DISPUTES ON PRICE VARIATION IN ENGINEERING PROJECTS: A STUDY IN CONTEXT TO INDIAN RAILWAY

In engineering projects, the cost of construction depends on the cost of materials and labours. The cost of materials and labours are fluctuating based on market trends. In this context, the price variation clause is included in most of the contract agreements to adjust the construction cost from the likely cost differences occurring due to the market fluctuations. From the Indian perspective, the price variations are assessed mostly based on the consumer price indices and wholesale price indices published in the Reserve Bank of India Bulletin. Due to the changes in the base year of the indices and the calculation method adopted by the Railways thereupon for the price variation, they often end up in a dispute between the contractor and the Railways. This paper primarily aims to bring out the monthly variation of the wholesale price indices with different base years and their impact on the price variation amount in Indian railway engineering projects and the disputes arising thereon. Monthly variation of indices, price variation amount calculated with different series indices, and conflicts on price variation due to the transition of old base year series indices to new base year series indices are dealt in detail . It is found that the price variation amount calculated with different series indices for the same quantity of works done during the same period are differing much and which is the root cause of the disputes on price variation