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last updated: 31st July 2011

All orders placed on a price variation basis should incorporate an agreed formula for calculating any change in price. A notable example is the BEAMA recommended formula for contract price adjustment.  The formula allows for a fixed element with separate elements for material and labour.  The formula, as printed, is intended as a guide that allows for the elements to be varied appropriately.  The percentage breakdown allocated to each element is mutually agreed between the purchaser and seller prior to award of the order.

The advantages of a BEAMA type formula are

  • The percentage of the elements can be varied, allowing adjustments according to whether the product or service is more labour or materials intensive; and
     
  • Price adjustments are calculated on Government price indices published monthly in the Trade and Industry Journal
     

Price variations should be

  • Calculated between the date of quotation and the agreed delivery date
     
  • Invoiced separately at the end of the contract.
     
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