The major cause of project cost overrun has been attributed to the delay in the release of funds when they become due, and this has given rise to two unpleasant consequences: the delay in accomplishing the different work schedules, and rising cost of constructional materials and labour due to inflation as a result of extended project duration. The effect of inflation would however not have an impact on the overall cost of the projects, in general, as this would have been provided for if jobs were carried out within the lime frame and payment schedule specified in the contract agreement. This presumption is built on the argument of Woodward that if the rate of return is applied to both cash inflows and outflows, the net effect on the overall calculation will be zero, whether the owner of the project is both the client and the contractor.
There is no doubt that poor scheduling and control and many other reasons mentioned earlier can impact negatively on the project, leading to cost overrun but the fact still remains that even with the best scheduling and control techniques in place, these factors-rising costs, mainly due to inflation and delay in effecting payment for work done remain dorninant. This view is strongly supported by Chizea who commented that most of the capital projects in Nigeria are either state or federal funded; payments to contractors, according to him are therefore disbursed through a bureaucratic chain designed to provide checks and prevent the misuse of public funds. Whether the objective is achieved is another subject of debate, but what is however apparent is that contractors hardly receive their payments as they become due. Most often the payments, when eventually received, have no resemblance to the expenditure that generated them as a result of inflation. This situation therefore calls for a suitable model to be developed for a proper appraisal.
The methodology used in evaluating price variation, especially in Nigeria, is very inadequate. This study is aimed at developing a suitable model, focusing primarily on the extent of work done, payment schedule, and government fiscal/monetary policies. This study based on empirical study is therefore an attempt to proffer solution to this intractable problem by proposing an alternative and replacement of the “Fluctuation in Rate of Exchange” with an extended “VOP Scheme”.
- Extended “VOP Scheme”
- Introduction
In Nigeria, the construction industry plays a dominant role in the economic activities, accounting for over 50 per cent of the Nation’s capital investment and 30 per cent of the Gross Domestic Product (GDP). The industry contributed about half of the total stock of fixed capital investment in the economy and second generation labour employment. The demand for more construction of all types despite tight monetary supply is a challenge to cut costs, thus substantial increases are being observed in construction projects. In addition, cost of construction materials is subject to supply and demand, directly affected by quality, quantity, time, place, currency exchange, material specification, and inflation pressure.
The way in which project cost escalation affects construction material prices and general price level has been studied extensively and many studies have concluded that valuation of variations has long been recognized as one of the commonest sources of disputes in the construction industry. The main reason for the disputes is the claims from contractor which frequently do not represent the true value of the works. The techniques for the valuation of variations need to be assessed to determine whether the rules for valuation of variations in the standard forms of contract are adequate and appropriate to reduce the disputes. This study examined the techniques for the valuation of variations and problems associated with it, secondly, it investigated the relevant legal cases of contract law in relation to the valuation of variations and finally identify the feasible solution of minimizing the disputes in valuation of variations.
Nigeria has solely been using conventional types of contracting (input-based contracts)for example, in the road sector. For road rehabilitation and maintenance, the prevailing practice has been the award of numerous contracts, usually with short contract periods. Once awarded, many contractors are faced with the problem of late payments or projects being entirely put on hold when the government runs out of funding. Even with late payment penalties and early termination clauses stipulated in the contracts, contractors have found it difficult to enforce their rights. On the other hand, the government has been left exposed, in cases in which contractors did not fulfil their contractual obligations although timing and amount of payments were in compliance with contract stipulations. These impediments have resulted in the withdrawal of a number of foreign contractors.
Pricing arrangements for longer term contracts should be exposed to fair VOP appraisal to identify the approach that offers best value for money, to the client and the contractor. Therefore, it is not reasonable that an employer transfers the risk of cost development to the contractor. Any contract sum should therefore allow an amount for VOP (Variation of prices) in order to cover price developments, which cannot be borne by the contractor.
The purpose of this study is to provide financial and economic analysis of the options identified in conditions of contract regarding VOP in order to identify a preferred option from an economic as well as financial perspective that could suit the argument the inclusion of a general VOP, that can be used to validate the assumptions made by the client and the and can be developed further to provide a more generic model to assess the financial viability of other proposed. The objectives of this study are to:
- Propose an extended VOP scheme for price adjustment (as a reasonable compensation against variation in prices of the selected materials and inputs) as close as possible to the actual;
- Set out a simple procedure for determination;
- Minimize ambiguities differences between Direct and General VOP; and
- Make the contract more equitable.
