Abstract:
The cost estimation prepared during the bidding stage may not same as the cost calculated
at the time of actual work done. This is because open market escalation of construction inputs. To
address this problem ICTAD has introduced a country specific documents “ICTAD formula method for
adjustments to contract price due to fluctuation in prices”. Price Fluctuation Formula mainly considers
several parts; value of work done for a particular period, non-adjustable work elements, cost of
materials at site, percentage input contribution from each construction inputs and price indices
variation compared to the start of the project. Therefore careful identification, selection and calculation
in relation to each and every factors used in the formula are very important to recover the actual cost
variation to the contractor.
This research mainly focused on effect of ICTAD price adjustment formula to recover the actual
material cost of contract. To fulfil this, research aimed at finding the relationship between ICTAD
price adjustment and true price adjustments through the data analysis and estimating accuracy and
effect of the ICTAD price fluctuation formula procedure. Finally some suggestions were made to
modify the formula to increase the accuracy of ICTAD price fluctuation formula. To fulfil above
objectives, analysis were carried out under four sections for the data gathered from 11 actual projects
which are already completed. Those four sections are Effect of Non- adjustable elements, Effect of
current indices related to the materials which are not used during a particular valuation period, Effect
of selecting Input percentage and Cost of Materials at the site.
Base on the results it was identified that excluding non-adjustable elements in the formula does not
affect to the actual cost recovery. But careful identification is very essential. Use of material cost at site
which is not still used for the construction is having some effects. It may lead to get higher price
adjustment to the contractor which may unfair to the client. Also use of same input percentages
throughout the project may lead to get higher price adjustment. Dividing the input percentages based
on the interim bills and not for the entire project may have fair decision to both contractor and the
client, but further research is suggested on this.
