• Architectural research
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• v.8 no.1
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• pp.69-76
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• 2006

The purpose of this study is to suggest policies to improve the price escalation system in a construction contract through a Policy Delphi technique. The Delphi, including two times questionnaires and a group discussion, was conducted by joining 14 experts. Also, the escalation provisions of various countries were examined. Results of the Delphi showed that the minimum fluctuation rate for price escalation was desirable at a level of 3%. To compute the fluctuation rate, calculating the price fluctuation of overall articles was more desirable than using price indices. A bidding date was more reasonable as the initial date of change in price. Losses caused by price change should be shared between contractor and owner; therefore a deduction rate should be introduced in price escalation. Meanwhile, overhead and profit should be adjusted in proportion to the fluctuation rate; but advance payment or the delayed construction amount should be deducted from the adjusted amount.

• Korean Journal of Construction Engineering and Management
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• v.12 no.4
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• pp.70-78
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• 2011

In case of long time progressive construction work, we need contract sum adjustment due to escalation for a period of works and the process of applying, consistent and obvious criterion is required. In this study, it were attempted to figure out problem and study this rational improvement by giving examples based on core activities of escalation adjustment. Based on literature study and legal system analysis, we classified processes of contract sum adjustment for escalation and defined 20 core activities for each process. From this measured variable, we carried out case study by giving 37 examples of escalation. As a result of case study, problems of each process was found and we suggested rational improvement. As this study, providers will be able to waste budget and the other will be given smooth escalation adjustment.

• Proceedings of the Korean Institute of Building Construction Conference
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• 2005.11a
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• pp.117-120
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• 2005

The business market of architecture has got a system that controls a deposit according to the price function. This system is written on a law of contract about countries. So the main body of construction has to make a reasonable contract. This study is written about a rate of numerical index on controling a deposit. We tried to fine problems and solutions of labor expenses, instrument costs and material costs which is so big and changable on the construction market Labor expenses are expressed according to the rate of construction scale between direct and indirect cost that applies ability of works. Instrument costs are expressed according to an output method of a unit price annually and a weight allowance of local instrument conditions and use frequence. The last material costs expressed according to a local weight allowance make a decision of the material cost index. They applies locally relative index more than absolute one on what uses the price rate of producers and importations. This solutions are not enough to apply to the real market, so it needs to exam and to be on the market after a feasibility study.

• Korean Journal of Construction Engineering and Management
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• v.5 no.6 s.22
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• pp.203-211
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• 2004

This study is the results to survey on the problems and improvable Policies for current escalation system in construction contracts, through a Delphi survey to experts. From the survey results, it is desirable to decide the fluctuation rate of construction cost, which is the requirement of escalation clause, on the basis of inflation rate or construction cost index. The desirable price fluctuation rate is proposed as a $3\%$ level. However, it is difficult for construction companies to cope with the sudden increase of material price in advance, arising from short-term shock factors such as exchange rate and international raw material's price. Accordingly escalation system for specified materials, as an exceptional mode, should be introduced. As a method to calculate the fluctuation rate, ARCA(adjustment rate for the categories of articles) is more desirable than ARI(adjustment rate for an index), because the ARCA can be more reflected the characteristics of each construction work.To rationalize the ARI method, it is needed to announce the wage index, material index and machinery expense index via detailed classification by construction types. Also, it is desirable to prescribe the bidding date as a starting date of the price change, rather than contact signing date. considering the price change can happen since the biddiilg stage.

• Journal of the Korea Institute of Building Construction
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• v.12 no.1
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• pp.108-114
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• 2012

Escalation method examining the changes in price index has been widely utilized in public construction projects. The previous escalation method determined estimated changes in price based on the average unit price of contract items over a period of time. In relation to this method, the issue has been raised that the fluctuation rates of previous method show different trends compared with other related price indices, as the influence of the small group of contract items with large unit prices overwhelms the others. This research suggested an improved escalation method which estimates the fluctuation rate by examining the changes in CCI (construction cost index) and applies it to the total amount or the partial amount deducted for labor cost in price escalation for previous bid price method. To verify the improvement, a case study is conducted on an educational facility, and the fluctuation rate was estimated in two different base periods (short term, long term). The results over the long term showed similar tendencies to those of related price indices, as well as significant differences in fluctuation rates compared to those of the previous method.

