MEMORANDUM CIRCULAR NO. 57 - PROCEDURE FOR THE COMPUTATION OF THE THIRTY PERCENT (30%) PER ANNUM CEILING IN PRICE ESCALATION FOR GOVERNMENT INFRASTRUCTURE CONTRACTS

In view of the diverse interpretations on the computation of price escalation claims which contribute to the delay in processing price escalation claims submitted to this Office for approval and in order to accurately implement the intent of the Memorandum submitted by the then Prime Minister and approved by this Office on July 18, 1984, allowing a price escalation ceiling of thirty (30%) percent per annum, the following computation shall govern contract price escalation claims for infrastructure works accomplished since November 1, 1983.  

The Allowable Escalation Rate (AER) shall be as follows:

AER = (N1 x 1%) + (N2 x 2.5%)

Where:

AER = allowable escalation rate
N1 = number of months from the date of
bidding/date agreed upon in the
contract (for negotiated contract)
up to October 31, 1983.
N2 = number of months from November 1,
1983 up to the period under consideration.

AER = (22 months x 1% per month)
(1 month x 2.5% per month)
= 24.5%

Since 19.07.98.