Ref: CB/IST-B-H/2019/21 June 15, 2019

THE REGISTRAR
Pakistan Engineering Council (PEC)
Attaturk Avenue, G-5/2,
Islamabad

SUBJECT: CLARIFICATION REGARDING PRICE ADJUSTMENT FORMULA

Dear Sir,

We are working as Contractor with Institute of Space Technology (IST), No-1 Islamabad
Highway near Rawat Toll Plaza Islamabad. The project title is “Construction of Boys
Hostel at IST Islamabad”. The Project Director(EoF) IST represents the “Employer” and
Chief Architect (Abbasy & Associates) is the “Engineer”. While calculating the Price
Adjustment, difference of opinion has arisen between the Resident Engineer Abbassy &
Associates & the Contractor. The reasons behind this difference of opinion is non-conformity
of conditions of the contract with PEC Guidelines and contradiction between clause 70 and
Appendix-C. Due to this situation, we are urged to refer the matter to your good self. In the
context of the said situation, we would like to make following submissions.

In mid of 2017, Employer floated two tenders, one for Academic Block and other for Boys
Hostel Building. The bidding documents were prepared for both the projects by M/S Abbasi
& Associates Rawalpindi (Annexure-A). The pre-bid meeting for 1st project was held on May
19, 2017. We submitted queries vide our email dated _____________ (Annexure-B ). In
response to which minutes of pre-bid meeting were send to us vide email dated. _________
(Annexure-C). Besides other points, we at S.No ____ of our submission pointed out that the
Appendix-C & Clause 70 are in contradiction to each other. In response to which the
decision was recorded at S.No ________of the minutes, i.e. “That Appendix C and PEC
Chapter for price adjustment will be followed”. Since clarification regarding the price
adjustment clause was received and a precedence has been set. we in the subsequent Pre-
bid meeting held on __________ for Hostel building did not repeat the issue. We stood
lowest in the Hostel project & Recent Construction was declared lowest in the Academic
Block. Both the projects were awarded to the lowest bidders.

The amended clause 70 & Appendix-C of both the projects is enclosed as Annexure-D.
From both the documents, it is crystal clear that he documents are word by word same,
hence cannot result two different interpretations. We submitted price adjustment details to
the Engineer, i.e. “Chief Architects ,Abbacy & Associates”, vide our letter No ……… the
same has been returned to us by their Resident Engineer with following comments (
Annexure-E)

Please re-submit the escalation bill after incorporating the following consideration.

a. Item consumed less that 5% in IPC will not be considered for escalation.

b. As per contract only escalation for Steel, Cement, Bricks & POL is applicable.

Page 1
During discussion with the Resident Engineer M/S Abbasy & Associates, he in his stance
that only items having billing more than 05% will be considered for price adjustment,
quoted reference of section B-1, Part-1 of Standard Procedure and Formula for Price
Adjustment by PEC. We clarified that the quoted reference is to be followed for preparation
of bidding documents, and once the documents are prepared and agreement signed, this
section cannot be used as reference for calculatiobn of price adjustment.

The second issue relates to ambiguity between Clause 70 & Appendix C (Annexure-D). The
formula given in Clause 70 by PEC was deleted by the Consultants, and their own clause
was added. As per PEC Standard bidding documents for civil works (Annexure-F). The
clause 70 is generalized and states the procedure & formula for the calculation of Price
adjustment, whereas Appendix-C lists the components on which the adjustment is
admissible. However in our case the Resident Engineer is of the view that the Pre-bid
minutes issued on __________ (Annexure-C) were specific to Academic Block and here the
interpretation will be different inspite of the fact that both the documents are word by word
same. And the RE is insisting that price adjustment will be admissible only on components
listed in clause 70 instead of components listed in Appendix C.

We would like to point out that the Clause 70 in the documents (Annexure-D) is
contradicting with the PEC Guidelines & standard conditions of contract. Because as per
PEC guidelines, the Price adjustment should be worked on “Time based formula” and not
the actual. Whereas clause 70 included in our documents, says actual escalation will be
paid. Interestingly the integrity of the clause itself is questionable, because its both
paragraphs tell different story and list different components . In first paragraph, it says price
adjustment is admissible on steel, cement, pol and bricks only, whereas in second
paragrapg, it say price adjustment is admissible on steel, cement, pol and blocks only and
actual escalation will be payable. Besides these issues, in para 1, it says “also refer to
Appendix C” The Appendix-C gives, weightages for Steel, cement, labour, pol and bricks.

In light of above, we would like to request following decisions.

The clause 70 given in bidding documents is in contradiction with PEC standard bidding
documents, because instead of giving any formula, it lists some components, even which are
not clear. As per instructions to user of Standard PEC bidding documents, the clauses
cannot be modoified in way that changes their purpose. Hence, in light of clarification in
prebid meeting (Annexure-C)and non-confirmity to PEC guidelines, the clause be declared
as null and void.

Secondly, as per PEC Guidelines, price adjustment is admissible on the components listed
in Appendix-C. since the said Appendix lists Steel, cement, labour POL and Bricks, for price
adjustment. The same may please be confirmed as valid basis for calculation of Price
adjustment without considering self created limit of 05% by the Resident Engineer.

A favorable & early response will be highly appreciated.

Thanking You

Page 2
Faithfully yours,

\FOR CAPITAL BUILDERS ISLAMABAD,

TARIQ MEHMOOD
Chief Engineer
Cell # 0333-5334605

Page 3