- Direct variation of Price
The Direct-VOP refers to cost of labour and classified materials, which allows for a direct reimbursement of additional costs against a basic rate. The basic rates are stipulated in the Contract agreement and form part of the estimate of the contractor (Table 1). These portions of the contract are adjustable covering approximately 30 per cent of costs and in most cases never more than 65 per cent.
Figure 1: Items breakdown for Direct and General VOP
The adjustment factor that covers less 66 per cent in Table 1 for payment of any Interim Payment Certificates in respect of changes in cost and legislation are determined for each of the types of construction work performed. The formulae are of the following general type, effective after six months from the date commencement of works:
Where:
pn is a price adjustment factor to be applied to the amount for the payment of the work carried out in the subject month;
A is a constant, specified in the Tender Documents, representing the nonadjustable portion in contractual payments
b, c, d, etc., coefficients representing the estimated proportion of each cost element (labour, materials, equipment usage, etc.) in the Works or sections thereof, net of Provisional Sums;
Ln, Mn, En, etc., are the current cost indices or reference prices of the cost elements for month “n,” applicable to each cost element; and
Lo, Mo, Eo, etc., are the base cost indices or reference prices corresponding to the above cost elements.
Base Date: The Base date for the cost of any item of work shall be the cost of the element of the item which was prevalent twenty eight (28) days prior to the date of submission of the tender.
Effective Date: The effective date of fixing the fluctuating rate of the items for price adjustment shall be twenty eight (28) days prior to the start of the execution month for which the contractor executed the item. The unit of time shall be a calendar month.
Source of Prices: The prices of elements subject to price adjustment are to an extent possible as given in the Statistical Bulletins published by Statistical Division of government. Where available, statutory notifications and official price from public sector organizations may be used at the option of the Employer. However, for a particular escalable item(s), the same source should be used throughout the currency of contract.
- General variation of Price
Prices are subject to developments (increase or decrease) and these developments are mainly driven by salary increase, market availabilities of goods, consumer trends and changes in rates of foreign exchange. The percentage of costs from the BEME/BoQ (excluding Bill 1), covering approximately 50 per cent of cost and subject to General-VOP, is stipulated in the Contract agreement as a part of the Schedule of the Basic rates. The larger amount of these costs consists of thousands of different items (e.g. spare parts, consumables, services, etc.) for which a Direct-VOP is barely impossible and would impose an unreasonable bureaucracy on both parties. Thus, it is neither reasonable nor fair that an employer transfers the risk of cost development to the contractor. Therefore, any contract should allow for a mode to cater for VOP (Variation of prices) in order to cover the various price developments, which cannot be borne by the contractor.
The list of items covered in the existing BEME/BoQ covers primarily cement; mild steel reinforcement; high tensile reinforcement; bitumen (cutback MC1 and cutback 125); petrol; diesel; aggregate (crushed granite). Construction equipment, plants, tools, machinery, supervision, services and associated project costs are exclusively not covered in the direct VOP (Section 1.2). However, the exclusion of this kind carry with them various well known limitations as illustrated above. Such exclusions are unsatisfactory because for fundamental input indices for calculating VOP some countries such as Japan include installation costs (e.g. water/gas/electricity supply, etc.). Other countries such as Finland include a wide range of additional cost items such as transport of materials to the site, equipment hire, site preparation, conveyance fees, outside fittings, etc. Similarly, range of items inclusion/exclusion in output price indices reported by OECD and European Union Member countries, all include estimates for trade margins, overheads, and profits for ‘general VOP’.
In addition, there is large volume of published studies that revealed that Government deregulation policies aimed at liberalizing the economy since 1986 are responsible for the instability in prices. It is therefore not surprising that fluctuation claims during these periods contribute significantly to additional cost. This study produced results which corroborate the need for the introduction of a ‘general VOP’. There is therefore a clear economic and social benefit that the costs to the government (and also the client) are affordable within the government’s current and expected budgetary allocations.
- Inflation
It has conclusively been shown that nominal project cost overruns were primarily due to unexpected inflation. Surveys and studies such as that conducted by Pohl and Mihaljek (1992) for 1,015 World Bank projects confirmed this claim. Inflation is critical to construction financial planning because NGN100 to be received in the future will undoubtedly be worth less than NGN100 received today. But the matter is complicated because prices fluctuate, quality varies, and buying patterns change.
