Escalation clause

Dear Nikul,

Escalation Clause for a Construction Contract as per FIDIC Standard Form of Contract - 1999 Red Book 1st Edition is extracted below, For more details i would recommend you to refer Sub-Clause: 13.8 Adjustments for Changes in Cost in the above said book.

Pn = a + b Ln/Lo + c En/Eo + d Mn/Mo + ...

Where,

"Pn" is the adjustment multiplier to be applied to the estimated contract value in the relevant currency of the work carried out in period "n', this period being a month unless otherwise stated in the Appendix to Tender

"a" is a fixed coefficient, stated in the relevant table of adjustment data, representing the non-adjustable portion in contractual payments;

"b', 'c", "d", ... are coefficients representing the estimated proportion of each cost element related to the execution of the Works, as stated in the relevant table of adjustment data; such tabulated cost elements may be indicative of resources such as labour, equipment and materials;

"Ln", "En", "Mn", ... are the current cost indices or reference prices for period "n', expressed in the relevant currency of payment, each of which is applicable to the relevant tabulated cost element on the date 49 days prior to the last day of the period (to which the particular Payment Certificate relates); and

"Lo", "Eo", "Mo", ... are the base cost indices or reference prices, expressed in the relevant currency of payment, each of which is applicable to the relevant tabulated cost element on the Base Date.

Components on each Contract based on its type and its circumstances.

I donot think there is any Judgment which has been awarded to have an automatic provision on compensation beyond1 year on Labour, If you come across or any one else have came across such, please let me know.

Would like to share with you an outstanding Supreme Court judgment on Escalation awarded by the Honourable Chief Justice of India - Justice Shri Altamas Kabir vide Civil Appeal No. 4806 of 2000; Decided On: 30.11.2006, (From the Judgment and Order dated 31.7.1998 of the High Court of Kerala at Ernakulam in M.F.A. No. 980/1990 C)

Kind regards,

Srinivas