ICTAD Formula Method for

Price Fluctuation
 ICTAD Formula Method for Price
Fluctuation
The ICTAD Formula Method was introduced in January
1993.
To Reimburse of Price fluctuation of Material, Labour &
Plant in Construction.
To Calculate the amount due to the Price Fluctuation.
There are two Formula
1. Contract exceeding 10 Million
2. Contract not exceeding 10 Million
 THE FORMULA METHOD FOR CONTRACT
EXCEEDING RS. 10 MILLION

F= 0.966 (V – Vna ) ∑ Px (Ixc – Ixb)

100 all inputs Ixb
F = Price adjustment for the period
V = Valuation of work done during the period concerned
Vna = Value of non – adjustable element
Px = Percentage cost contribution of input X
Ixc = Current index for input X
Ixb = Base index for input X
 V - Valuation of work done during the period
concern

 Valuing the cumulative work done including the 80 % of

the cost of material delivered to site but has not been
incorporated in permanent works and deducting the
cumulative payment certified up to the previous bill.
V = (Vc + Mc) – (Vp + Mp)
Vc = Cumulative Value of work done during the period concerned.
Mc = 80 % of the invoiced value of material used for permanent
works on current valuation.
Vp = Cumulative Value of work done up to previous claim.
Mp = 80 % of the invoiced value of material used for permanent
works on previous valuation.
 Vna – Non Adjustable Element

 Value of work done under the items which will not be

considered for price adjustment and have been listed
accordingly in the Contract.
 Generally there are three categories of items will be
considered as non-adjustable element.
1. Items in the BOQ for which the expenditure will be fixed and
executed at early stages of contract. (Most preliminaries items
fall under this )
2. Provisional sum item.
3. Extra works items for which the rates are agreed based on the
prices prevailing at the time of execution of works or are priced at
Day-work rates.
Vna – Non Adjustable Element

V =V –V
na nac nap

V = Cumulative of work certified under items specified as

nac

non- adjustable element up to the current bill

Vnac = Cumulative of work certified under items specified as

non- adjustable element up to the Previous bill
 Px – Input Percentages
The percentage cost contribution of major materials, Plant and Labour to
the contract.
When include these item, it is suggested to exclude the less cost
significant items, in computing the input percentages.
Combined effect of such items will be less than 10% of the total cost of
inputs.
Hence the total contribution of major inputs will be considered as 90%.
The computation of input proportions is based on the costing major input
items required for proposed construction.
The costs will be calculated using the prices that prevailed at the time of
bidding.
The cost of major inputs will be considered as 90% of the total cost.
 Px – Input Percentages
Input proportion of a particular input will be computed as the ration
between the cost of the input and the cost of all inputs.
Example
Indices No Input Name Input percentage
(Px)
P2 Heavy Machinery 37.89
M7 Metal 20.66
M30 Bitumen 16.89
P3 Fuel 5.19
L2 Unskilled labor 4.35
M8 Sand 2.9
L1 Skilled labor 2.12
90
 Indices
The indices used in the formula shall be those
published by ICTAD.

Monthly indices will be published in Bulletin of

Construction Statistics.

The type of indices applicable to this formula shall

be Material(M indices), Labour (L indices) & Plant
& Equipment (P indices)
 Ixb – Base Indices
“Base Indices” shall be the indices for the input,
prevailing for the calendar month, one month prior
to the date set for the submission of Bid.

