A study on contractor's contract price fluctuation adjustment under FIDIC 1999 red book

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A study on contractor's contract price fluctuation adjustment under FIDIC 1999 red book

 

Author: Guan, Zhenghui
Title: A study on contractor's contract price fluctuation adjustment under FIDIC 1999 red book
Degree: M.Sc.
Year: 2013
Subject: Construction contracts.
Construction industry -- Cost.
Construction industry -- Cost control.
Hong Kong Polytechnic University -- Dissertations
Department: Faculty of Construction and Environment
Pages: xii, 90 leaves ; 30 cm.
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2646771
URI: http://theses.lib.polyu.edu.hk/handle/200/7161
Abstract: Clients may prefer to include fluctuation adjustment clauses in construction contracts to take on the responsibility of price movements. One of the methods of calculating the amounts of fluctuation is based on the formula rules. The formula rules in dealing with price fluctuations was first introduced by using the Baxter Formula and the Osborne Formula in the UK in 1970s and the FIDIC (Federation Internationale Des Ingenieurs-Conseils) formula rules were developed based on the fundamental knowledge of these two formulae. In the UK and other developed countries, many professionals have published books or journal articles concerning the research on the Baxter and Osborne formula rules, while publications on the FIDIC formula rules are rather few. This research is aimed at studying the different scenarios of contractor's entitlement due to contract price fluctuation adjustment by using the FIDIC formula rules. Using the research methods of literature review, interviews, case studies and sensitivity analysis, the implications of different methods to fill in the coefficients of various adjustable cost elements will be analyzed and improvements in tendering procedures for contract price fluctuation adjustment will be recommended. The literature review lays a theoretical foundation on the contract price adjustment mechanism and the index-based formula rules. Through data collection and analysis using the above mentioned methods, a practical research on the FIDIC formula rules is achieved. Unlike the Baxter and Osborne formulae, the FIDIC formula requires a contractor to fill in the source of indices and coefficients of adjustable cost elements when tendering for projects. It is recommended that the contractor should obtain the proper source of indices and preserve the successive publications of current indices during the construction period. The main tactics for filling in the coefficients are that, with the competitive coefficients of the adjustable cost elements, the results of price fluctuations should be beneficial to the contractor even when some of the selected cost indices fall in values. On the other hand, if the coefficients of the adjustable cost elements are not filled in properly, the results of the price fluctuations may be adverse to the contractor even if some of the selected cost indices are on the rise.

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