Price adjustment and the budget's base date

Every building project has at least three dates at which prices apply. They are often months, sometimes years, apart.

Base date	What applies at that date	The client's question
Cost base date of the budget	price level on which the cost calculation rests	Which month do my figures refer to?
Tender date	price level the bidders build into their prices	Has the budget been brought forward to this date?
Construction period	price level when materials are bought and installed	Who bears the movement until then?

The Bauherr (the client) answers the first question itself, by recording the cost base date expressly each time it approves a cost determination. The second is answered by updating the budget. The third is answered by the contract: with a fixed price or with an escalation clause.

Anyone comparing a cost calculation with tenders must bring both to the same base date. The usual method is updating with a construction price index. How it works and which index suits which work is set out in the article on updating costs with the construction price index. This article deliberately gives no index values.

The update is a basis for decision, not a justification. It shows which part of the gap between budget and tender stems from general price movement. The rest has other causes: quantities, standard, market conditions in the trade or the region. On the regional differences that a federal index does not capture, see the article on regional construction cost differences.

For the client, one rule follows: the approved budget is not silently increased by the index movement. The update is shown, justified and approved as a decision in its own right. Otherwise the budget grows every month without anyone having decided it.

Without an agreed escalation clause, the agreed price applies. An adjustment is then possible only exceptionally under general rules, whose conditions must be examined in the individual case. For the budget this means that price movement during construction is in principle priced into the tender, with a risk mark-up the bidder sets itself.

With an escalation clause, the client takes part of the risk upon itself. It pays more if the prices of the materials covered rise, and less if they fall. The advantage is a tender without a speculative mark-up; the disadvantage is an amount that is not yet fixed when the contract is signed. A Stoffpreisgleitklausel (material price escalation clause) is therefore a budget decision: the client buys comparability of tenders in exchange for an open line in the forecast.

Federal building has a standard instrument: form 225 of the VHB (the federal procurement manual for building works). The position on the conditions for its use is set out in a decree of the Bundesministerium für Wohnen, Stadtentwicklung und Bauwesen (BMWSB, the Federal Ministry for Housing, Urban Development and Building) of 20.06.2023 (BII6 - 70437/9#4).

The special rules have expired. The special rules introduced in March 2022 in connection with the war in Ukraine, and extended several times, ended on 30.06.2023. Since 01.07.2023, the general rules of the guideline on form 225 VHB apply again.

As at the decree of 20.06.2023, a material price escalation clause requires three conditions:

Condition	Content under the decree
Price movement	prices of the material are subject to changes "to a particular degree" (unofficial translation, as are all quotations here)
Period	long period between submission of the tender and installation: 10 months, in exceptional cases 6
Weight	"material costs amounting to at least one per cent of the estimated contract sum"

There is a variant for materials without a reliable starting value. Form 225a, introduced in June 2022, may still be used from 1 July 2023 where no robust base value 1 can be determined.

The position as at 21 October 2026 confirms these conditions. The Fachinformation Bundesbau (federal building information portal) publishes the consolidated reading version of the VHB 2017, as at 2023, whose guideline on form 225 sets out the same three conditions in point 2.1: materials exposed to price changes to a particular degree, at least 10 months between submission of the tender and the agreed completion date, 6 months in justified exceptional cases, and a material cost share of at least 1 per cent of the estimated contract sum. Its public download area lists no later decree on the material price escalation clause. Länder (federal states) and municipalities may have their own requirements.

The private client is not bound by the VHB, but can use it as a guide. The decree's conditions make a useful checklist: is the material really volatile, is the period until installation long, is the material's weight large enough to justify the effort? If any of the three questions is answered no, a fixed price is often the simpler solution. A client who nevertheless opts for an escalation clause makes four determinations before tendering:

1. Which materials. Only materials with a large weight and high volatility, not all of them across the board.
2. Which index. A publicly available, verifiable price index per material, not a manufacturer's price.
3. Which starting value. The value at the tender date, documented in the contract.
4. Which limits. Whether there is a threshold below which nothing is adjusted, a deductible, or a cap. These values are a matter for negotiation and are not quantified here.

Adjustment must work in both directions. A clause that covers only increases is not protection for the client but a one-sided risk.

Price adjustment is neither a variation nor a contingency. It does not arise from a change to the work and therefore does not belong in the variation register. Nor is it a risk that may or may not occur, but a movement whose direction and size are open.

The federal RBBau (federal building guidelines) separates it expressly. Under C.8 RBBau, the Projektkostenziel (project cost target) is made up of building costs, ancillary building costs, "the forecast increases in building costs" and risk costs. Price increases are thus a component in their own right, separate from the risk costs, whose funds under letter d. the client releases only when the risk occurs. The private client can adopt this structure as a model; how the components add up to the total budget is shown in the article from the works budget to the client's total budget.

In the cost forecast during construction, the line has two parts: the adjustment already billed in the interim invoices and the expected adjustment for materials not yet installed. The second is re-estimated with the current index level at each update, as described in the article on forecasting the final cost during construction.

The following example is entirely invented; the percentages are assumptions, not index values. A cost calculation shows EUR 3,000,000 net for building costs, at a cost base date 12 months before the tender date. For the update, a fictitious price movement of 4 per cent is assumed.

Step	Calculation	Amount
Budget at the cost base date		EUR 3,000,000
Update to the tender date	3,000,000 times 1.04	EUR 3,120,000
Total of the lowest tenders		EUR 3,150,000
Gap without update	3,150,000 minus 3,000,000	EUR 150,000
Gap after update	3,150,000 minus 3,120,000	EUR 30,000

The gap shrinks from EUR 150,000 to EUR 30,000. Only this EUR 30,000 is a question for the design or the market; the rest is price movement that the client must expressly approve.

The contract includes a material price escalation clause for reinforcing steel. In the tender, the fictitious material cost of the reinforcing steel is EUR 200,000, more than 1 per cent of the contract sum (around 6.3 per cent of 3,150,000). If the relevant index rises by a fictitious 10 per cent by the time of installation, the result is extra pay of the order of EUR 20,000, before any deductions the specific clause provides for. This amount goes on the price adjustment line, not under variations and not in the contingency.