ASPHALT PRICE ADJUSTMENT. PRICE ESCALATION IN THE 21 ST CENTURY. Presenters. Brigitte M. Codling, Contract Monitor Asphalt Price Adjustment Administrator Vermont Agency of Transportation Brian L. Donald, Contracts and Specifications Engineer
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PRICE ESCALATION IN THE
Asphalt Price Adjustment Administrator
Vermont Agency of Transportation
Construction Contracting Staff Supervisor
Vermont Agency of Transportation
From 1973 to the current day there have been a variety of global and local events that have necessitated the implementation of Asphalt Price Adjustment ~ Price Escalation provisions in highway construction contracts.
Price variance cited that reveals unpredictable, uncontrollable shifts away from normal price trends.
Determine the primary cause of the price variance and assess whether that condition is expected to exist in the foreseeable future.
If it is determined that the condition will persist, begin implementation.Need Determination
When Asphalt Price Adjustment Provisions include a Trigger Clause, the entire provision is only “triggered” into effect when the market price for a ton of asphalt increases beyond a previously established margin.
AASHTO has suggested that a 5% trigger is sufficient
(In Vermont that amount is >2000 tons of bituminous mix)
Which will provide for either compensation to the contractor or a credit to the State.
Price Adjustment provisions should contain a reasonable margin for upward and downward price movement.
Preferably in percent % form rather then actual dollars $
Currently Vermont’s Asphalt Price Adjustment provision does not contain a movement margin; however, the Agency intends to include such a clause in the updated version of that provision.
The index should be established using data obtained from consistent and reliable sources, and data should be secured on the same day each month.
An index price can be established by recruiting data from local, regional, state-wide, or national markets.
Which ever is the most relevant for your projects.
In Vermont we recruit binder prices from terminals that actually supply material to our projects.
VAOT recruits binder prices monthly ~ but offers a bi-monthly averaged posted price for the purpose of calculating Asphalt Price Adjustments.Establishing Prices:
recruitment process as the Posted Price.
The Index Price is averaged monthly rather then bi-monthly.
The Index Price is made a part of the Asphalt Price Adjustment provision, within contracts that have been cited as needing such a provision.
22. SUPPLEMENTAL SPECIFICATION - ASPHALT PRICE ADJUSTMENT PROVISIONS, dated May 1, 2001, is hereby made a new subsection of the Specifications superceding all previous editions and their modifications.
Asphalt Price Adjustment. The Contractor's attention is directed to these Asphalt Price Adjustment Provisions. The procedure outlined in the Provisions will be used to compute any price adjustments for asphalt cement if the Agency determines that asphalt cement costs have changed during the construction of this project.
The index price for asphalt cement is $213.00 per ton, f.o.b. the supplier's terminal.
Agency of Transportation May 1, 2001
ASPHALT PRICE ADJUSTMENT
This specification contains price adjustment provisions for asphalt cement used in asphalt concrete mixtures produced under Section 303 - Plant Mixed Base Course, Section 406 - Bituminous Concrete Pavement, Section 409 - Open Graded Asphalt Friction Course, and 490 – Superpave Bituminous Concrete Pavement. The price adjustment will be based on the quantity of asphalt cement incorporated in the work multiplied by the difference between an index price and an average posted price.
The procedures will be as follows:
Price Adjustment = Quantity of Asphalt X (Average Posted Price - Index Price)
Note: The Price Adjustment may be either positive or negative.
5. Payment will be as follows:
The work performed under Section 303, 406 and 409 will be paid for at the Contract unit prices bid following established Agency practices.
At the end of each bi-monthly period, the Engineer will compute the Price Adjustment for that period and enter it for payment on the next bi-weekly estimate.
Payment will be made under:
Pay ItemPay Unit
406.50 Price Adjustment, Asphalt Cement LUMP UNIT