The evidence of inflation can be clearly seen in the case of the contract for the dualization of the East-West Road Section II, Kaima to Ahaoda, awarded in 2009 with a completion date of 2014. When the project was inspected in January 2013, the completion was just 24 per cent. The project will need, at least, an additional 2 years beyond 2014 before it can be completed at the current pace of work, assuming no major unforeseen issues emerge in the future. The budget has ballooned by 89 per cent, from about N44 billion to N89billion due to inflation and VOP claims.
Another example to the foregoing is the Ikpa-Ikot to Ibiomin-Ikot Road, in Akwa Ibom State, contracted for almost N5billlion in 2011 originally scheduled for completion in 2014, but in January 2013, the completion rate was only 30 per cent. The Gbaaregolor to Ogulagha Road in Delta State, contracted out in 2009 for just over N16billlion, with a completion date of 2011, is only 20 per cent completed in January 2013. The East-West Sampou to Odoni Road, traversing the borders of Bayelsa and Rivers States, was contracted out in 2010 for almost N11billion, with a completion date of 2014. The completion rate as of January 2013 was 50 per cent. All of these projects will need an addition 12 to 24 months to complete.
As a consequence of the foregoing, it is proposed that the development of these costs should be captured under a General VOP and be subject to the CPI (Consumer Price Index), all items less farm produce” published by the National Bureau of Statistics(NBS). In the absence of a dedicated Industrial Price Index” the CPI allows for a fair average of the national price development. This will ensure more realistic competitive bids and execution of contracts scheduled for equitable and just manner.
- Consumer Price Index (CPI)
The tool that economists use to compare prices of the past and to measure inflation is called the consumer price index (CPI). The CPI is an example of an index number, a derived quantity that describes the ratio of a quantity and its value at a base period (or its values at a standard). The base period index is typically set to 100, so that percentage increases from the base period can be almost instantly inferred.
Consumer Price Index (CPI) in Nigeria increased to 141.90 in January of 2013 from 141.10 in December of 2012. Consumer Price Index (CPI) in Nigeria is reported by the Nigeria National Bureau of Statistics. Historically, from 2004 until 2013, Nigeria Consumer Price Index (CPI) averaged 91.83 reaching an all-time high of 141.90 in January of 2013 and a record low of 54 in March of 2004.
Figure 2: Trend analysis of Nigeria’s ‘core’ CPI from 2004 TO 2012
There are various Standards Forms of Construction Contracts in Nigeria that contain relevant provisions where variation claims may be applicable (e.g. BPP Act 2007). Despite these facts delay in closing the project are still common occurrences, and such definitely affect the cash flow position of contractors.
Variation of prices for equipment, plant, tools, machinery, supervision, services and associated project cost not captured on the Direct Variation of Price should be used to calculate price variation for finished construction work as they generally do reflect the whole range of influences that impact on market price. These include changes in productivity, profit, and trade margins of the construction contractor, and changes in actual market conditions.
The Consumer Price Index (CPI) is an indicator of changes in consumer prices experienced by Nigerians. It is obtained by comparing, over time, the cost of a fixed basket of goods and services purchased by consumers. Since the basket contains goods and services of unchanging or equivalent quantity and quality, the index reflects only pure price change.
Figure 3: Trend and forecast analysis of Nigeria’s CPI, all items less farm produce” published by the NBS
The CPI is widely used as an indicator of the change in the general level of consumer prices or the rate of inflation. Since the purchasing power of money is affected by changes in prices. Consumers can compare movements in the CPI to changes in their personal income to monitor and evaluate changes in their financial situation.
As CPIs provide timely information about the rate of inflation, and such suggests a strong link exist between VOP and construction projects, particularly in Nigeria. They can come to be used for as a base to calculate VOP. Internationally, CPI is used to set and monitor the implementation of economic policy; Central Bank of Nigeria, for example, uses the CPI, and special aggregates of the CPI, to monitor its monetary policies. Thus, it is recommended that CPI be used to adjust contracted payments to contractors.
- Using CPI
The term construction covers a wide variety of activities, including the construction of dwellings, non-residential buildings, and civil engineering works such as roads, bridges, dams, etc. Construction activity also encompasses repair, renovations, rehabilitation and maintenance of existing structures, etc. This diversity of construction activity is the cause of one of the major problems in the compilation of construction price indices, justifying the use of CPI as proxy for calculating general VOP.
