- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 30 Mar 2018
Fluctuations in construction contracts
Fluctuations provisions in construction contracts provide a mechanism for dealing with the effects of inflation, which on large projects lasting several years can be very significant. On smaller projects, the contractor will be expected to take inflation into account when calculating their price (a firm price). On larger projects, the contractor may be asked to tender based on current prices (prices at an agreed base date) and then the contract makes provisions for the contractor to be reimbursed for price changes to specified items over the duration of the project (a fluctuating price).
- Changes in taxation.
- Changes in the cost of labour, transport and materials (sometimes referred to as 'escalation').
- Increases in head office or administrative costs.
The amount of fluctuations may be calculated from nationally published price indices (for example Joint Contracts Tribunal (JCT) bulletins or public records) rather than calculating actual cost increases which could be very time consuming.
Payment calculations are then based on a project programme for activity and a payment chart against the programme resulting in a cash flow projection. Quarterly percentage assessments of inflation are then added to the projected figures allowing for price fluctuation.
 Find out more
 Related articles on Designing Buildings Wiki
- Base date.
- Cash flow estimate.
- Construction inflation.
- Contract conditions.
- Contract sum.
- Procurement route.
- Tender inflation.
 External references
- Guide to DB05, Sarah Lupton, p101. Available from RIBA bookshop.
- Architect's Legal Handbook, Ninth edition, Anthony Speaight and Gregory Stone, Architectural Press 2010, Page 200. Available from RIBA bookshop.
- Estimating and Tendering for Construction Work, Martin Brook, Third Edition, Elsevier Butterworth Heinemann, 2004, P185. Available from RICS books.
Featured articles and news
When is there a right to light, and what happens if it is obstructed?
What would the nationalisation of economic infrastructure mean for GB?
A new guide to improving value by reducing design error.
We've reached 80,000 page views a day and 10,000 registered users. Why not join them?
A masterplan is a framework within which a location is encouraged to develop or change. Read our introductory article.
New consultation announced on a specialist Housing Court to settle landlord-tenant disputes.
ICE responds to a transport consultation advising the government to make decisions enabling more inclusive cities.
BRE and Loughborough University complete first phase refurbishment of demonstration home.
How the risk of collapse of fibrous plaster ceilings is being addressed in theatres.
If you’re a great writer and have practical experience of the construction industry, it could be you.
Frustrated by long documents or technical jargon? Put off by sign-up forms or costs? Take this 5 min survey to help improve construction knowledge.