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Increase in Prices of Construction inputs

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Shahzad Munawar
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Due to uncertain and sudden increase in POL and Steel prices all over the World during last six to twelve months, the construction industry is realistically affected by both commodities. In such situation how can a Contractor quote his tender and survive in such conditions?

Although the Contract has Escalation Clause but upto what limit the Employer entertain this escaltion in such uncertain situation (too high inflation)?

Replies

Andrew Flowerdew
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Joined: 14 Dec 2004
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Shahzad,

Look at the clause, it may be linked to a general retail price index (RPI) in which case the allowable increase will generally be lower than the materials you are concerned about.

It may be (unusual if it is) the actual variation in price of the material in question in which case you are entitled to the full amount.

The client has taken the risk on and is therfore liable to whatever the allowable cost is.

As a general guide construction material increases usually average out at about 2 to 3% above RPI.