Theory And Measure For Adjusting Contract Price Of Hydropower Project

The price escalation of inflation, which is difficult to predict and cannot be neglected, is the major risk in the procedure of hydropower project construction. It is the effective measure to manage such a risk by means of adjusting the contract-price. In the field of domestic hydropower construction, the measures of adjustment formula and documentary proof, recommended by the World Bank, was firstly brought into use for adjusting price when Lubuge Hydropower Station was constructed. Then, similar measures were widely used in the construction of many giant hydropower stations, such as Ertan, Xiaolangdi, etc. Based on the practice of these projects, the existed achievement of domestic researchers, the Purchase Guide of the World Bank, etc, combined with the management of the whole project as well as the contract, in this paper, the theory and measure for adjusting price was approached widely and intensively. Firstly, some quantitative analysis and qualitative discuss were made for the necessity of price adjustment. Then the advantages and disadvantages for the measure of document-proof were evaluated comprehensively, and some contract skills and management details were also studied through an example of a certain compensation claim. Then all the factors of price adjustment by formula measure, the keystone for the subject, were studied theoretically and methodically. What was suggested for adjusting contract price in this paper was a systematic measure by which the adjustment will be done mainly according to adjustment formulae and the documentary proof will be taken into account, too. To such a new measure, one of the main points was it easy to use, as the "equitableness"may be more meaningful than the "preciseness"to some extent. Another point was that the price risk will be shared by both contract sides; and then, it should be necessary to set a non-adjusting factor in the adjustment formula. Also it was showed that to adopt a series of formulae for different periods of the project will have the adjusting more reasonable, correspondingly this will add chiefly the work load before contract concluded, but not make the implementation and management of contract troubled. Moreover, the upper limit and the lower one for adjusting price would seem to be worth a try in domestic hydropower projects. In addition, the statistic price index was not only the basis of the adjustment formula, but also concerned in the usual problems to the subject in this paper. One of the problems for using the formula measure, which existed generally but had not been paid enough attention to, was that whether the formula was yet applicable when the base year of statistic price index had changed. Discussing another instance of contract dissension, the author pointed out that the appropriate measure was to apply the famous Gauss's least square method, and it should be combined with the intrinsic statistics rule of price index. Thus a measure combined mathematical statistics with social economics was introduced.