Limitations and Hypothesis Underlying the Application of CIDA Price Fluctuation Formula in Sri Lanka

Abstract

The CIDA price fluctuation formula has been recommended in construction projects of more than three months’ duration. The aim is to recover unforeseen costs due to open market escalation, at least to some extent. The industrial perception has not however been researched in detail for further improvements. This research is to gauge the industrial enthusiasm towards the CIDA price fluctuation formula as a means of recovery of loss. The objectives are to disclose the limitations and hypothesis underlying its application, reveal the context in which it operates, measure the perception and key concerns of the users with regard to its reliability. At the outset, a desk review was carried out to identify the logic behind the formula. Existing pre-published information was tracked down in this review. A literature survey was carried to understand the context in which it operates. A series of interview was conducted to gauge the individual perception of practitioners who have been dealing with the formula application. A Maximum Variation Sampling method was adopted to ensure collecting a wide range of participants with different viewpoints and, a narrative analysis method was used to identify shared comprehension among the practitioners. It was found that many of the criticisms entail a valid basis. Hence, it is recommended to publish the indices regularly and calculate the input proportions jointly. It is also recommended to calculate cost adjustment factors for individual contracts and publish the price indices in district basis or introduce price adjustment procedure specific to each administrative district.

Keywords: CIDA formula; Compensation; Open market vacillations; Price escalation