COST FLUCTUATIONS

Section 12.8
12.8.1 What is a cost fluctuation?

After the close of _________.

Increase (decrease) costs external to the contracting parties but
affecting the Contract Price
e.g. Council ______, law or regulation, toll, ________ etc.

How do you administer a cost fluctuation claim?

Claim as for a____________

Excludes adjustments for day works, prime cost sums, variations
payments based on actual costs or current prices, advances made
(A3, pg 67).
The claim is for an increase (decrease) in _________
because of events subsequent to the Contract signing that have
impacted on costs.
Dayworks, prime cost sums, variations payments based on actual
costs or current prices, advances etc removed from the tender sum
they are based on actual costs.
The claim is as a variation to the Contract.
The claim is based on a formula which takes into account the
proportionate change in Labour costs and Material costs over the time
period.

portion

portion

0.4L L 0.6M M
V

L
M

Adjusted

Sum

NOTE: 0.4 and 0.6 above are standard fixed amounts.

Q
change in
Labour Costs

Q
change in
Materials Costs

0.4L L 0.6M M
V

L
M

Previous quarters Costs

NDCM/QS

Contract Administration

Simple Calculation:
Details
Tender closed June

2005

Claim for June

2006

Valuation of work to date

$1,128,000

Prime Cost Sums

$50,000

Variations to date

$40,500

Cost Fluctuation Claim:

June 2006

Step 1
Tender closed

June 2005

Valuation of work to date

$1,128,000

Prime Cost Sums

less

$50,000

Variations to date

less

$40,500

Valuation subject to fluctuation

$_________

Step 2
From NZ Statistics (see http://www.stats.govt.nz )

Labour Cost Index

Materials Cost Index

Dec 2005

1107

Dec 2005

1285

Dec 2006

1153

Dec 2006

1407

Step 3
Calculate the amount of fluctuation from the above formula and the relevant statistics
from NZ Statistics.
For this example use the cost indices above

0.4L L 0.6M M
V

L
M

=
=
=
This is added to the claim in the Other claims part of the monthly claim.

NDCM/QS

Contract Administration

If you are assessing a fluctuation claim check:

1)

The Special Conditions of Contract do not make other provisions for

fluctuations.

2)

The current claim to date has had the Prime Cost Sums, variations,
dayworks etc removed.

3)

The correct Labour and Material Cost Indices are being used.

4)

The calculations have been done correctly.

EXERCISE

Tender Amount
Details
Tender closed June
Final Claim

2007
June 2009

Contract Sum

$3,642,000

Included Sums

$90,000

Cost Fluctuation Claim:

June 2010

Step 1
Tender closed

June 2007

Tender Contract Sum

$ 3,782,500.00

Less Included Sums

Less Variations to date

$
$

90,000.00
121,500.00

Less Other Claims

23,000.00

Valuation subject to fluctuation

$___________

Labour Cost Index

NDCM/QS

Materials Cost Index

June 2007

1132

Dec 2007

1423

June 2009

1244

Dec 2006

1515

Contract Administration