By Muhammad Faisal Kaleem
ISLAMABAD, Feb 03 (Wealth Pakistan) – The Planning Commission has raised the ceiling for the variable portion of the price adjustment formula by up to 70% for construction materials used in National Highway Authority (NHA) projects, aiming to protect contractors from sharp cost increases and ensure timely completion of road schemes.
According to a document available with Wealth Pakistan, the move comes after an unprecedented rise in the prices of key construction inputs.
Why the adjustment was needed
Officials said the existing price structure no longer reflected market realities. Over the past year, the costs of diesel, steel, cement, bitumen and labour have increased significantly. As a result, contractors faced mounting financial pressure.
To address this issue, the government revised the price adjustment formula included in FIDIC-based contracts. The formula contains a fixed portion and a variable portion. The variable component uses weightages of materials that directly influence overall project costs.
Policy framework already in place
Meanwhile, a senior NHA official, speaking on condition of anonymity, told Wealth Pakistan that the decision follows a policy introduced last year.
“The NHA executive board approved a framework for incorporating price adjustment provisions in development contracts,” he said.
Under this policy, the authority defined standard operating procedures and introduced multi-tier evaluations to ensure transparency and accountability.
Role of engineering and economic bodies
During project execution, the Pakistan Engineering Council (PEC) guidelines serve as the benchmark for all claims. Contractors can use a structured mechanism to seek adjustments, although interest payments remain excluded.
Furthermore, several national economic bodies review and approve projects depending on their scale and nature. These include the Planning Commission, National Economic Council (NEC), Executive Committee of the National Economic Council (ECNEC), Ministry of Planning, Development & Special Initiatives, and Council of Common Interests (CCI).
Step-by-step claim process
Under the revised system, the contractor first submits a comprehensive claim to the project engineer. The engineer evaluates it according to PEC criteria and forwards the findings to the project director.
Next, a zonal committee — comprising the NHA member zone, GM project, accounts director and project director — reviews the case and recommends adjustments.
Afterward, the employer’s review committee examines the proposal. This body includes members from engineering, planning, procurement, budgeting and coordination wings.
Finally, the NHA chairman assesses the financial impact and sends the case to the executive board. The Divisional Development Working Party, Central Development Working Party, or ECNEC then grants final approval and allocates funds.
Relief for contractors
Officials said the revised formula aims to provide temporary relief to contractors struggling with volatile markets. In particular, sharp increases in steel, cement and fuel prices had disrupted project budgets.
Moreover, delays in earlier approvals often slowed construction and triggered disputes between contractors and the NHA. The new framework seeks to reduce such litigation and keep projects on schedule.
Focus on accountability
The Planning Commission stressed that stronger monitoring would accompany the enhanced variable portion. Authorities will verify each claim against documented price indices and quantities to prevent misuse.
Officials added that the decision should restore contractor confidence and support smoother execution of strategically important highway projects across Pakistan. However, they warned that consistent implementation remains essential to achieve the policy’s intended impact.