Principles to Construction Works for Law no:4734

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Principles to Apply in Calculation of Price Difference related with the Construction Works to be tendered under Public Procurement Law No.4734
Official Gazette Date:
31/12/2002
 
Official Gazette No:
24980/ 3. Reiterated
 

Purpose
Article 1- The purpose of these principles is to establish the principles and procedures to be used in calculation of the price differences for the construction works contracted pursuant to Public Procurement Contracts Law No 4735 of the Contracting Entities under the scope of Public Procurement Law No 4734.
Scope
Article 2- The transactions related with the price difference calculations to be applied in construction works that the Contracting Entities are to procure by taking lump sum turnkey or unit price bids according to Public Procurement Law No 4734 shall be carried out according to these principles.
Basis
Article 3- These principles have been drawn up based on the article 8 of the Public Procurement Contracts Law No 4735.
Principles to be observed by Contracting Entities
Article 4- The Contracting Entities must include provisions stated herein in the specifications and contracts of the construction works to be procured under Public Procurement Law# 4734 in order to be able to calculate price difference.
Definitions
Article 5- For the application of provisions on the services procurements the following definitions shall apply;
a) Contracting Entity: the organizations and institutions within the scope of the Public Procurement Law No 4734,
b) Work: All kinds of construction works within the scope of Public Procurement Law No 4734 and the installation, production, preparation, transportation, completion, large scale repair, restoration, environment arrangement, drilling, demolishing, reinforcement and mounting works related thereto.
c) Contract: Written agreement between the Contracting Entity and the contractor for the procurement of services over lump sum or unit prices,
d) Turnkey Lump Sum Price: The total price offered by the tenderer for the whole of the work and approved by the Contracting Entity and shown in the contract based on application projects and location lists thereto in construction works to be contracted on turnkey lump sum price,
e) Unit price: the price, offered by the contractor and shown in the contract after being approved by the Contracting Entity for each work item in the schedule prepared by the Contracting Entity based on preliminary and/or final projects and location lists thereto in construction works to be contracted over unit prices,
f) Work item: The units forming the basis for the payments, technical or special characteristics of which are stated, with unit price definitions and the costs of which are shown in the contract or unit price of which is established later, at the works to be carried out according to the unit price contract,
g) Work group: the units forming the basis for the payments, which are comprised of the sum of the work items related with the interim or final payments and showed by progress ratios in works to be performed under turnkey lump sum price,
h) Year: Calendar year,
i) Day: Calendar day,
j) Execution month: the month in which the works are performed according to the work program approved by the Contracting Entity,
k) Base Index: the index for the month preceding the month in which the tender date exists,
l) Current index: the index for the month preceding the month in which the progress payment is prepared,
m) Price difference: The price to be paid or deducted according to these principles for the work items or preparations carried out in the execution month according to the work program in the unit price contracts and for the work groups realized as per the progress ratios in the execution month according to the work program in lump sum contracts,
Price difference calculation
Article 6- The price difference shall be calculated according to the following formula: 
F = An x B x ( Pn - 1 )
                 In              Çn              Dn           Yn             Kn             Gn          Mn
Pn = [ a —— + b1 —— + b2 —— + b3 —— + b4 —— + b5 —— + c —— ]
                 I0              Ç0             D0            Y0             K0             G0          M0
Whereas;
F: Price difference (TL),
An: the amount (TL) calculated by multiplying the work items or preparations realized in the execution month by the contract prices in works with unit prices at progress payment no (n), where n=1 at the first progress payment; and the amount (TL) calculated by multiplying the work group and/or the work item production amount realized in the execution month according to the progress ratio by the contract prices in lump sum works,
B: the coefficient of 0.90,
