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Abstract The constructon industry s a vtal sector n any 1.1 Literature Revew
economy and sgnfcantly contrbutes to the soco-economc Escalaton reflects change n productvty, technology,
growth of a country. Cost escalaton s one of the proft margns and market condtons such as hgh demand
and so on. And complcatng the stuaton Price escalaton
consequental dentfed rsks faced by constructon ndustry. vares by regon and procurement strategy [1]. Cost
So the objective of the study s to ntend new and modfed escalaton s drectly proportonal to ncrease n Price of all
the constructon element of the orgnal contract. Escalaton
theores so that the subject area nclnes towards precson n constructon market has been extremely volatle and s
expected to contnue n the near future due to demand for
and perfecton under the case study of buldng constructon
resources, sklled workers and contnuous strong growth [2].
project. The study proposes new approaches and method such Nne out of every ten constructon projects experences cost
escalaton and most occurs before constructon begns.
as Market Rate Method (MRM) that can be mplemented n the Escalaton manly attrbutes because of poor ste
feld of cost escalaton, so that dfferent errors, complextes n management and supervson, low speed of decson makng
and clent-ntated varatons at the constructon phase of the
the stll used technques could be removed. The results of project [3]. Delay n projects are the unversal phenomenon
study denotes that ths new approach yelds better results than and constructon projects are no excepton. cost escalaton
can be categorzed nto two broad groups: uncontrollable and
the tradtonal method whch are more wdely utlzed. controllable factors [4]. Tll now, many researchers have
presented varous rsk management models and technques
to mnmze rsk of escalaton. But the correlaton among
Key words : Constructon ndustry, Cost Escalaton, Whole
varous rsks assocated wth escalaton and ther
Sale Price Index (WPI), Market Rate Method (MRM). nterdependency s not yet reported. Therefore, the man
objectve of ths study reflects methods by whch partcpants
n constructon projects can both track the extent of
1.INTRODUCTION escalaton and work together to mnmze the mpact of cost
escalaton on the success of a project.
In general construction projects ranges from several months
to several years. Therefore there s probablty that the cost 2. Case Study
of labour and materal ncreases, hence ncreases the cost of
project. Escalaton s a rsk that can account for a substantal Ruparel Arana at Parel, Mumba s taken as case study. A
part of constructon cost, especally n long term projects tender document, bll of quanttes and abstract sheets
where the varablty and uncertanty s greater. n mult- provdes necessary data for project cost and schedulng
project programs, the effect of escalaton can be the prme actvtes.
concern. Cost escalaton n constructon project refers to 3. TRADITIONAL METHOD (WPI)
antcpated ncrease n cost of constructng a project over a
perod. Cost ncrease usually occur as a result of fluctuaton
of market forces and reflect ncreases n the cost of materal/ WPI s the Index that s used to measure the change n the
labour and hgher levels of constructon actvty. n average Pricelevel of goods traded n wholesale market. n
nda, a total of 676 commodtes data on Price level s
developng country such as nda cost escalaton s one of the
tracked through WPI whch s an ndcator of movement n
major phenomenon faced by the constructon ndustry whch
prces of commodtes n all trade and transactons. t s also
has led to delay of several other projects assocated wth t. the Price Index whch s avalable on a weekly bass wth the
Thus there s need for more realstc approach towards the shortest possble tme lag only two weeks. The ndan
management of cost assocated wth the projects. government has taken WPI as an ndcator of the rate of
nflaton n the economy. WPI s a measure to montor the
movement of general level of prces n the economy. t s
2017, IRJET | Impact Factor value: 5.181 | ISO 9001:2008 Certified Journal | Page 1954
International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395 -0056
Volume: 04 Issue: 03 | Mar -2017 www.irjet.net p-ISSN: 2395-0072
4. PROPOSED METHOD MARKET RATE METHOD v) Excluson of overhead and proft mark-up on the
Priceescalaton.
(MRM)
v) Adequate assurance that the contractors Pricedoes not
There are many parameters nvolved n the calculaton of any nclude a hdden escalaton contngency.
Price Index and due to so many drawbacks n calculaton of v) A system for dentfyng, and trackng through the
ndces, t s very dffcult to develop ndces whch reflect the fabrcaton or delvery phases, the specfc materals subject
true pcture of the varaton n prces of dfferent materal. to escalaton terms.
