Fluctuations in construction contracts

The following Construction practice note provides comprehensive and up to date legal information covering:

  • Fluctuations in construction contracts
  • What are fluctuations?
  • When would fluctuations provisions be used?
  • Fluctuations provisions in standard forms
  • JCT
  • NEC

Fluctuations in construction contracts

What are fluctuations?

Fluctuations provisions are clauses in construction contracts thatallow the contract sum to be adjusted to take account of changes to the price of labour, materials and other costs throughout a construction project.

By way of example, if a contractor tenders on the basis of prices current at the time of tender, and then inflation results in the cost of procuring the works increasing during the project, the contractor bears that cost. Where there are no fluctuations provisions in the building contract the contractor is deemed therefore to have taken account of inflation and the risk of any inflationary increases in its pricing. On the other hand, where there is no fluctuations clause, if prices go down, a contractor could benefit from the reduced costs.

Where fluctuations clauses are included in a construction contract, the contractor could be entitled to be reimbursed some or all of any additional costs caused by rising prices. Calculating the increased cost may be achieved by using an index based formula, or by using a published list of market prices for various items.

When would fluctuations provisions be used?

Clearly fluctuations provisions are likely to be of more benefit to a contractor in times of high inflation where the cost of procuring labour, materials and other goods for the works is likely to increase.

Due to low rates of inflation

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