PVC – Price Variation Clause
Source: 46A of GCC for works
Purpose:
To resolve the conflicts between Contractors and Railway due to variation 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. 5 Crores or more.
However the authority competent to accept the tender or SAG officer of 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.
Example: Estimated value of Tender is Rs. 5.50 Crores (as per NIT). But the value of the Contract
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 be applicable to a Works Contract which is either an AMC or a Zonal Contract.
PVC shall not be admissible for the following items
Specific payments to consultants.
Materials supplied free of cost by Railways to the Contractor
Fixed component.
Any extra NS items included in subsequent variation
Base Month: Shall be taken as month 28 days prior to opening of Tender including extensions,
if any, unless otherwise stated elsewhere.
Example1: 5th July, 2021 is Tender Opening Date. In this case, June, 2021 is the Base month.
Example2: 31st May, 2021 is Tender Opening Date. In this case, May, 2021 is the Base month.
Base Quarter: Shall commence from the month following the Base month.
In above Example1: The Base Quarter is July to September, 2021.
In above Example2: The Base Quarter is April to June, 2021
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.
Fixed component @15% shall not be considered for any price variation.
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 (excludes: Specific payments to consultants, material supplied by Railways at
fixed price, 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
The above formulae is applicable for other components i.e., Other Materials, Plant & Machinery,
Formulae for Steel :
Sw x (Sq – Sb)
S = ___________
Sb
S = Amount of price variation in Steel
Sw= Gross value of Steel supplied by the Contractor as per the On Account Bill for the month under consideration.
Sq= Index number of Monthly wholesale Price Index for the relevant category of mild steel item for the Average price index of the 3 months of the Quarter under consideration.(DIPP)
Sb= Index number of Monthly wholesale Price Index for the relevant category of mild steel item for the Average price index of the Base period under consideration.(DIPP)
Formulae for Steel is equally applied to the Cement component too.
PVC – Extended period of Contract
PVC applicable , if extension granted vide Clause 17-A of Standard GCC. (Due to delay on part of Railways)
PVC not applicable, if extension granted vide Clause 17-B of Standard GCC. (Due to delay on part of Contractor ) 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.
Example: Construct a PV formula from the following data of Building Contract. Total Agreement Value is Rs.2,40,000. ( includes: Consultant payment - Rs. 10000, Cement - Rs. 20,000, Steel - Rs.10000)
Base rate indices and End of Quarter figures for the Indices are as follows.
Workout the PV payable
W= Gross Value = Rs.2,40,000 - Rs.40,000 (Excluded items) = Rs.2,00,000
Solution:
Labour component ( L):
W x (Lq – Lb) x Lc
L = ___________ ___
Lb 100
2,00,000 x ( 105 -100) x 40
= ------------------------------- ---- = Plus Rs.4000
100 100
Fuel Component (F):
W x (Fq – Fb) x Fc
F = ___________ ___
Fb 100
2,00,000 x ( 150 -200) x 5
= ------------------------------- ---- = Minus 2500
200 100
Cement Component (C):
Cv x (Cq – Cb)
C = ___________
Cb
20,000 x ( 630-600) x
C = ------------------------------- = Plus 1000
600
Steel Component (S):
Sw x (Sq – Sb)
S = ___________
Sb
10,000 x ( 535-500) x
C = ------------------------------- = Plus 700
500
Total of variation = 4000 – 2500 + 1,000 + 700 = Rs. 3200
Revised amount to be paid to the contractor = Rs.2,40,000 + Rs. 3,200 = Rs. 2,43,200
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