In order to measure general price increases, the Bureau of Labour Statistics constructs an imaginary “market basket” of goods that an average family needs to lead an average life. The market basket includes specific items relating to housing, food, transportation, medical care, clothing, entertainment, education and communication. Currently, there are thousands of items in the “basket.” To illustrate, CPI can be thought of as the amount the average contractor would have to spend in a given month to buy the same basic goods and services that one would have to pay N100 for in the base period. The Table below shows the official CPI for year 2012.
| 2012 | CPI (Jan=100) | 2012 | CPI Jan=100) | 2012 | CPI Jan=100) | 2012 | CPI (Jan=100) |
| Jan | 129.90 | Apr | 137.00 | Jul | 140.40 | Oct | 141.90 |
| Feb | 130.00 | May | 138.90 | Aug | 140.90 | Nov | 142.50 |
| Mar | 137.10 | Jun | 139.80 | Sep | 141.30 | Dec | 143.50 |
For example, on average in December 2012, a client would have to spend NGN143.5 to buy the same goods and services that a client would have paid NGN100 for in the base period January 2012. Similarly, in September 2012 a client would have to spend NGN141.30 to buy the same goods and services that he would have paid NGN100 for in the base period January 2012. Now since each CPI number is equivalent to NGN100 in the base period, each CPI number is equivalent to every other one: NGN143.5 in December bought the same goods and services on average that would have cost NGN140.9 in August. NGN140.40 in July bought the same goods and services on average as NGN 137.10 did in March. We can say that 142.50 November naira is equivalent to 13.00 February naira.
For example, consider the Average Cost of cement per ton from 2007 to 2013:
| Year | HT Steel bars (Ton) | per cent Change |
| 2006 | 103,000.00 | |
| 2007 | 156,000.00 | 51.5 per cent |
| 2008 | 252,252.00 | 61.7 per cent |
| 2009 | 285,000.00 | 13.0 per cent |
| 2010 | 299,500.00 | 5.1 per cent |
| 2011 | 305,100.00 | 1.9 per cent |
| 2012 | 322,615.00 | 7.7 per cent |
| 2013 | 350,658.00 | 14.9 per cent |
The graph shows the price of steel reinforcement bars/per ton rising from a minimum of NGN 103,000 per ton in 2006 to its maximum in 2012 of NGN 322,615.00. Since the value of the naira fluctuates each year, this graph is not a realistic depiction of steel reinforcement bars costs over this period. To get a more accurate understanding, we convert the entire data series to constant 2013 naira.
| YEAR | Nominal cost | CPI | COST (2013NGN) |
| 2006 | 103,000.00 | 158.80 | 105,724.18 |
| 2007 | 156,000.00 | 142.36 | 178,617.59 |
| 2008 | 252,252.00 | 87.47 | 470,055.95 |
| 2009 | 285,000.00 | 95.74 | 485,220.39 |
| 2010 | 299,500.00 | 107.63 | 453,563.02 |
| 2011 | 305,100.00 | 120.26 | 413,537.25 |
| 2012 | 322,615.00 | 136.62 | 384,908.83 |
| 2013 | 350,658.00 | 144.13 | 396,558.19 |
Table 1: The graph of cement costs in constant 2013 naira
In fact, steel reinforcement bars costs went down every year except one from 2009 to 2012. In constant 2013 naira, steel reinforcement bars costs were at their highest in 2009. The cost dropped every year except 2013. The graph in constant naira tells a very different (and more realistic) story of steel reinforcement bars costs. In general, most time series in involving money should be converted to constant naira using the CPI.
- The Proposed VOP: Arguments and explanations
Prices are subject to developments (increase or decrease). These developments are driven by salary increases and market availabilities of goods. It is not reasonable that an employer transfers the risk of cost development to the contractor. Thus, any contract sum should therefore allow an amount for VOP (Variation of prices) in order to cover price developments, which cannot be borne by the contractor.
The VOP is structured in two classes. Direct VOP (covering approx. 30 per cent of costs) and General VOP on labour and classified materials, allows for a direct reimbursement of additional costs against a basic rate (direct VOP).
The basic rate is stipulated in the Contract agreement and formed part of the estimate of the contractor. Therefore, the General VOP should be subject to the CPI (Consumer Price Index) published by the NBS – Nigerian Bureau of Statistics. The percentage of costs from the BEME/BoQ subject to General VOP is stipulated in the Contract agreement under the Schedule of the Basic rates. Having contractual VOP in place, the contractor still bears risk of some uncovered escalation of prices, especially those arising from costs which are related to international procurement.
While it might be argued that the advance payment does hedge price developments, it can be concluded that the advance payment is meant to reduce the financial burden of the contractor at the beginning of the project when huge investments in plants, equipment and site installations are necessary to commence works but payments from the employer are only based on work items.
