Price Escalation and Adjustment: How Reimbursements for Construction Materials Differ Among U.S. Departments of Transportation

Price adjustment clauses (PACs) are an effective means to minimize risk when fluctuating material costs create budget overruns in transportation construction projects. PACs for fuel and asphalt are available in most departments of transportation (DOTs) throughout the U.S. PACs for steel and Portland cement/concrete are less common. Price adjustment formulas for each construction material differ from state to state and produce a range of reimbursements. The purpose of this study is to compare the different formulas used by the DOTs and evaluate how these formulas and associated policies, such as trigger value and inclusion or exclusion of the price difference below the trigger value, influence the price adjustments. Scenario analyses are performed for three construction materials: fuel, asphalt, and steel. The results indicate that the most critical factors affecting price adjustment are fuel adjustment factors, trigger values, minimum requirements, and inclusion/exclusion of the price difference when the trigger is reached.