Price Fluctuation
In the Open Standard
Pradeep MendoncaMember for 19 years 2 months
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Hi,
We have a contract stipulating that contractor can vary the price if there is price escalation in the market. We have agreed on the base price and any increase thereon shall be paid to the contractor.
The formula for this price increase is:
(Cost at time - Base rate) x Actual quantity delivered to site + OH&P (as in appendix to contract).
My question is: Why should the client bare the risks if the contractor has delivered additional quantity (for wastage etc.) Isn’t it the contractors reponsibilty to reduce the wastage?
My arguement was "actual quantity delivered to site is what required at site. The site requires what is there in the drawings. So the contractor is not entitled for any additional quantity and hence not paid". Am i right in this??
Please advice.
Thanks,
Pradeep
We have a contract stipulating that contractor can vary the price if there is price escalation in the market. We have agreed on the base price and any increase thereon shall be paid to the contractor.
The formula for this price increase is:
(Cost at time - Base rate) x Actual quantity delivered to site + OH&P (as in appendix to contract).
My question is: Why should the client bare the risks if the contractor has delivered additional quantity (for wastage etc.) Isn’t it the contractors reponsibilty to reduce the wastage?
My arguement was "actual quantity delivered to site is what required at site. The site requires what is there in the drawings. So the contractor is not entitled for any additional quantity and hence not paid". Am i right in this??
Please advice.
Thanks,
Pradeep
5 replies
Oldest first- 0Sherif Fam ·
For each item in the construction industry; there is an acceptable percentage of wastage (steel reinforcement for example 2-5% depending on the elements e.g. slabs are different than columns than raft, etc. - average is 3%). If you go for pre-formed steel; the wastage is very minimum; but the price is higher (in some cases it bypasses the steel fixers wages plus the wastage)
If I am in ur position; I will suggest to mutually agree a reasonable wastage percentage for the different materials with your contractor. If the contractor goes beyond it; he bears the difference.
Also bear in mind that the quantity surveying has to take into consideration the practical method statement (not simply engineering quantity surveying).
Regards, - 0A D ·In UAE market as of now, its very risky for a client to have fluctuating rates in the contract.
Just for a Glimpse:
Cost of RMC has gone up from 205 per m3(Jan 06) to 356 per m3 (June 08).
Reinforcement steel has gone up by 300% (AED5950 from AED 1875) Jan 06 to Jun 08. (Steel, Cut and bend)
Same is teh case with road sub-base, ceramic tiles, diesel and asphalt. (Rates hav increased 2.5 times more as compared with last two years)
Labour r too tough to get and also rates have goen from AED 8 to AED 19 per hour (Incld all costs)
How somedody can dare to have such a fluctuating contract?? U have set urself inside a cooker.
:-|
Rav - 0Pradeep Mendonca ·I agree that there is price fluctuations in the market.
What I really dont understand is why the client should bare the risk if the contractor delivers additional material at site (keeping in mind the wastage). It is the contractors responsibilty to ensure to minimise the wastage and should not be paid other than what is there in the drawings !!
Any take? - 0Mike Testro ·Hi Pradeep
Sharif is correct - the increase costs should not apply to excess wastage and there are industry standards that set out what a reasonable wastage factor is.
Otherwise you can ask the contractor to open up his tender to see what aste allowance he has made.
Make sure you apply the formula to all materials - some may actually have gone down in price.
Best regards
Mike Testro
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