Due to varous complcatons, t s not possble to obtan
completely flawless values of the cost ndces. Hence the 5. Data Analyss for Case Study
objectve of the study s to use a practcal approach for
calculaton of cost escalaton whch elmnates the use of cost The Data analyss s done consderng two major components
ndces and stll gves realstc results. used n the constructon (.e.) Steel And Cement. Both the
components are calculated by usng the tradtonal method
Wholesale Price Index (WPI) and Market Rate Method (MRM)
4.1 Values To Be Consdered and the result obtaned by both these methods are
nterpreted
) The base Price of cement (.e.) Market rate of cement s
taken 28 days pror to date of release of tender. Table 5.1 Shows the calculaton of escalaton usng
Wholesale Price Index (WPI) method usually practced
) The current Price should be taken as the Price of the
materal n the month under consderaton. CEMENT
STEEL
) Adoptng ths methodology, all the area of ndstnctness RTER YEAR RATE (0.85*Pc*R*(Si- (0.85*Pc*R*(Ci-
are elmnated. The MRM for computng the cost escalaton
So))/(100*So) Co))/(100*Co)
can result nto realstc result, f properly and thought fully
adopted. So
) t purges all the uncertanty related to varous cost ndces.
=147.4
) By usng the proposed Market Rate Method, more and PS 0 PC Co
more materals can be removed from ths other materals
category, snce there s no want of ndces n ths method, =134.70
whch are otherwse unavalable for most of the materals.
4.3 Requirements of Market Rate Method
2017, IRJET | Impact Factor value: 5.181 | ISO 9001:2008 Certified Journal | Page 1955
International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395 -0056
Volume: 04 Issue: 03 | Mar -2017 www.irjet.net p-ISSN: 2395-0072
2009 2011
Nov- Sevent
h April - 2.25 132.80 16 -3.71 148. 10 2.24
2009
2011 10
Dec-
May-
Secon 2009 3.16 148. 2011
d Jan-2010 140.03 16 -2.53 27 10 3.18 June-
Feb- 2011
2010 July- 0.36 148.
March- Eighth 2011 132.80 16 -0.60 10 10 0.36
2010 Aug-
April- 2.45 151. 2011
Third 2010 134.63 16 -3.39 67 10 3.08 Sep-
May- 2011
2010 Oct- 1.00 148.
June- Ninth 2011 132.80 16 -1.65 10 10 0.99
2010 Nov-
July- 2.53 151. 2011
Fourth 2010 133.70 16 -3.76 67 10 3.19 Dec-
Aug- 2012
2010 0.61 148.
Sep- Tenth Jan-2012 132.20 16 -1.00 10 10 0.60
2010 Feb-
2017, IRJET | Impact Factor value: 5.181 | ISO 9001:2008 Certified Journal | Page 1956
International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395 -0056
Volume: 04 Issue: 03 | Mar -2017 www.irjet.net p-ISSN: 2395-0072
March-
Table 5.2 Shows the calculation of escalation using Market
Rate Method (MRM). In this Approach, the escalation of the 2010
construction material has be obtained by applying market
April- -0.09
rates (i.e. market price) of purchase instead of the WPI and
generalized Indexes. In case study, this new concept has been Third 2010 2.45 31180 16 244 10 3.37
applied on the two major construction material (i.e. steel and
cement) May-
Table 5.2 Shows the calculaton of escalaton usng MRM 2010
(Market Rate Method) Proposed Method
STEEL CEMENT June-
QUART MON CERTIF Vs= Vc= 2010
TH & IED
Fourth July- 2.53 32340 16 1.17 247 10 3.79
ER (0.85*Pc*R*(Si - (0.85*Pc*R*(Ci-
YEAR RATE 2010
Market 2010
Market
Rate/To Sep-
n Co
2010
R (Rs in Rate/B
Cr.) in Ps So ag Pc =210
Fifth Oct- 3.80 34700 16 5.68 240 10 4.62
=31270 in
2010
Rs.
Rs. Nov-
2010
Amou Amou Dec-
Si Y nt Ci Y nt
2009 Feb-
2009 March-
Nov- 2011
2009 May-
2017, IRJET | Impact Factor value: 5.181 | ISO 9001:2008 Certified Journal | Page 1957
International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395 -0056
Volume: 04 Issue: 03 | Mar -2017 www.irjet.net p-ISSN: 2395-0072
2017, IRJET | Impact Factor value: 5.181 | ISO 9001:2008 Certified Journal | Page 1958
International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395 -0056
Volume: 04 Issue: 03 | Mar -2017 www.irjet.net p-ISSN: 2395-0072
BIOGRAPHIES
Nilesh D Patil received his BE
degree in civil engineering from
shivaji University (Maharashtra) in
2015, pursuing the M.Tech degree
in Construction Management from
Government College of
Engineering, Karad, Maharashtra.
2017, IRJET | Impact Factor value: 5.181 | ISO 9001:2008 Certified Journal | Page 1959