Price Adjustment

Business Guide | June 2018

The purpose of price adjustment is to protect the parties against unexpected price escalations, so they should be included whenever a contract is vulnerable to such risks.

This guidance note discusses the application of price adjustment provisions in contracts for goods, works, and plant. Price adjustment is a modification made to the overall price of a contract to take account of legitimate changes in the costs of performing it. Price adjustment provisions include formulas designed to protect both the borrower and contractors from price fluctuations. Price adjustment formulas allow contractors to offer more realistic prices at the time of bidding, by estimating actual cost implications that will be encountered. Different price adjustment formulas are applied for contracts of different sizes and for different components.

Video: How does ADB define Price Adjustment?

Contents 

  • Introduction
  • Deciding to Apply Price Adjustment
  • Applying the Price Adjustment Formulas
  • Contract Management
  • Appendixes