Feasibility constraints in public works price adjustment weighting in Nepal

Abstract

Price-adjustment clauses distribute construction cost fluctuation between public employers and contractors, but the weighting intervals written in bidding documents do not necessarily provide the discretion they appear to provide. This study audited 31 official Nepal e-GP works documents and collapsed repeated designs into 19 distinct coefficient-range specifications. For each specification, the feasible combinations of labour, materials and equipment coefficients were derived under the contractual normalization constraint with a non-adjustable coefficient of 0.15. Seventeen specifications produced polygonal feasible regions, whereas two nominal interval sets collapsed to a single admissible weighting. Among polygonal specifications, feasible area in the labour-material coefficient plane ranged from 0.0012 to 0.0350, a 29-fold difference. Historical sensitivity was then evaluated for eight specifications whose index sources were compatible with Nepal Rastra Bank construction labour, construction materials and machinery/equipment series. Under the 2022/23-2023/24 annual-average movement, the broadest specification permitted a 1.810 percentage-point spread in the adjustment factor, equivalent to about NPR 1.81 million per NPR 100 million of adjustment-eligible work. The results show that coefficient normalization should be checked explicitly when drafting and evaluating price-adjustment schedules.