NDCM/QS Contract Administration 1

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.

NOTE: 0.4 and 0.6 above are standard fixed amounts.

M

MM

L

LLV

6.04.0

L portion M portion

Adjusted Sum

M

MM

L

LLV

6.04.0

Q change in Labour Costs

Q change in Materials Costs

Previous quarter’s Costs

NDCM/QS Contract Administration 2

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

• Dec 2006

1107

1153

• Dec 2005

• Dec 2006

1285

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

=

=

=

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

M

MM

L

LLV

6.04.0

NDCM/QS Contract Administration 3

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 2007

Final Claim 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 $ 90,000.00

Less Variations to date $ 121,500.00

Less Other Claims $ 23,000.00

Valuation subject to fluctuation $___________

Labour Cost Index Materials Cost Index

• June 2007

• June 2009

1132

1244

• Dec 2007

• Dec 2006

1423

1515