For Example,
If the bids were closed on any date of the month
of September, the applicable base indices shall
be the indices published for the month of August
of the same year
 Ixc – Current Indices
The current index of a particular input shall be the index
published by ICTAD for that input for the month
applicable.
The Contractor is supposed to submit the monthly
statement for the payment.
For the first interim bill, Current indices shall be taken as
the indices prevailing on the first month after
commencement of the contract.
For any other interim claim or the final claim the Current
indices shall be taken as indices prevailing for the calendar
month, one month after the previous valuation was done.
 Ixc – Current Indices
Example for the use of Current Indices
Details of monthly statement submitted by the Contractor
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
Case a Claim 1 Claim 2 - - Claim 3 Final
Case b - Claim 1 Claim 2 - Final -

Applicable Current Indices

Claim 1 Claim 2 Claim3 Final Claim

Case a 6onth 1 Month 2 Month 3 Month5
Case b Month 1 Month3 - Month 4
 Method Of Computation Of Price Fluctuation

The Formula is considered in two parts for the purpose of

computations:
0.966 (V – Vna ) as the first part

100
∑ Px (Ixc – Ixb) as the second part
all inputs Ixb
 Method Of Computation Of Price Fluction

Computation of V- V na

1.0 Price adjustment computation for the Valuation No

2.0 Previous Valuation
 a. Date 04/2011
 b. Cumulative value of work done Rs. 6,521,904.02
 c. Cost of material at site Rs. 450,000.00
 d. Cumulative cost of non-adjustable element Rs. 105,650.00
3.0 Current Valuation
 a. Date 09/2011
 b. Cumulative value of work done Rs. 9,745,967.43
 c. Cost of material at site Rs. -
 d. Cumulative cost of non-adjustable element Rs. 155,890.00
 e. Indices applicable for Current Valuation May/ 2011
 Method Of Computation Of Price Fluctuation

 4.0 Computation of V – Vna

V – Vna = (3b+3c-3d) –(2b+2c-2d)

 = 2,723,823.41
5.0 0.966 (V – Vna ) = 26,312.13
100
6.0 Computation of ∑ Px (Ixc – Ixb)
all inputs Ixb
Method Of Computation Of Price Fluctuation

Name of input Input Base index Current Index Px (Ixc – Ixb)

percentage (Px) (Ixb) (Ixc)
Feb/2011 Ixb

Heavy
Machinary (P2) 37.89 313.7 313.7 0.000
Metal (M7) 20.66 267.5 273.9 0.079

Bitumen (M30) 16.89 870.7 870.7 0.000

Fuel (P3) 5.19 715.8 747.6 0.231
Unskilled
labor(L2) 4.35 352.1 352.1 0.000
Sand (M8) 2.9 1780.3 1791.0 0.017
Skilled labor
(L1) 2.12 363.5 363.5 0.000
0.327
Method Of Computation Of Price Fluctuation

 7.0 Price Adjustment for the Current variation

 F = Step 5 X Step 6
 26,312.13 X 0.327
= 8,604.06
The Formula Method For Contract Not Exceeding Rs. 10 Million

F= 0.869 (V – Vna ) (Itc – Itb)

Itb
F = Price adjustment for the period
V = Valuation of work done during the period
concerned
Vna =Value of non – adjustable element
Itc = Current Composite index for type of
work
Itb = Base Composite index for type of work
 Method Of Computation Of Price Fluctuation

 Step 1: Estimating the cumulative value of work done up to

the time of valuation
 V = (Vc + Mc) – (Vp + Mp)
 Vc = Cumulative Value of work done during the period
concerned.
 Mc = 80 % of the invoiced value of material used for
permanent works on current valuation.
 Vp = Cumulative Value of work done up to previous
claim.
 Mp = 80 % of the invoiced value of material used for
permanent works on previous valuation.
 Method Of Computation Of Price Fluctuation

Step 2: Excluding the non-adjustable element

V = V – V
na nac nap

 Vnac = Cumulative of work certified under items specified as

non-adjustable element up to the current bill

 Vnac = Cumulative of work certified under items specified as

non-adjustable element up to the Previous bill
Method Of Computation Of Price Fluctuation

Step 3: Computation of Price fluctuation

 a. Calculate the factor,
0.869 (V – Vna)
 b. Using the appropriate base and current composite
indices compute
(Itc – Itb)
Itb
 c By multiplying the result obtained from Step ‘a’ and Step
‘b’ above the price adjustment due for the current valuation
can be computed.