conditions of Contract for Construction (Red Book) contain a formula agreed by parties
@etconp