Exploring Relationship between Price Escalation Components using Regression Analysis – A Case Study of Pakistan Construction Sector

Abstract

Keeping in view the present unprecedented price fluctuation, it has become a critical aspect to explore the relationship of elements being evaluated during contractual escalation mechanism. The current study investigated the components of the escalation provisions being practiced in local construction industry to understand their relationship with components admissible for compensations. The research is based upon the price adjustment mechanism under FIDIC scheme. As a case study, available escalation bills of an actual construction project have been evaluated and the period of billing ranged from July 2011 to May 2018. Multiple regression analysis was implemented at this stage to explore the relation of escalation paid with its four (04) components considered in provisions. This included cement, labour, reinforcement and fuel. The results have shown a strong relationship of components with the escalation provision which was linear in nature.