NPM 031-2005

Requesting Entity: Municipality of Tabuk, Kalinga

Issues Concern: Contract Price Adjustment



Whether or not a contract price adjustment may be made despite a stipulation in the contract to the effect that the contract price shall not be subject to any price adjustment/alteration

Even assuming, that there indeed occurred an extraordinary circumstance, this would still not in any way affect the earlier stipulation agreed upon by the parties which states that no contract price adjustment shall be made. Witness item 47.0 of the Contract Data:

"The Contract Price shall not be subject to any price adjustment or alteration with the exception of any adjustment to the Contract Price resulting from a Variation/ Change Order issued in accordance with the Appendix (Change Order Procedures) attached to the Contract Agreement."

Quite significantly, the request for price adjustment is based on erratic increase of the price of steel and not resulting from a variation order or a change order. Hence, this situation does not justify an adjustment in the contract price, as the same does not fall under the exception to the agreement under the aforementioned Clause in the Contract.

Furthermore, Clause 47 of the Contract for the Construction of the 350 cu. m. Elevated Steel Tank signed by Scepter Engineering and Integrated Services and the Municipality of Tabuk also provides that prices shall be adjusted for fluctuations in the cost of inputs only if provided for in the Contract Date. Hence, absent such abovementioned conditions, no contract price adjustment shall be allowed.

By way of operation of the presumption that the contract has been freely entered into and agreed upon by the parties, the stipulations of the parties represent their agreement and, hence, shall govern their relations. Thus, in light of this principle, it is the considered view of this office that under the circumstances, no price adjustment is possible.