Therefore, the 50 per cent of the prices contained in the Bill of Quantities, excluding Bill 1 should be linked to the Consumer price Index for All items less Farm Produce as quoted by the National Bureau of Statistics in Nigeria (hereinafter referred to as the “CPI”), valid at the Base Date.
This means in the certificates commencing as from the end of the thirteenth month, any increases or decreases of the CPI current for the month in which certification takes place compared to the CPI valid at the base Date should, as the case may be, be paid to or allowed by the Contractor within the payment being certified. The net increase or decrease in the amount to be paid for a month shall be calculated and certified for payment as follows:
Pn = 50 per cent x A x CPI percentage = net addition/deduction in naira
Where:
A = the net amount of works certified for payment the BEME for relevant month, without allowing for any retention monies, advance, recovery of advance, previous fluctuations.
CPI percentage = (CPI current month – CPI base date) x 100
CPI base date
The formula expressed above is a generalized form of the FDIC procedure given below. If the resulting Price Adjustment Factor (CPI per cent) is positive (+ve), the price should be added to the contractor’s payable amount. If the result is negative (-ve), the price should be subtracted from the payable amount. The executed quantities of the elements subject to Price Adjustment can be obtained from the actual measurement or from certified invoice of the contractor or any other mode agreed between the contractor and the client which shall be stipulated in the contract.
“Pn” is the Price Adjustment factor for the work carried out in the period “n”, and a suitable proxy for CPI per cent because CPIs provide timely information about the rate of inflation, In addition, they are published frequently, usually every month but sometimes every quarter. They are available quickly, usually about two weeks after the end of the month or quarter. They are also usually not revised. CPIs tend to be closely monitored and attract a lot of publicity. Thus
CPI per cent = Pn
Ln, Mn, En, Effective Date Prices (current prices) of escalable items for the period “n”; and Lo,Mo,Eo, the Base Date Prices for the specified items can be replaced with 𝐶𝑃𝐼𝑛 (as of month of Invoice) and 𝐶𝑃𝐼𝑜 (as of signing of contract) respectively. Similarly, “b,c,d…”, Coefficients or weightages for each specified item of escalation in the Contract can collectively be replaced with corresponding ratio of the Total Cost of Project to Cost of elements (General VOP- equipment, plants, tools, machinery and other materials on one part; and supervision, services, associated project costs, not more than 65 per cent of the total contract price). Therefore, it can be concluded that:
Pn = A + b (Ln /Lo) + c (Mn/Mo) + d (En/Eo) = CPI per cent =A+B (CPIn/CPIo)
Therefore, 𝐶𝑃𝐼 per cent=𝐴+𝐵 𝐶𝑃𝐼𝑛/𝐶𝑃𝐼𝑜
Where:
B = Direct Adjustable Portions (e.g. steel reinforcement bars, diesel, cement, etc.)
A = General adjustable portions (e.g. services, equipment, etc.)
CPIn = CPI as of month of Invoice
CPIo = CPI as of signing of contract
CPI per cent = Adjustment factor
The Employer/Contractor shall at the time of preparation of monthly invoice documents determine the CPI per cent published by the Nigerian Bureau of Statistics.
If “P” is the amount payable (prior to adjustment) at the rates entered in the Price Schedule of the work carried out in period “n” then, Adjusted (revised) amount payable to the Contractor for work carried out in the period “n” = 𝑃(𝐶𝑃𝐼 per cent−1), following the procedure enumerated in this document. The adjustable portion of the Contract shall generally be fixed between 0.35 to 0.55 (35 per cent to 55 per cent) depending on the nature of the project and discretion of the Employer. General-adjustable VOP portion shall, thereby, not be generally more than 35 per cent. The table below shows data and analysis results on a subsample of a typical generic project using the expression from the CPI%.
Figure 4: General Variation of Price on other materials and associated project costs
- Conclusion
The major cause of project cost overrun has been attributed to the delay in the release of funds when they become due, and this has given rise to two unpleasant consequences: the delay in accomplishing the different work schedules, and rising cost of constructional materials and labour due to inflation as a result of extended project duration. The effect of inflation would however not have an impact on the overall cost of the projects, in general, as this would have been provided for if jobs were carried out within the lime frame and payment schedule specified in the contract agreement. This presumption is built on the argument of Woodward that if the rate of return is applied to both cash inflows and outflows, the net effect on the overall calculation will be zero, whether the owner of the project is both the client and the contractor.
