Railway Accounts Department Examinations

Showing posts with label PV clause. Show all posts
Showing posts with label PV clause. Show all posts

Sunday, April 15, 2018

Price Variation clause


PVC – Price Variation Clause
·         Purpose: To resolve the conflicts between Contractors and Railway due to variation in prices, PVC is incorporated in the Conditions of the Contract.  This will protect the interests of Contractors as well as Railways against the rising and declining the prices of components of the Contract respectively.

·         PVC  clause – 46 A of GCC – Standard General Conditions of Contract (of Indian Railways)  -

                                      Click here for GCC

                        GeneralConditions of Contract

·          Applicability: Applicable only for contracts of value (contract agreement value) as prescribed by Ministry of Railways from time to time.  At present the contract agreement value is Rs.5 Crores or more.
·           However the authority competent to accept the tender or SAG officer or Executive Dept, whichever is higher may decide that PVC shall not be applied to the contract’s Agreement value of Rs.5 Crores or more   OR that PVC  shall apply to the contract’s Agreement value of less than 5 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.

                             Click here for authority


·          Example: Estimated value of Tender is Rs.5.05 crores (as per NIT).  But value of Contract as per Contract Agreement is  Rs.4.5 Crores then PVC shall not apply, even if the actual final value is Rs.5 Crores or more due to variation in quantities during the execution of the Contract.  Thus variation in quantities after signing of Contract Agreement is not relevant for deciding whether PVC is applicable to a Contract or not.

·         PVC shall not applicable to a Works Contract which is either an AMC or a Zonal Contract.
                                Click here for authority

                                  Railway Board letter

·         PVC shall not be admissible for the following items

1.       Specific payments to consultants.
2.       Materials supplied free of cost by Railways to the Contractor
3.       Fixed component.
·         Base Month: Month of opening Tender (incl: Extension if any)
·         The quarter for applicability of PVC shall commence from the month following the month of Opening the Tender.
·         The Price Variation shall be based on the average Price Index of the Quarter under consideration.
·         The percentages of different components of various types of engineering works are as follows.
Type of work
Labour
Fuel
Material
Detonators
Explosives
Other Material
Fixed
Total
Earthwork
50
20
-
-
-
15
15
100
Ballast & Quarry products
55
15
-
-
-
15
15
100
Tunnelling
45
15
-
5
15
5
15
100
Other works
30
15
40
-
-
-
15
100

·         Formulae for Labour component :
                                       W x (Lq – Lb)  x Lc
                         L  =     ___________     ___
                                        Lb                   100

Where
 L = Amount of price variation in Labour
W= Gross value of Work
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 applicable , if extension granted vide Clause 17-A of Standard GCC.
2.       PVC not applicable, if extension granted vide Clause 17-B of Standard GCC. But if PVC is favorable to the Railways, that is the rates under consideration are decreased, then the PVC is applicable even under the extension is granted vide clause 17-B of Standard GCC.

·         Practical example:  2015 Appendix 3 exam General Expenditure paper (Without Books)

Construct a PV formulae from the following data.

Component
Percentage
Fixed component
15
Skilled Labour (L)
20
Fuel  (F)
15
Cement ( C )
25
Steel (S)
25
Total
100

·         Base rate indices and End of Quarter figures for the Indices are as follows.

Particulars
Base date index
End of the Quarter index
Skilled Labour ( L)
100
103
Fuel (F)
200
120
Cement ( C)
300
309
Steel (S)
400
380

Workout the PV payable, if the value of the Work done in the quarter is Rs.50 lakhs.

Solution:

Labour component ( L):

                                   W x (Lq – Lb)  x Lc
                         L  =     ___________     ___
                                        Lb                   100

      50,00,000  x ( 103 -100)  x 20
   = -------------------------------     ----  =  30,000 Plus
                      100                      100

Fuel Component (F):

                                   W x (Fq – Fb)  x Fc
                         F  =     ___________     ___
                                        Fb                   100

      50,00,000  x ( 120-200)  x 15
   = -------------------------------     ----  =  3,00,000 Minus
                      200                     100

            Cement Component (C):

                                   W x (Cq – Cb)  x Cc
                         C  =     ___________     ___
                                        Cb                   100

      50,00,000  x ( 309-300)  x  25
   = -------------------------------     ----  =  37,500 Plus
                      300                      100

            Steel Component (S):

                                   W x (Sq – Sb)  x Sc
                         S  =     ___________     ___
                                        Sb                   100

      50,00,000  x ( 380-400)  x  25
   = -------------------------------     ----  =  62,500 Minus 
                      400                      100

Total of variation = 30,000 – 3,00,000 + 37,500 – 62,500 = 2,95,000

Revised amount to be paid to the contractor = Rs.50,00,000 – Rs.2,95,000  = Rs. 47,05,000

Alternate Solution
Particulars
%
Base date index
End of the Quarter index
Change in %
% of Gross value Rs.50,00,000
Revised  Gross value due to PVC
Variation
1
2
3
4
5 =
(4-3)/100
6 =
Rs.50,00,000 x Column 2
7 = 6 x 5
8 = 7 - 6
Skilled Labour ( L)
20
100
103
Plus 3 %
10,00,000
10,30,000
30,000
Fuel (F)
15
200
120
Minus 40 %
7,50,000
4,50,000
(-) 3,00,000
Cement ( C)
25
300
309
Plus 3 %
12,50,000
12,87,500
37,500
Steel (S)
25
400
380
Minus 5 %
12,50,000
11,87,500
 (-) 62,500
Fixed component
15
100
100
No change
7,50,000
7,50,000
Nil
Total
100



50,00,000
47,05,000
2,95,000

Note:
Candidates are advised to monitor the latest guidelines issued by Railway Board in regard with Price Variation Clause.
                                                                                                                %%%%%