Pn: the price difference coefficient calculated by applying the basic indexes and current indexes used in price difference calculation and representative coefficients of the weight ratios of the a, b1, b2, b3, b4, b5 and c values at the progress payment no (n), where n=1 at the first progress payment,
a: the fixed coefficient representing the weighted ratio of labor to be used in the performance of the contracted works,
b1: the fixed coefficient representing the weighted ratio of cement to be used in the performance of the contracted works,
b2: the fixed coefficient representing the weighted ratio of iron/steel to be used in the performance of the contracted works,
b3: the fixed coefficient representing the weighted ratio of fuel to be used in the performance of the contracted works,
b4: the fixed coefficient representing the weighted ratio of lumber to be used in the performance of the contracted works,
b5: the fixed coefficient representing the weighted ratio of other materials to be used in the performance of the contracted works,
c: the fixed coefficient representing the weight ratio related with the depreciation of the equipment and machinery to be used in the performance of the works under contract,
It is mandatory that one, several or all of the fixed coefficients a, b1, b2, b3, b4, b5 and c be determined by the Contracting Entity in consideration of the ratio in the work tendered such that their sum to be equal to one (1.00) and be published in the tender document. These fixed coefficients shall in no way be changed during the execution of the contract.
The basic indexes (o) and the current indexes (n) in the formula mean the followings;
İo, İn: the basic and current indexes of labor; the figure in the "Turkey" line of the Table 3- Urban Places Consumers' Price Index on Regional and Provincial Base Table published by the Prime Ministry State Statistics Institute with 1994=100 base,
Ço, Çn: the basic and current indexes of cement; the figure in the "Production of Other Non-metallic Mineral Products" line of the Table 2- Wholesale Prices Index Figures Table published by the Prime Ministry State Statistics Institute with 1994=100 base,
Do, Dn: the basic and current indexes of iron/steel; the figure in the "Main Metal Industry" line of the Table 2- Wholesale Prices Index Figures Table published by the Prime Ministry State Statistics Institute with 1994=100 base,
Yo, Yn: the basic and current indexes of fuel; the figure in the "Coal, Refined Petroleum Products" line of the Table 2- Wholesale Prices Index Figures Table published by the Prime Ministry State Statistics Institute with 1994=100 base,
Ko, Kn: the basic and current indexes of lumber; the figure in the "Wood and Fungus Products Production" line of the Table 2- Wholesale Prices Index Figures Table published by the Prime Ministry State Statistics Institute with 1994=100 base,
Go, Gn: the basic and current indexes of other materials; the figures for the base and current indexes relating to the other materials to be used in the work and to be included in the tender document by the Contracting Entities after determining on the basis of sub sectors from the Table 2- Wholesale Prices Index Figures Table published by the Prime Ministry State Statistics Institute with 1994=100 base; where the Contracting Entities failed or was not able to establish such indexes, the figure in the "General" line of the Table 2- Wholesale Prices Index Figures Table published by the Prime Ministry State Statistics Institute with 1994=100 base,
Mo, Mn: the basic and current indexes of machinery and equipment depreciation; the figure in the "Machine and Equipment Production" line of the Table 2- Wholesale Prices Index Figures Table published by the Prime Ministry State Statistics Institute with 1994=100 base,
In case one or several of the indexes stated above are changed by Prime Ministry State Statistics Institute during the implementation of the contract, the price difference shall be calculated by the new index when it is established for the changed one, if not, by the figure in the "General" line of the Table 2- Wholesale Prices Index Figures Table published monthly by the Prime Ministry State Statistics Institute with 1994=100 base.  
However, though the payment of price difference is stated in the administrative specifications and contract, if the Contracting Entity did not specify a representative coefficient for the a, b1, b2, b3, b4, b5 and c fixed coefficient such that their totals equal to one (1.00) according to the qualifications and requirements of the work, the figure in the "General" line of the Table 2- Wholesale Prices Index Figures Table published monthly by the Prime Ministry State Statistics Institute with 1994=100 base shall apply as the base and current indexes  instead of the above coefficients.

