Annexure 10 — NONCONSULT_MANUAL

The formula for price variation will thus be:- = ⎣ ⎢ ⎢ ⎢ ⎡� + � 1 � + � 1 �� 100 ⎦ ⎥ ⎥ ⎥ ⎤ − Pa is then adjustment amount payable to the contractor (a minus figure will indicate a reduction in the contract price) on the date of supply.

Po is the contract price on the base date (which is taken as the date on which tender is due to open). a is the assigned percentage to the material element in the contract price.

b is the assigned percentage to the labour element in the contract price. (F, a and b being percentages should total 100)

Lo and L1 are the average wage indices for the quarter before the quarter in which base month falls and for the quarter before the quarter in which date of delivery falls; respectively. For example, for a tender opening on March 17, 2016 (base date), Lo would be average wage index for the quarter of Oct-Dec 2015.

Mo and M1 are the material prices/ indices as average of the month, two months prior to the month in which base month falls and average of the month, two months prior to the month in which date of delivery falls, respectively. For example, for a tender opening on March 17, 2016 (base date), Mo would be prices/ index as average of the month of January 2016. All material prices/ indices will be basic prices without excise duty and without any other central, state, local taxes and duties and Octroi.

If more than one major item of material is involved, the material element can be broken up into two or three components such as Mx, My, Mz.

The following conditions would be applicable to price adjustment: 1. There is a Time-lag period between the date of delivery/ base date respectively and the dates on which indices/ prices are to be considered as per above formula. This time lag can be a few months/ weeks prior to such base date/ date of delivery, depending on the frequency of publishing/ availability of indices/ prices and the supply chain process of manufacturing. This must be specified in the definitions of L0/ L1 and M0/M1 indices in the formula in the tender document as above. 2. Base date shall be assumed to be the bid submission deadline. 3. No price increase is allowed beyond original delivery period.

Annexure 10: Example of Formula for Price Variation Clause (Refer Para 6.5-2-d-x)) (The formula for price variation should ordinarily include a fixed element, a material element and a labour element. The figures representing the material element, and the labour element should reflect the corresponding proportion of input costs, while the fixed element may range from 10 to 25% (ten to twenty-five percent). That portion of the price represented by the fixed element and profits and is not subject to variation. The portions of the price represented by the material element and labour element along will attract price variation.)

4. No price adjustment shall be payable on the portion of contract price paid to the contractor as an advance/ interim payment after the date of such payment. 5. No price adjustment shall be payable if this is less than or equal to 2% (two percent) of Po. 6. Total adjustment will be subject to maximum ceiling of ____% (to be specified in tender document), beyond which the price variation would be capped at this level. As soon as it comes to light that price variations are likely to go beyond this ceiling, and if the Contractor is not agreeable to the price variation being capped at that level, he may notify the Purchaser under ‘Frustration of Contract’ provisions in the Tender Document/ Clause, for termination of contract. 7. Payments for services would initially be made as per the base price mentioned in the contract. Price adjustment bill should be submitted only quarterly for the services delivered during the quarter. 8. In GTE tenders extra care should be taken in selecting the price indices. Preferably the price indices should be from the same country and of same currency as the country and currency of the bidder. In case price is in a currency of a country where inflation is low and the indices are from country with much higher inflation rates, � 1 � and � 1 � should be multiplied by a correction factor of exchange rates� 1 �, where E0 is the exchange rate of country of M and L indices with reference to currency of price P. For example, if M&L are from India and P is in $, then Eo is Number of Rs. in a $ on base date and E1 is the exchange rate on determination date. 9. Even if there is no price adjustment claim, contractor must submit all relevant data to prove that there is no downward variation. In any case he must submit a declaration as follows; “It is certified that there has been no decrease in the price because of decrease in price variation indices in the price variation formula. In the event of any decrease of such indices that come to light later regarding the payment claimed by us, we shall promptly notify this to the purchaser, and we undertake to refund and agree to the purchaser deducting any excess payment made to us in this regard, from our future payment due.”