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Kuwait Energy
2014-12-30 05:09:22

Price adjustment formula for inspection services

I am negotiating an inspection contract with a Company for duration of 2 years. Inspection will be performed on a call of basis as and when requested by us in Iraq.

The Company we are negotiating the rates with have submitted their unit rates with condition that they will be relooked at in case of: 'fluctuation of inflation, labor costs or exchange rate in the country where the services are provided, which was not reasonably foreseeable at the time of the conclusion of the contract, the parties are bound, within a reasonable time of the invocation of this clause, to negotiate alternative contractual terms which reasonably allow for the consequences of the event affecting the economic balance of the contract'.

I have done in the past price adjustable contracts where I did incorporate a formula linked to consumer price indices published on www.bls.gov/ but that was far in the past and to my regret I have not saved those contracts.

I was wondering if you could recommend any good formula linked to recognized authority which regularly publishes statistics so that I can use?
 •   2015-01-28 18:30:46
Just select a reasonably reliable and clearly applicable index. If you don't want to be going through a price reset every year, you might consider setting a "floor" which the rate of change must hit. Be sure to set the *time* when you are going to measure the difference. If you are using an index like US Govt numbers on BLS.gov, be sure to specify which of the published figures governs.

I don't know what information exists for Kuwait and I imagine that Iraq is far too unstable to have reliable figures.

In any situation where you are not paying in a local currency, consider using an index from the source country of the contract currency.
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