The revision of prices in the construction and public works sector

In the construction sector, fluctuations in material and labour prices can affect the financial balance of projects. The revision of prices makes it possible to adapt to these variations. Here are tips for applying it and securing your construction sites.

What is price revision?

The revision of prices in the markets, especially in the construction sector, allows to adjust contractual costs according to economic fluctuations.

Unlike a fixed price, which is fixed and can only be changed under specific conditions, a revised price can be adjusted periodically during the term of the contract.

Definition and applicability

The price review applies to contracts with adjustable prices. It allows the initial price to be adjusted according to changes in labor costs, materials, and other economic factors.

The aim is to maintaining the financial balance of the contract, so that neither the supplier nor the customer are disadvantaged by unexpected economic changes after the signing of the contract.

Review mechanism

Les revision procedures must be defined in the contractual documents such as the Special Administrative Clauses Book (CCAP) or the General Administrative Clauses Book (CCAG).

These clauses detail how prices can be revised based on economic indices or resource prices, which are often updated by official bodies such as INSEE in France.

Why revise construction prices?

Reviewing prices is essential for long-term construction projects, where the risks of inflation and fluctuating material costs are high. Here are the main benefits:

• Inflation protection: adjust costs to reflect increased labor and material prices.
• Adaptation to material fluctuations: pass on changes in material prices to avoid financial losses and get a profitable construction site.
• Economic balance of the contract: ensure the economic balance of the contract so that neither the supplier nor the customer encounter unexpected financial difficulties.
• Long-term sustainability: make projects more predictable and financially stable.
• Fairness in the market: take into account real costs, promoting fair prices and healthy competition.

Before integrating price reviews into your contracts, it is important to write accurate and complete quotes. For more details on this subject, consult our page dedicated to Writing the quotation.

When is it possible to review prices?

Unlike the update, which is applied only once to adjust the original price if more than three months have elapsed between the determination of the price and the actual start of the work, the price review can be applied regularly throughout the project. The terms of the price revision are specified in the CCAP or the CCAG.

How do I calculate the price revision?

Calculating the price revision in construction requires an understanding of the BT and TP indices, as well as the application of a formula.

The BT and TP indexes

BT (Building) and TP (Public Works) are the indices that are used to adjust prices in the construction industry. They are established by the National Institute of Statistics and Economic Studies (INSEE) and measure changes in raw material and resource costs used.

• BT index: it tracks the evolution of the costs of six main items: equipment, salaries and expenses, energy, materials, miscellaneous expenses and transport.
• TP index: in addition to these six items, it also includes waste-related costs.

INSEE updates these indices regularly, by publishing provisional values every three months and final values thereafter. This makes it possible to monitor the evolution of costs and to pass them on to the prices of ongoing projects.

Practical application of indices

These indices therefore make it possible to reassess initial costs set out in quotes or contracts. They are used to adjust prices from the original fixing date to a specific date provided for in the contract.

Using the BT and TP indices, the parties can Adjust prices fairly and transparently, based on real market fluctuations.

The formula to apply to revise prices

Here is an example of a price revision formula based on a BT index:

P = P0 x BT/BT0

• P: revised price
• P0: Original price to be revised
• BT0: BT index of the month in which market pricing was established
• BT: BT index of the month of the revision date

Practical calculation example

Let's say you have a contract with an initial price (P0) of €100,000 established in January, with a BT (BT0) index of 150. In July, the BT Index (BT) rose to 160. Here's how you calculate the revised price (P):

P = 100,000 × 160/150 = 106,667€

The revised price, which reflects the increase in costs due to changes in the BT indices, is €106,667.

The price revision is necessary to maintain the financial balance of construction projects in the face of economic fluctuations. It is of course not a substitute for a good construction site monitoring, essential to guarantee the profitability of a project.