Research for AASHTO Standing Committee on Highways. Task 274. Price Indexing in Transportation Construction Contracts

When market prices of cement, steel, or other commodities used in transportation infrastructure construction are increasing, state departments of transportation (DOTs) will typically be faced with demands from their contractors that price indexing or cost escalation clauses be incorporated in construction contracts. Such demands have most recently been spurred by sharply rising petroleum prices and consequently increased costs of fuel and asphalt products. Price indexing and cost escalation clauses shift business risk from the contractor to the DOT. While this shifting of risk may benefit the agency through contractors' willingness to submit lower bids, the agency faces greater uncertainty in budgeting and managing the final costs of a project. There is little information available on how an agency's use of such clauses may affect construction-market competition or commodity prices within a regional market. There is also little information on how the use of particular price indices may influence the outcome of the agency's use of indexing, and how general economic conditions may affect these outcomes. Agency decision makers seek guidance for judging if consideration of indexing and escalation clauses is warranted, whether the benefits an agency may gain using such clauses outweigh the costs, and how best to implement indexing. The objectives of this project are to describe the current state of DOT practice in using price indexing or cost escalation clauses in construction contracts and to provide guidance for DOT staff making decisions about whether and how such clauses should be used. The project will review primarily the experiences of those DOTS that have used price indexing or cost escalation clauses, but will consider also any other available data that illustrates the effectiveness or ineffectiveness

• Record URL:
  http://www.trb.org/TRBNet/ProjectDisplay.asp?ProjectID=2602
• Supplemental Notes:
  • The research team's final report is available at http://onlinepubs.trb.org/onlinepubs/nchrp/docs/NCHRP20-07(274)_FR.pdf.

Language

• English

Project

• Status: Completed
• Funding: $100000.00
• Contract Numbers:

  Project 20-07, Task

• Sponsor Organizations:

  Federal Highway Administration

  1200 New Jersey Avenue, SE
  Washington, DC  United States  20590

  American Association of State Highway and Transportation Officials (AASHTO)

  444 North Capitol Street, NW
  Washington, DC  United States  20001

  National Cooperative Highway Research Program

  Transportation Research Board
  500 Fifth Street, NW
  Washington, DC  United States  20001
• Project Managers:

  Lemer, Andrew

• Performing Organizations:

  Jack Faucett Associates

  Bethesda, MD  United States 
• Principal Investigators:

  Skolnik, Jon

• Start Date: 20090831
• Expected Completion Date: 0
• Actual Completion Date: 20101130
• Source Data: RiP Project 21415

Subject/Index Terms

• TRT Terms: Cement; Commodities; Decision making; State departments of transportation; Steel
• Uncontrolled Terms: Cost escalation; Market pricing; Price indexes
• Subject Areas: Highways; Planning and Forecasting;

Filing Info

• Accession Number: 01464244
• Record Type: Research project
• Source Agency: National Cooperative Highway Research Program
• Contract Numbers: Project 20-07, Task
• Files: TRB, RiP, USDOT
• Created Date: Jan 3 2013 2:39PM