Contract price change during the construction phase: unforeseen market conditions

Abstract

Abstract The unstable economic conditions that have been in place in the Slovenian and international construction markets reveal the problem of a disproportionate increase in the prices of construction materials and energy products. Such increases will therefore result in higher costs of construction services, which would ultimately affect the total value of the construction project. These events in turn bring uncertainty to the construction project and would negatively impact the business of construction companies and investors. Legal and construction practices have so far developed various ways to regulate contract changes arising due to unforeseen market conditions. The present paper offers a contribution to the contract price change solution during the construction phase. The introduction first presents the measures and guidelines that deal with the differences in contract prices in Slovenia and some other countries. Then, various methods of calculating price differences that have emerged in current Slovenian practice are described. As a result, a proposal for a hybrid method of monthly price difference calculation is presented. The hybrid method represents a balanced solution resulting from the unforeseen increase in construction material prices on the market and is applicable to all construction projects. The three methods, i.e., a calculation method, a method based on the GZS-ZGIGM index, and a hybrid method, are applied to a real example of a public contract. The calculation of the price valorisation, represented as an index of the recognised price increases of contract works, is carried out. The results are compared, and further solutions are proposed.