Though the determination of price variation has always been a contentious issue because of no defined approach, the results of this study support the idea that the application of the proposed methodology will be very successful in resolving this conflict among project participants, particularly in Nigeria. Hopefully this methodology could achieve the same feat with little or no modification in other countries.
It is without doubt that the issue of price variation is inevitable in contract execution although the process of its determination has always been a thorny one leading at times to project abandonment. This study has explained the central importance of sharing construction cost burden of projects reduce enormous cost burden on all parties and an unpleasant spiral effect on the whole economy.
A change in Sub-Clause 13.8: Adjustments for Changes in Cost is hereby recommended, by deleting the existing sub-clause 13.8 in its entirety and replace with the following:
The Addendum II Contract Price shall be deemed to have been calculated in the manner set out below and shall be subject to variation in the events specified hereunder:
(1) (a) the prices contained in the Bill of Quantities are based upon the rates of wages and other emoluments and expenses (including the cost of employer’s liability insurance and Third Party Insurance) payable by the Contractor to work people engaged upon or in connection with the Addendum II Works in accordance with the rates and wages fixed by the national Joint Industrial Council, the Federation of Building and Civil Engineering Contractors and the Federal Ministry of Labour, Employment and Productivity, current at the Base Date and applicable to the area concerned.
(b) If the said rates and wages and other emoluments and expenses (including the cost of employer’s liability insurance and Third Party Insurance) shall be increased or decreased after the Base Date, the net amount of such increase or decrease shall be an addition to or a deduction from the Contract price, as the case may be, and paid to or allowed by the Contractor accordingly.
(c ) The prices contained in the bill of Quantities are based upon the prices of the materials good and other inputs to the Works specified in the list attached thereto which were current at the date of tender. Such prices are hereinafter to as Basic Prices.
(d) if after the base Date the price of any of the materials, good or other inputs to the Addendum II Works specified as aforesaid increase or decrease, then the net amount of the difference between the basic price thereof and the price payable by the Contractor and current when the materials, goods or and other inputs to the Addendum II Works are bought shall, as the case may be, be paid to or allowed by the Contractor.
(2) (a) If the Contractor shall, subject to sub-Clause 4.4[Subcontractors], sub-let any portion of the Addendum II Works he shall incorporate in the sub-contract provisions to like effect as those contained in sub-clause (1) of this Particular Condition.
(b) If the price payable under such a sub-contract so sub-let as aforesaid is decreased below or increased above the prices in such sub-contract by reason of the operation of any of the foregoing provisions of this clause, then the net amount of such decrease or increase shall accordingly be deducted from or added to the Contract Price and allowed by or paid to the Contractor as the case may be.
(3) 50 per cent of the prices contained in the Bill of Quantities, Bills [x] to [x], shall be linked to the Consumer price Index for All items less Farm Produce as quoted by the National Bureau of Statistics in Nigeria (hereinafter referred to as the “CPI”), valid at the Base Date.
Commencing twelve months after the Commencement Date, that means in the certificates commencing as from the end of the thirteenth month, any increases or decreases of the CPI current for the month in which certification takes place compared to the CPI valid at the base Date shall, as the case may be, be paid to or allowed by the Contractor within the payment being certified. The net increase or decrease in the amount to be paid for a month shall be calculated and certified for payment as follows:
50 per cent x A x CPI percentage = net addition/deduction in naira
Where:
A = the net amount of works certified for payment in Bills [x] to [x] for relevant month, without allowing for any retention monies, advance, recovery of advance, previous fluctuations.
CPI percentage = (CPI current month – CPI base date) x 100
CPI base date
The Contractor shall, within give written notice to the Employer’s Representative of any of the events referred to in paragraph 1(b), 1(d) and 2(b) of this particular Condition which may give rise to adjustment of the Contract Price. The Contractor shall submit to the Employer’s Representative detailed monthly claims with invoices, accounts and documents or records in format approved by the Employer’s Representative. The Employer’s Representative shall check, calculate and agree with the Contractor the amount payable to or allowable by the Contractor as the case may be, be added to or deducted from the Contract Price.
The additional amounts certified for payment in accordance with the above, shall be increased by 15 per cent to account for Contractor on-cost.
Subject to the provisions of Sub-Clause 8.4[Extension of Time for Completion], on amount shall be added to or deducted from the Contract Price in respect of amount otherwise payable to or allowable by the Contractor by virtue of this Particular Condition if the events referred to in paragraphs 1(b), 1(d) and 2(b) of this Particular Condition occurs after completion Date.
- Analysis and Attachments
