Price Variation, Quantity Variation and Delay Claim on a Rural Road Package
A state PWD has awarded a 4.5 km rural road package for Rs 8.4 crore with a 12-month completion period. The work order was issued in January 2023. Possession of 1.2 km could not be given for 8 months because of land acquisition litigation. The priced BoQ has 12,000 m³ of WBM Grade-III at an estimated rate of Rs 1620/m³; the contractor quoted Rs 1850/m³, 14.2% above the estimate. The contract has a price variation clause with base month December 2022 and weights: labour 0.25, cement 0.15, steel 0.10, plant and machinery 0.15, fuel and lubricants 0.10, fixed 0.25. For the current quarter the index numbers are labour 130, cement 118, steel 112, plant 125, fuel 145, all against 100 in the base month. Actual WBM-III quantity measured is 15,500 m³ because of a design change in the profile. The contractor has claimed escalation, his tendered rate for the whole 15,500 m³, and compensation for idle machinery for 8 months.
1. Compute the price variation payable on a work value of Rs 1.00 crore executed in the current quarter, and state the conditions under which it is admissible.
Read the worked answer
Price variation formula (weighted index method):
P = 0.25(130/100) + 0.15(118/100) + 0.10(112/100) + 0.15(125/100) + 0.10(145/100) + 0.25(1.00)
- Labour: 0.25 × 1.30 = 0.3250
- Cement: 0.15 × 1.18 = 0.1770
- Steel: 0.10 × 1.12 = 0.1120
- Plant: 0.15 × 1.25 = 0.1875
- Fuel: 0.10 × 1.45 = 0.1450
- Fixed: 0.25 × 1.00 = 0.2500
P = 1.1965, i.e. a variation of +19.65%.
On Rs 1.00 crore of work done, escalation = Rs 19.65 lakh.
Conditions: PVC applies only to work executed within the original contract period plus any extension granted for the employer's risk. Since the 8-month delay is due to land acquisition (employer's risk), the price adjustment should be allowed to run through the extended period rather than being frozen at the original completion date. Also confirm that the index numbers are the ones specified in the contract (base December 2022, base values 100), and that the work value used excludes the fixed component if the contract so provides - the 0.25 fixed weight is already neutral in the formula above.
2. How should the WBM-III quantity variation be paid? Compute the split and assess the contractor's claim for Rs 1850/m³ on the entire quantity.
Read the worked answer
Variation: BoQ 12,000 m³, actual 15,500 m³ → (3500/12,000) × 100 = +29.17%, which crosses the usual ±25% deviation threshold in PWD/CPWD conditions of contract.
Split:
- Up to 25% variation: 12,000 × 1.25 = 15,000 m³ at the tendered rate.
- Beyond 25%: 15,500 − 15,000 = 500 m³ at a rate to be fixed by the competent authority on the basis of rate analysis, not automatically at the tendered rate.
Assessment of the contractor's claim: the tendered Rs 1850/m³ is 14.2% above the estimate of Rs 1620/m³. That is within the broad 15% band usually treated as reasonable, and the BoQ rate is a contract rate for the work as described, so there is no automatic renegotiation on the first 15,000 m³. For the 500 m³ beyond 25%, the contractor is entitled to a revised rate only to the extent the excess quantity changes his cost (extra lead, dewatering, restricted working front) - not to a windfall rate on the whole quantity. The correct approach is a rate analysis (material, labour, plant, overhead, 15% contractor's profit and overheads) and negotiation, with the engineer's decision recorded in writing.
Also check whether the design change was instructed; if the increase is due to an instructed change, the variation is a valid instruction and the contractor is entitled to be paid at the agreed/derived rate, with no additional claim for loss of profit on the omitted quantity.
3. Advise on the 8-month delay: extension of time, liquidated damages and the idle machinery claim.
Read the worked answer
Extension of time: the failure to hand over 1.2 km of land is an employer's risk event. The contractor is entitled to a reasonable extension of time without liquidated damages, roughly proportional to the blocked work if it was on the critical path - 8 months is not automatically justified for 1.2 km out of 4.5 km.
Mitigation duty: the contractor was obliged to proceed on the remaining 3.3 km. The EOT should be assessed against the actual effect on the programme (float analysis), not simply the duration of the land dispute. If the blocked stretch controlled a bridge or the only available borrow area, the full 8 months may be justified; otherwise a shorter EOT with no LD is the correct outcome.
Idle machinery: payable only if:
- The plant was actually mobilised and shown in the site register before the blockage.
- It could not be redeployed to the 3.3 km available or to another site, and the contractor mitigated.
- Notice was given within the contractual period (commonly 28 days) with records of idle hours, fuel, and depreciation or hire rates.
Compensation is then limited to idle-of-plant rates (ownership cost, not profit), for the proven idle period only. The land-acquisition delay itself does not entitle the contractor to loss of profit on the whole contract.