Suitability of ICTAD formula and CIDA price indices to calculate the amount of price escalated in construction projects

Abstract

Price fluctuation is a significant risk factor, in every construction project market. It is unavoidable and difficult to forecast. However, it is often argued that there is a difference between the amount calculated with the CIDA price fluctuation formula method and the actual price fluctuation. Therefore, the aim of this research is to investigate the industry opinion on whether there is a difference between price escalations calculated using the CIDA price fluctuation formula and actual price fluctuation. A qualitative research approach was selected to achieve the aim of this research. Through a broad study of literature, it was identified the most critical factors which affected actual price fluctuation deviation. Meanwhile, semi-structured interviews were carried out to identify the reasons affecting fluctuation difference by analysing the data, which was used, and comparing the opinions given by the interviewees. The data was analysed using context analysis. The results of the research confirm that. there is a difference between the amount of price escalation using the ICTAD price fluctuation formula and the actual being used. The main reason behind this difference is the less accuracy of cost indices. To improve the accuracy of the results of this formula, appropriate data collection using an appreciate sample of contractors in producing price indices is recommended as the main.