I am trying to work out the PAF according to the contract condition as follows:
The proportion used to calculate the Price Adjustment Factor are
0. 20 linked to the index for 4/CE/EL/01 Electrical Engineering Labour
0. 15 linked to the index for 4/CE/EL/02 Electrical Engineering Materials
0. 20 linked to the index for 4/CE/ME/01 Mechanical Engineering Labour
0. 15 linked to the index for 4/CE/ME/02 Mechanical Engineering Materials
0. 10 linked to the index for 4/CE/01 Civil Engineering Labour
0. 10 linked to the index for 4/CE/02 Management and Administration
0. 10 non-adjustable
I have managed to work out the following:
i am not sure however how to calculate the factor for non adjustable 10% - do i keep the base rate at 100 and the current month indexation rate at 100? any help would be appreciated.
Assuming this is an ECC form, the calculation should be (L-B)/B. B is the Base Date Index, so Jan 2020 in your case and L is the Latest Index, so is June 2021. This calculation is applied to each of the indices and then multiplied by the relevant proportion, as follows;
4/CE/EL/01 (115.8-115.2)/115.2 x 0.20 = 0.10%
4/CE/EL/02 (111.5-105.4)/105.4 x 0.15 = 0.87%
4/CE/ME/01 (114.2-113.9)/113.9 x 0.20 = 0.05%
4/CE/ME/02 (125.1-113.1)/113.1 x 0.15 = 1.59%
The ‘products’ (resulting percentages) are added together to give the Price Adjustment Factor. In your case this totals 2.73%.
The ‘non-adjustable’ element would have an index of 100 which would never change so this would always equate to 0.00%, which means that 10% of the PWDD would not be adjusted.
How the PAF is applied depends on what main option you have.
Thank you Andrew, this actually agrees with my calcs
Do the PAF Calculations apply retrospectively to the total value of works done to date?
For example the overall indices adjustment gives a change of 3%, the total value of works is £100, does that mean the total value become £103?
Please, what is the weighting in the spreadsheet?
Just to clarify. In the above calculation - does the base (B on the formula) stays the same year on year or so we change it each year so effectively L for year 1 becomes B for year 2 and so on? When calculating price adjustment yearly….
Just to clarify - the contract states that the base rate for indices is Jan 2020