Abstract:
The construction and maintenance of our national highway infrastructure consumes significant quantities of materials that include asphalt concrete, Portland cement concrete, steel, and the fuel required for such activities. The price of major construction materials fluctuates during the period of a construction contract and price escalations frequently counterbalance the planned benefits of infrastructure projects to the community. Present research effort mainly focused on the prevalent price adjustment practices in construction industry of Pakistan. For this purpose Pakistan Engineers Council’s (PEC) price adjustment formula, being used for contract price adjustment by highway construction industry in Pakistan has been studied. Also an effort has been made to compare PEC price adjustment formula with other similar practices and its implications in construction contracts and suitable measures to improve the formula. The interviews with professionals revealed that major components of PEC price adjustment formula that need revision are: minim elapsed period for escalation, minimum percentage for item weightage, weightage of fixed and adjustable portion of PEC formula, temporary works and sources of material prices. Price escalation factors were identified through comprehensive literature review and were validated through knowledge elicitation technique. Results indicated that price escalation was mainly responsible for project delays, low quality and price overburdens. Also, it was revealed that POL and steel are the items that are most susceptible to price fluctuation. Present study also developed a price escalation model for highway projects, in order to forecast escalation factors for different construction items such as cement, steel, bitumen and unskilled labour. Model has the capability to predict the project cost along with major price escalation factors. Model developed in present study can be used by highway industry in Pakistan for contract price adjustment resulting from fluctuation in prices of construction material and unskilled labour.
