This is a classic example of how mechanical formulas can break ethical coherence when they no longer reflect economic reality.
Under FIDIC Red Book (1999), the price adjustment clause (Sub-Clause 13.8) is meant to preserve fairness between parties, not to create distortion or loss due to unrealistic indices or coefficients.
If the coefficients were incorrectly chosen or the official indices became unrepresentative, you can act on two levels:
Contractual Level - Rebalancing the Mechanism
- Use Sub-Clause 13.7 (Adjustments for Changes in Legislation) or the Variation and Value Engineering mechanism to show that the statistical base has become objectively unreliable.
- Present a factual case (economic deviation analysis) proving that the formula no longer reflects actual cost evolution.
- Propose, by mutual agreement, an equitable adjustment of coefficients under Clause 3.5 (Determinations), ensuring the Engineer’s neutrality.
Ethical & Governance Level - Restoring Intent
- The purpose of the clause is economic equilibrium, not mechanical rigidity.
- If applying a flawed formula violates fairness, the parties should seek a good-faith correction, as allowed under FIDIC’s core principles and civil law doctrines (e.g., Rebus Sic Stantibus).
In short:
Don’t fight the formula, restore the fairness it was meant to protect.
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