User Documentation: Contract Price Adjustment Calculator

1.0 Introduction

The Price Adjustment Calculator is a powerful tool designed to accurately calculate price adjustments in contracts, specifically tailored for the engineering and construction industry. This user documentation serves as a detailed guide to help you navigate the Price Adjustment Calculator effectively. Ensure to input accurate and relevant information for accurate results.

Calculator URL: https://www.beyondnothing.com/price-adjustment-calculator/

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2.0 Invoice and Contract Data:

2.1 Base Amount (Non-Adjusted Invoice)

Enter the value of your invoice or works. This value may be inclusive or exclusive of taxes as per your contract. This will be considered as a BASE AMOUNT to which the adjustment will be applied.

2.2 Important Dates

Select the base and adjustment dates:

  • Select the BASE DATE and ADJUSTMENT DATE for your price adjustment calculation using the provided date selectors provided.
  • These dates are based on your contract. Usually, base dates are the date of bid submission or end of bid validity.
  • Adjustment Dates may be either the date of invoice, installation of works, or a median date as indicated in your contract.

After selecting the base and adjustment dates, the column headings for material data inputs will automatically display the selected dates.

3.0 Price Variation Data

3.1 Fixed Portion:

Obtain the fixed portion value from the relevant section of your contract. This value represents the portion of your contract that is non-adjustable.

  • Input the fixed portion value into the designated input field.

3.2 Materials

  • You can adjust your invoice price based on the price variations of up to 10 materials.
  • Each material requires specific information:
    • CODE: A unique identifier for each material.
    • MATERIAL NAME: Input the name of the material.
    • COEFFICIENT: Enter the coefficient value representing the weightage of the material in the price adjustment formula.
    • INDEX ON [Base Date]: Input the price index value for the material on the base date.
    • INDEX ON [Adjustment Date]: Enter the price index value for the material on the adjustment date.
    • IMPORTED: Check this box if the material is imported. This will enable additional fields for currency exchange rates.
    • FX RATE ON [Base Date]: Input the currency exchange rate for the material on the base date (if applicable).
    • FX RATE ON [Adjustment Date]: Enter the currency exchange rate for the material on the adjustment date (if applicable).

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price escalation
Sample Input Date for Price Variation

Important Notes

  • Ensure that the sum of the Fixed Portion and all Material Coefficients adds up to 1.
  • The program provides fields for up to 10 materials. In addition, Diesel and Labor have been predefined with “D” for Diesel and “L” for Labor.
  • All necessary values should be entered accurately to obtain precise results.

If the Coefficients do not equal to 1, an error message will be generated and you will need to adjust your coefficients

Weightage Validation Check

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4.0 Outputs

The Price Adjustment Calculator provides the following outputs based on the input data.

  1. SUM OF FIXED PORTION AND MATERIAL COEFFICIENTS: This is a validation check to ensure your formula is being correctly applied.
  2. PRICE ADJUSTMENT FACTOR: The Price Adjustment Factor represents the calculated adjustment based on the provided data, according to the formula shown here.
  3. ADJUSTMENT APPLIED: This output displays the total adjustment amount applied to the invoice or works.
  4. ADJUSTED INVOICE: The Adjusted Invoice value reflects the updated invoice amount after applying the calculated price adjustment.
invoice adjusted for price escalation
Price Adjustment Outputs

5.0 Price Adjustment Report

Clicking the GENERATE PRICE ADJUSTMENT REPORT BUTTON will generate a downloadable pdf report summarizing your price adjustment calculation. This report will have a temporary URL in your browser and can be downloaded upon opening. For best results, use a browser that can open pdf documents such as chrome or edge.

price variation formula
Downloadable pdf Price Escalation Report

5.1 Elements of the Price Adjustment Report

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  1. Summary Table:
    • The report begins with a summary table that provides an overview of the price adjustment calculation. It includes key information such as the invoice value, base value, adjustment applied, and the adjusted invoice value.
  2. Formula and Calculation Method:
    • The report explains the price adjustment formula and the calculation method used. It outlines the variables involved in the formula and how they contribute to the overall adjustment calculation.
  3. List of Materials with Their Weightages:
    • A detailed list of materials used in the calculation is presented, along with their respective weightages or coefficients. This helps identify the significance of each material in determining the price adjustment.
  4. Table of Price Indexes for Each Material:
    • The report includes a table that displays the price indexes for each material on the base and adjustment dates. This information is essential for computing the price adjustment based on the material-specific variations.
  5. Currency Exchange Rates for Imported Materials:
    • If imported materials are considered in the calculation, the report includes a table showing the currency exchange rates for each imported material on the base and adjustment dates. This factor is crucial in adjusting the invoice value accurately.
  6. Price Adjustment Formula:
    • The report provides the explicit price adjustment formula, showcasing the actual values of the variables involved. This allows stakeholders to understand the precise calculation process.
  7. Line-by-Line Calculation:
    • A line-by-line calculation is presented to demonstrate how the price adjustment factor is obtained. It shows the computation for each variable, including the fixed portion, material coefficients, price indices, and any additional factors like currency exchange rates.
  8. Application of Price Adjustment Factor:
    • Finally, the report illustrates the application of the price adjustment factor to adjust the invoice value. It showcases the step-by-step process and the resulting adjusted invoice amount.

Formula:

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The Price Adjustment Calculator utilizes the following price escalation formula to compute the variation amount:

PF = FP + a*(A1/A0) + b*(B1/B0) + … + n*(N1/N0) + Cd*(D1/D0) + Cl*(L1/L0)

where:

  • PF: Price Adjustment Factor
  • FP: Fixed Portion
  • a, b, …, n: Coefficients for each material
  • A1/A0, B1/B0, …, N1/N0: Price indices for each material on the adjustment and base dates
  • Cd: Coefficient for Diesel
  • D1/D0: Price index for Diesel on the adjustment and base dates
  • Cl: Coefficient for Labor
  • L1/L0: Price index for Labor on the adjustment and base dates

Disclaimer

Usage of this price adjustment calculator does not guarantee any success in price adjustment/variation/escalation claims. The report generated by this website is for informational purposes only and does not constitute legal advice or establish a contractual relationship. The information provided in the report is based on the data and inputs provided by the user, and beyondnothing.com disclaims any liability for errors, omissions, or inaccuracies. Users are advised to consult with legal, financial, and engineering professionals for specific advice and guidance pertaining to their individual circumstances. By using this calculator and the generated report, users acknowledge and accept that beyondnothing.com and its affiliates shall not be held responsible or liable for any loss or damage arising from the use of the calculator and report.

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