Appendix – A

Appendix 2 - Price Escalation

Prices payable to the Contractor, in accordance with the Contract, shall be subject to
adjustment during performance of the Contract to reflect changes in the cost of labor and
material components, in accordance with the following formula:

Adjustment for Changes in Cost

The adjustment for changes in cost shall be payable as per adjustment formula “Weightage
for various component shall be as under:

Labour 35 %
Materials 25 %(Excluding cement and steel)
POL 7.5 %
Note The total of labour, material, POL, Cement and steel components shall be less than
100%. In case the total exceeds 100 %, the percentages shall be adjusted to 100 %.
The actual variation in cost of cement and steel shall be paid for quantities used or as
per consumption statement which ever is less. The variation in prices of Cement & Steel
shall be worked out on the basis of the prices of cement and steel prevalent on the date bids
were received and the price operative during the period for which adjustment to be worked
out. Price of cement shall be the price payable as per Rate Contract entered into by the D.
G. S. & D. with cement factories. In case there is no DGSD RC then rate contract of MP
State Government Organization with cement factories, for respective periods shall be
considered. Price of steel (steel for reinforcement and structural steel) shall be the price at
which steel is available at the nearest stock-yard controlled by the Steel Authority of India,
for respective periods.

(A) LABOUR
VL = O.75xPL/100 x R x (ILI-IL0) / IL0
VL= Increase or decrease in the cost of work during the quarter under consideration
due to change in rates for labour.
R= The value of the work done in rupees during the quarter under consideration
excluding the cost of materials supplied by the department and excluding other
items as mentioned in this Clause.
IL0 = The average consumer price index for industrial workers prevailing on the day 28
(twenty eight) days prior to the closing date for submission of Bid in which
tenders were opened/ negotiated (as published in Labour Bureau Simla, for the
area).
IL1 = The average consumer price index for industrial workers for the quarter of
calendar year under consideration (as published in Labour Bureau Simla for the
area).
PL = Percentage of labour components as indicated in Appendix to Bid.
(Note: In case of revision of minimum wages by the Government or other
competent authority, nothing extra would be payable except the price escalation
permissible under this Clause.)
(B) MATERIAL
VM= 0.75xPM/100 X R x (LM1-LMO)/ LMO
VM = Increase or decrease in the cost during the quarter under consideration due to
change in rates of material.
R= The value of the work done in rupees during the quarter under consideration
excluding the cost of materials supplied by the department and excluding other
items as mentioned in this Clause.
LM0 = The average wholesale price Index (all commodities) prevailing on the day 28
(twenty eight) days prior to the closing date for submission of Bid in which
tenders were opened/ negotiated (as published in Reserve Bank of India
Journal).
LM1 = The average wholesale price Index (all commodities) for the quarter under
consideration (as published in Reserve Bank of India Journal).
PM = Percentage of material components as specified in the Appendix to Bid.

(C) POL
Vt = 0.75 x Pf /100 x R x (Fj- Fo) / Fo
Vt = Increase or decrease in the cost of work during the quarter under consideration
due to change in the rates for fuel and lubricants.
Fo = The average wholesale price index of High Speed Diesel (HSD) as published in
Reserve Bank of India Journal prevailing on the day 28 (twenty eight) days prior
to the closing date for submission of Bid in which tenders were opened/
negotiated.
Fi = The average wholesale price index of HSD for the quarter under consideration as
published in Reserve Bank of India Journal.
Pf = Percentage of fuel and lubricants component as indicated in the Appendix to Bid
R= The value of the work done in rupees during the quarter under consideration
excluding the cost of materials supplied by the Employer and excluding other
items as mentioned in this Clause.
(Note: For application of this clause price of HSD is chosen to indicate fuel and
lubricant component.)
The base date shall be the date twenty eight (28) days prior to the Bid closing date.
The date of adjustment shall be the mid-point of the period of manufacture or installation
of component or Plant.
The following conditions shall apply:
(a) No price increase will be allowed beyond the original delivery date unless covered
by an extension of time awarded by the Employer under the terms of the Contract.
No price increase will be allowed for periods of delay for which the Contractor is
responsible. The Employer will, however, be entitled to any price decrease
occurring during such periods of delay.
(b) If the currency in which the Contract price, P0, is expressed is different from the
currency of the country of origin of the labor and/or materials indices, a correction
factor will be applied to avoid incorrect adjustments of the Contract price. The
correction factor shall correspond to the ratio of exchange rates between the two
currencies on the base date and the date for adjustment as defined above.
(c) No price adjustment shall be payable on the portion of the Contract price paid to
the Contractor as an advance payment.