Application Principles
Article 7- The following principles must be observed in price difference calculation:
a) No amendments may be made to the procedures and principles in the contract related with the price difference once the contract is signed.
b) The costs to be paid or deducted in addition to the contract price as a result of the application of these principles are in the form of price difference and do not affect the contract price.
c) These principles shall not apply to works, the costs of which are paid in foreign exchanges or Turkish Lira equivalent of foreign exchanges by calculating exchange differences separately.
d) During the preparation of the progress payments in cases where the index to apply to the progress payment is not revealed, the price difference shall be computed using the previous index. As soon as the new indexes are revealed, the price differences for the following progress payments shall be corrected accordingly.
e) The price differences, such calculated, cover all price increases that might be the subject of price difference payment. Other than this, no price difference shall be paid due to the procedures, the type and amount of the machinery, equipment, material and labor used by the contractor, devaluation of Turkish Lira against foreign exchanges, the increase in the price of the material procured from abroad and other similar reasons.
f) At works, for which an advance payment is made, the amount to be paid to the contractor having deducted the advance from the progress payment is considered as the (An) amount. Where the price difference coefficient (Pn) is smaller than 1, no advance payment shall be deducted from (An) amount.
g) These principles shall apply to work items and/or work groups and the work preparations carried out according to the work program.
h) In case a new unit price is established during the execution of the work for the work item, for which there exists no unit price in the contract and which is requested to be performed by the Contracting Entity, in unit price contracts, this price shall be established according to the market value and conditions of the month in which the price is established. The price computed by dividing the newly established unit price by the execution month price difference coefficient (Pn) is multiplied by the amount of work item and the resulting amount is included in the column "works performed with the contract unit prices" at the progress payment and paid to the contractor as the new work item on the basis of contract. The price difference for this work item is found by calculating over the indexes of the execution month.
Work program and allocation segment
Article 8- The contractors, having signed the contract, shall prepare and have approved by the Contracting Entity a detailed work program showing the work items, monthly works, annual allocations and monthly distribution of these.
In case an allocation in any work program of any month is not spent, the index of the month, in which the work program is not realized, shall continue to apply in the following progress payments until the progress payments become equal to the unspent portion of the allocation.
In case time extension is granted to the contractor due to the forces majeure stated in article 10 of the law no 4735 or when the Contracting Entity's fault caused the delay of the execution of the contract, price difference shall be calculated for works carried out according to the revised work program, which is prepared by the contractor and approved by the Contracting Entity, based on the extended time.
In cases where the contractor fails to prepare the work program and have it approved by the Contracting Entity, the work program is prepared and approved by the Contracting Entity one sided. The contractor is obliged to comply with such prepared and given work program.
Preparation Application
Article 9- Preparation price might be paid to the materials used for the portions of the contracts, where the unit price works and turnkey lump sum contracts are performed together, made according to the unit price contract. However, it is mandatory that the list and the prices of the goods for which the preparation payment is to be made are indicated in the tender document. These materials shall be prepared for the work items in the work program and in the amount sufficient to those works. No preparation payment shall be made for the excessive amounts of the materials.
Price difference shall be calculated according to these principles for the materials prepared according to the above conditions.
Production Increases and decreases
Article 10- On condition that the provisions of the article 8 are considered related with the allocation segments, in cases where increases or decreases in the amount of the production are determined as a result of the interim or final measurement of any production in unit price contracts, the increased or the decreased amount (regardless of the month the production is performed) is valued by the price difference coefficient of the month in which the increase or decrease is finalized so as not to exceed the work completion date.   
Application in the penalty works
Article 11- When the price difference is calculated at works, which failed to receive time extension although the duration expired and which is performed with the permission of the Contracting Entity, the lower of the (Pn) value valid at the end of the expiration date of the duration and the (Pn) value during the period of penalty work shall apply.
Works for which no price difference is envisioned
Article 12- Though the payment of price difference is not envisioned in the administrative specifications and contract of the work tendered, in case the work completion date is postponed by granting time extension due to forces majeure or the failure of the Contracting Entity, price difference may be paid to the work items or work groups, carried out in the postponed period according to the work program, pursuant to these principles on condition that it is stated in the administrative specifications and the contract.
The base index in the price difference calculation means the index of the month in which the work completion date takes place, and the current index means the index of the month in which the progress payment preparation date takes place. The figure in the "General" line of the Table 2- Wholesale Prices Index Figures Table published monthly by the Prime Ministry State Statistics Institute with 1994=100 base shall be considered as the base and current indexes.

Enactment
Article 13- These principles shall enact on 1/1/2003.
Enforcement
Article 14- The Cabinet shall enforce these principles.