Escalation Evaluation

Dear
Would you please elaborate what excatly u mean by escalation evaluation. Do u mean quantity escalation.

I mean to say that does there exist any standard Escalation Formula which may apply for all types of Contracts or it varies from Contract to Contract.

e.g Given below Escalation (Price Adjustment) Formula for Labour , Fuel and material is specified for one Contract. Can we imply this formula on other s or there exist any standard formula which apply for all types of Contracts

Escalation = 0.10 *VOW*(ILC-ILO)/ILO +0.15 *VOW (IFC-IFO)/IFO

For me I think it varies defending what country / contract . eg. in our country Phillipines we are using PD 1594 wherein different formula for escalation is written. etc...........

In short, in my long experience there is no fixed standard formula that can be used as a standard accross all contracts.

Cost Price Adjustment / Rise & Fall / Escalation, all mean the same thing, what can / does happen is

1- As a contractor working on a large / long duration project like a Power Station, you may qualify to use different formulas that address a "Major Discipline", example - Civils, Structurals, Mechanicals, Piping, Electricals, C&I etc.

2- Your Company may be exposed to say "3" Major Disciplines, then 3 different formulas would apply everytime you bill the client.

3- If you are a Civil/Structural contractor it would be useless to have anything to to with an electrical trade material index.

4- However, you may adjust the formula in some countries to do the following.

a- When you place an order on a Steel Supplier - you may want to increase the Steel Index % and lower the labour index %.

example- 15% Fixed + 35% (Steel) + 50% (Labour) to

15% Fixed + 45% (Steel) + 40% (Labour)

I have used this approach with great success, i.e. Labour in general increases faster than most other components and it makes a significant difference on a project that is longer than 24 months.

Hope this helps to clarify your query.

Your eloboration on escalatin is helpful to some extent as and when I apply it on my case. thanks for it

Had You have a look to the contract?
A lot of time You can find direct in the contract how to consider the escalation, and which formula to use.

I think a planner must read at least once the whole contract.

Luca

Your comments on my statement are negated in totality as you could not understand the situation clearly.

Some Contract does not contain Escalation Formula as in our case and such compensation is mutually agreed between the parties on certain parameters which are derived in light of Monthly Statistical Bulletin and Price Indices being applied in the same Country.

In light of above situation I requested for a Global formula of Escalation which in any case will have to be finalized/implemented with the mutual consent of the parties.

You ask a formula.
So let out the parameters and where to bring it.

I saw/read a lot of contracts and in mostof them
were already the indication of how to consider the
escalation. In few case a formula was also given.
You never stated that you give a look to the contract after all.

Of course the parameter will be differents contry by conutry as in ceertain country, You can not compare Uk with India or Pakistan!

If I remember well also the Fidic are giving a formulation to adopt, with some economical/statistical parameters to bring in the contry You are working.

Good lucky with Your general formulation

Good Lucky to you also for consideration my views on formulization