The FIDIC Formula: Ensuring Fair Adjustment of Raw Material Prices
The FIDIC Formula: Ensuring Fair Adjustment of Raw Material Costs
At PMA Project Management and Arbitration, we rely on the FIDIC formula as an effective tool to fairly and efficiently adjust raw material costs. This formula provides a transparent and equitable approach to updating costs based on changes in raw material costs, ensuring the continuity of contractual relationships between parties without distorting contractual fairness.
How Does the FIDIC Formula Work?
The FIDIC formula is based on the concept of determining the fair value of the contract Price, taking into account the cost of raw materials as a primary factor in determining this value compared to what has been executed during the period. The process of adjusting costs involves the following steps:
- Determining Adjustment Periods: Appropriate time periods are identified for making costs adjustments, considering economic conditions and changes in raw material costs.
- Evaluating the Raw Material Cost Increase coefficient: The coefficient for the increase in raw material costs is analyzed and determined based on the source agreed upon by the parties.
- Applying the Mathematical Formula: The FIDIC formula is used to calculate appropriate adjustments in the agreed-upon raw material costs, based on tangible changes in their costs during the execution period.
Benefits of the FIDIC Formula
- Fair Dealings: The FIDIC formula provides a fair methodology for adjusting raw material costs, maintaining the equity of the contractual relationship.
- Transparency and Clarity: Utilizing the FIDIC formula ensures complete transparency in the costs adjustment process, thereby strengthening trust between parties.
- Enhancing Trust and Stability: The use of the FIDIC formula contributes to enhancing trust and stability in contractual relationships, preventing disputes arising from changes in raw material costs.
Conclusion
The FIDIC formula is a fundamental tool to ensure the effective adjustment of raw material costs in commercial contracts. At PMA, we are committed to applying this formula in a transparent and fair manner, contributing to the enhancement of trust and stability in our contractual relationships and achieving mutual success.
Ultimately, the FIDIC formula is not just a traditional tool in contract management but a crucial element that ensures the fairness and stability of contractual relationships. Let us work together to enhance trust and transparency in our commercial relationships and emphasize the importance of continually developing mechanisms and standards that achieve the best outcomes for everyone. At PMA, we are committed to delivering high-quality services with transparency and fairness, and we always look forward to ongoing interaction and collaboration with you to achieve mutual success