Comments on: Stats needed to put clause into effect http://www.cmguide.org/archives/1343 All you need for your career.. Thu, 26 Jan 2012 11:12:34 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Zack Ali http://www.cmguide.org/archives/1343/comment-page-1#comment-302 Zack Ali Sat, 27 Jun 2009 08:54:32 +0000 http://cmguide.org/?p=1343#comment-302 All parties involve in the construction contract should begin to realize that the escalation clause or Variation of Price VOP, if need to be incorporated into the contract will not only siding a single party, i.e. the contaractor but to certain extend offer a very competative pricing and give fair justification to the parties in the contract. Many clients do not realize that by the absence of such clause, most of the contractors will put certain % of factor during the pricing of the tender in order to reduce the risk of price increase in materials that usually create unnecessary additional cost to the project. A lack of government indices and statistics does not mean a restriction for implementing and adapting such clause into the contract. As price escalation is mostly applied only to some major materials namely steel bar, cement based items, diesel and bitumen (for general contracting), a simple approach in implementing this clause is by ensuring that all parties i.e. client, contractor and consultant should create a monthly market price database for these few items in order to manage the escalation. Every month, the contractor will require to submit the prices of the said items, to be verified by the consultant with the approval of the client. We should also understand that such variation of prices not only required to be adjusted when the material price increase but vise-versa, when the material price decrease, which definitely will have big advantage to the client as well. Another solution to the absence of government statistic or indices, is to request the corporation from all contractors to submit the basic material prices to UAE Contractor Association on monthly or quarterly basis, so that the Association could generate a proper database. From; Zack Ali, GM, IJMME LLC All parties involve in the construction contract should begin to realize that the escalation clause or Variation of Price VOP, if need to be incorporated into the contract will not only siding a single party, i.e. the contaractor but to certain extend offer a very competative pricing and give fair justification to the parties in the contract.
Many clients do not realize that by the absence of such clause, most of the contractors will put certain % of factor during the pricing of the tender in order to reduce the risk of price increase in materials that usually create unnecessary additional cost to the project.
A lack of government indices and statistics does not mean a restriction for implementing and adapting such clause into the contract. As price escalation is mostly applied only to some major materials namely steel bar, cement based items, diesel and bitumen (for general contracting), a simple approach in implementing this clause is by ensuring that all parties i.e. client, contractor and consultant should create a monthly market price database for these few items in order to manage the escalation. Every month, the contractor will require to submit the prices of the said items, to be verified by the consultant with the approval of the client.
We should also understand that such variation of prices not only required to be adjusted when the material price increase but vise-versa, when the material price decrease, which definitely will have big advantage to the client as well.
Another solution to the absence of government statistic or indices, is to request the corporation from all contractors to submit the basic material prices to UAE Contractor Association on monthly or quarterly basis, so that the Association could generate a proper database.

From;
Zack Ali,
GM, IJMME LLC

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