Measures for Cost Escalation in Bridge

Abstract

The study throws light on various existing and traditional methods that are being used in computation of Cost Escalation in the construction sector. The thesis reviews the existing methods for calculation of escalation in India and premeditates the techniques adopted by the other nations across the globe. The existing method in India uses Wholesale Price Index (WPI) for materials and Consumer Price Index (CPI) for labour to calculate the escalation. Similar approach is being followed by many other countries too, but now-a-days some of the organisations have realized the shortfalls and hitches in this traditional method. Few organisations have taken initiative to develop construction specific cost indices such as Construction cost index (CCI), Producer Price Index (PPI), etc. The cost of escalation obtained from the present method is too low than the actual escalation amount incurred in the projects. The three main reasons for such a difference are: the use of WPI which is a general price index, the non availability of indices for majority of construction materials and the absence of construction specific regional wise cost indexes. Hence an urgent need has been felt to review the present approach. The use of actual prices (purchase rates) of the materials in the escalation formulae and secondly, the adoption of CCI to calculate escalation. In this study both the methods suggested have been proved with valid practical data and evidences and have been found to be significantly better than the existing approach.