PVC – Price Variation Clause - Works
Source: 46A of GCC for works
● To resolve the conflicts between Contractors and Railway due to variations in prices
● To protect the interests of Contractors as well as Railways against the rising and declining prices of components of the Contract respectively.
Applicability: Contract agreement value is Rs. 2 Crores or more. (Not Tender Value)
● However the authority competent to accept the tender or SAG officer of the Executive Dept, whichever is higher may decide that PVC shall not be applied to the contract’s Agreement value of Rs. 2 Crores or more
that PVC shall apply to the contract’s Agreement value of less than 2 Crores also. Such a decision should be taken with the concurrence of associated finance and the same should be incorporated in the Special Conditions of Contract before issuance of NIT – Notice Inviting Tender.
Example: Estimated value of Tender is Rs. 2.50 Crores (as per NIT). But if the value of the Contract as per the Contract Agreement is Rs. 1.75 Crores, then PVC shall not apply, even if the actual final value is Rs.2 Crores or more due to variation in quantities during the execution of the Contract.
Thus variation in quantities after the signing of the Contract Agreement is not relevant for deciding whether PVC is applicable to a Contract or not.
● PVC shall not be applicable to a Works Contract which is either an AMC or a Zonal Contract.
● PVC shall not be admissible for the following items
1. Specific payments to consultants.
2. Materials supplied by the Railways to the Contractor, either Free or at a fixed rate.
3. Fixed component i.e., 15 %
4. Any extra NS items included in the subsequent variation falling outside the purview of the Bill(s) of quantities of tender, under clause 39(1)(b) of these Standard GCC i.e., other than SSOR items, unless applicability of PVC and Base Month has been specially agreed while fixing the rates of such extra item(s)
● Base Month: Shall be taken as the one month prior to the closing of the Tender unless otherwise stated elsewhere.
Example 1: 5th July 2022 is Tender Closing Date. In this case, June 2022 is the Base month.
● Base Quarter: Shall commence from the month following the Base month.
In the above Example: The Base Quarter is July to September 2022.
● The Price Variation shall be based on the average Price Index of the Quarter under consideration.
● Fixed component @15% shall not be considered for any price variation.
● Formulae for Labour component :
W x (Lq – Lb) x Lc
L = ___________ ___
L = Amount of price variation in Labour
W= Gross value of Work (excludes: Specific payments to consultants, material supplied by Railways either free or fixed price, the Price value of Steel & Cement)
Lq= Consumer price index number for Industrial workers – All India published by RBI for the Average price index of the 3 months of the Quarter under consideration.
Lb= Consumer price index number for Industrial workers – All India published by RBI for the Base period. Lc= % of Labour component
PVC – Extended period of Contract
1. PVC is applicable if an extension is granted vide Clause 17-A of Standard GCC. (Due to delay on the part of Railways)
2. PVC is not applicable if an extension is granted vide Clause 17-B of Standard GCC. (Due to delay on the part of the Contractor ) But if PVC is favourable to the Railways, that is the rates under consideration are decreased, then the PVC is applicable even under the extension granted vide clause 17-B of Standard GCC.
MCQ - Takeaways:
PVC stands for Price Variation Clause
Clause 46A of GCC for Works
Applicable for Contract Agreement Value Rs. 2 Crores and above. (Not Tender Value)
Fixed component - 15%
PVC is not applicable for AMC and Zonal Contracts
PVC not admissible - Components of
Payments to Consultants
Fixed Component i.e., 15%
Materials supplied by the Railways to the Contractor, either Free or at a Fixed price.
Any Extra NS items (other than SSOR items)
Base Month: One month prior to the closing of the Tender
Base Quarter: Commence from the month following the Base Month.
Price Variation Basis - The Average Price Index of the Quarter under consideration.
PVC applicable - Extended Period on account of Railways
PVC applicable - Extended Period on account of Contractor - Declining the Price only. That is favourable to the Railways
PVC is not applicable - Extended Period on account of Contractor - Increasing the Prices.