Can you explain in detail about the cost escalation clause for cement?
Cost escalation clause is used for medium to long term projects to account for the price hike in the cost of materials during the execution period of project work. This is because the commodities like cement and steel for major component of any construction and any significant rise in the price may lead to the rise in expense of the contractor and hence decreasing the price. If this clause in not introduced, the contractor may have to face heavy losses or work on no profit no loss basis. Consequently, the working company may forefeit the work. Hence, this clause is necessary. Following is the description of the clause along with formula as given in the book General Conditions of Contract for Construction Work 2020, published by Central Public Works Department, Ministry of Housing & Urban Affairs, Govt. of India (widely used and accepted for construction works in India): Clause 10CA: Payment due to variation in prices of materials after receipt of tender If after submission of the tender, the price of materials specified in Schedule F increases/ decreases beyond the base price(s) as indicated in Schedule F for the work, then the amount of the contract shall accordingly be varied and provided further that any such variations shall be effected for stipulated period of Contract including the justified period extended under the provisions of Clause 5 of the Contract without any action under Clause 2. However for work done/during the justified period extended as above, it will be limited to indices prevailing at the time of updated stipulated date of completion considering the effect of extra work (extra time to be calculated on pro-rata basis only as cost of extra work x stipulated period/tendered cost).If updated stipulated date of completion as calculated on pro- rata basis does not cover full calendar month then indices will be considered or restricted to previous month. The increase/decrease in prices of cement, steel reinforcement, structural steel and POL shall be determined by the Price indices issued by the Director General, CPWD. For other items provided in the Schedule 'F', this shall be determined by the All India Wholesale Price Indices of materials as published by Economic Advisor to Government of India, Ministry of Commerce and Industry. Base price for cement, steel reinforcement, structural steel and POL shall be as issued under the authority of Director General CPWD applicable for Delhi including Noida, Gurgaon, Faridabad & Ghaziabad and for other places as issued under the authority of Zonal Chief Engineer, CPWD and base price of other materials issued by concerned Zonal Chief Engineer and as indicated in Schedule 'F'. In case, price index of a particular material is not issued by Ministry of Commerce and Industry, then the price index of nearest similar material as indicated in Schedule 'F' shall be followed. I hope this answers your question.