Agreement With Price Adjustment
States should take into account the need for price adjustment provisions in projects under development. Projects that have been approved for lease but have not received offers may be considered for the measure. Projects that have been awarded should not be subject to action. Although there are currently projects under construction that are affected by rising fuel and/or asphalt prices, no measures are currently proposed until the impact of prices can be fully corrected. When entering into a fixed-price contract for an extended contract period, the supplier should include an emergency provision for inflation in the price or offer. A contract that does not contain a clause to accommodate the current price changes that occurred during the performance of the contract is called a fixed-price contract. If the time interval between the date of the offer and the completion date is so short that the costs incurred by the contractor or supplier vary in negligible proportions, a contractor may be expected to enter into a fixed-price contract. If companies do not stipulate in the contract that an escalation is based on SEIFSA`s formula and indices, contract providers may submit price increases as they see fit. Similarly, in the contract, buyers can refuse all claims as they see fit. Thus, companies /business partners We are again facing the possibility of oil shortages and price uncertainties due to unrest in the Middle East. The oil embargoes of 1973, 1974 and 1979 led to price speculation and excessive prices for fuels and asphalt products. This has resulted in serious problems for contractors in the development of realistic offers.
The application of price adjustment clauses in contracts provided a mechanism for transferring the risk of contractors to contracting agencies for the proposed offers. Contract price adjustment clauses are intended to determine offer prices at the time of offer on the basis of known costs and to manage the subsequent separation of cost escalation risks. An important aspect of re-establishing escalation in a contract between two parties is the inclusion of an agreement between the two parties on all aspects of an escalation of the contract or a CPA. The basic logic behind a CPA is to adjust the base price (the price at the beginning of the reference period) with a market-related change to calculate a new price to ensure a fair outcome for both parties. As the overall inflation rate increases, it is likely that the costs of a supplier or supplier will change in a relatively short period of time, so that a supplier who commits to a fixed-price contract is not sure to retain its profit margin. Suppliers of goods and/or services are increasingly reluctant to take risks of escalating costs. Their customers are also reluctant to cover the costs of a contract price risk premium or to participate in supplier over-bidding for possible future cost increases in their offer.