• International Commerce and Information Review
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• v.16 no.2
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• pp.89-109
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• 2014

The purpose of price escalation clauses has the effect of increasing the L/C value subject to external pricing mechanisms. This will be found inter alia in metals and oil products transactions. Such a clause gives rise to a question. That is, whether it is enforceable or whether it constitutes a letter of credit. The problem is what to reference to a source outside the context of a letter of credit constitutes a non-documentary condition rendering the undertaking something other than a letter of credit. Reference to an objective and readily available index is not something that renders the undertaking obscure and is not "non-documentary in the sense that it is possible to make an objective verification of the data. The possible solution is that not every non-documentary condition will be disregarded. For example, an index specified in the credit will not be disregarded as stipulated in ISP98 and URDG758. If a non-documentary is "central and fundamental", it seems that the parties intended a dependent payment obligations. The most common means of overcoming this conflicts of interests is to issue an instrument incorporatingan escalation clause, but capping the bank's maximum payment obligation.

• Korean Journal of Construction Engineering and Management
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• v.20 no.3
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• pp.3-11
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• 2019

The construction of a facility is an act whereby infrastructure such as roads and railways and other facilities such as housing and office spaces are constructed, and due to the characteristics of the relevant industry where such construction is carried out in a custom order method, it requires a long period of time mostly. While the construction is carried out over a long period of time, fluctuations in the price of raw materials required for the construction occur. Therefore, the cost of the construction also fluctuates inevitably. The fluctuation of the construction cost meshes closely with the profit of a constructor and the efficiency of government spending. Therefore, it is necessary to maintain the construction cost at a reasonable level by adjusting the construction cost rationally in order to secure the required construction quality and spend the budget efficiently. The buffer system for solving such problem is the contract amount adjustment system by fluctuations in prices (Escalation/De-Escalation). In this study, the method combining the escalation method based on the item adjustment method was suggested for an efficient contract amount adjustment method. In addition, it is proposed that there be an investigation and codification of matters not applied to government acts and regulations on contracts related to the adjustment of fluctuations in prices legally.

• Korean Journal of Construction Engineering and Management
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• v.12 no.2
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• pp.3-11
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• 2011

There are several causes to recalculate the contract amount in public construction projects. Among them, the escalation clause was introduced in 1969 and now the condition to recalculate the cost is effective after 90 days from the date of contract and the rate of fluctuation should be more than 3% from the date of bidding. The two calculation methods for the rate of fluctuation are item-adjustment and index-adjustment. According to the results of investigation into 4 public institutions and 163 projects, all of them have used the method of index-adjustment and the rate of projects that spend over 6 months obtaining the approval of contract amount adjustment is more than 90%. The reason for spending lots of time is caused by problems of the calculation method on the price fluctuation rate. Therefore, it is necessary that the calculation method should be diversified to cope with the problems and a option of the builder should be expanded as well. Furthermore, if the way to apply correction factors to construction price index and average index based on the producer and consumer price index made by the bank of Korea is added, then the duration will be reduced without additional expenses. This study proposed the diversification of the calculation method using price fluctuation rate and builders' expanded options as improvement on the managerial method of Price Fluctuation System for the prompt and efficient contract amount adjustment.

• Journal of the Korean Society of Safety
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• v.8 no.2
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• pp.58-63
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• 1993

Recently, a large amount of flammable or explosive materials have been handled or stored in chemical industries. H the equipments fail or the materials release in consequence of operation errors, fire and explosion could occur to them. Thus, risk assessment using quantification of risks is very important when design of processes and modifications of installed processes are performed. The purpose of this study is to develop the program for fire and explosion index in order to quantify the expected damage of fire and explosion incidents in chemical plants, to identify equipment that would be likely to contribute to the creation or escalation of an incident, to comunicate the potential fire and explosion risk to management and to account of damage cost.

• Proceedings of the Korean Institute Of Construction Engineering and Management
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• 2004.11a
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• pp.256-260
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• 2004

As a large portion of defence budget are alloted for military facility construction, reasonable budget estimation in the planning stage has been officers' main concerns. However the proper estimation of construction cost is difficult to be carried out due to the absence of systematic criteria. To improve the budget estimation for military facility construction, this study proposes a cost index model which can convert historical cost to current cost. Thus the developed cost index would enhance effectiveness of budget estimation process 3nd support reasonable decision making. This cost index model is developed by analyzing historical cost data with statistical methodology The study is executed by following process. First, factors which affect construction cost for the most are selected by analyzing historical cost data. second, the selected factors are categorized material cost, labor cost and equipment cost, and weights of those factors are calculated by dividing the cost of each factor by total item costs. Last, cost index is developed by using weighted average method.