Price revision in Spanish public works contracts

Price revision in works contracts only applies when all of these conditions are met at once:

The two thresholds operate together: revision only reaches works executed once both have been crossed, so the first 20 per cent of the contract and the first two years are never revised. In contracts shorter than two years, the consequence is direct: no revision is possible, and all cost variation risk travels in the offered price.

Where it applies, revision runs through the standard polynomial formulas approved by regulation for each class of works (building, roads, hydraulic works and so on). Each formula decomposes the price into the dominant materials of that typology (steel, cement, aggregates, energy, bituminous materials...) with fixed coefficients, and updates each component with the official price indices published monthly. The resulting revision coefficient is applied to each progress certificate.

Two structural exclusions define the real scope. First: labour costs are not revised; the formulas include a fixed term representing, among other things, that non-revisable share. Second: the formula revises against official sector indices, not against the company's actual costs, so a badly hedged purchase can lose money even with revision in force. Revision cushions; it does not indemnify.

The precedent of the acute materials inflation years is worth recalling: the legislator had to approve an exceptional, temporary revision mechanism for contracts that lacked one, with strict requirements and limited scope. The structural lesson for bidders is that extraordinary rescues exist but are not a plan: they arrive late, cover partially and require proving severe impact.

A standard formula always has the same anatomy: a revision coefficient equal to the sum of several variable terms plus a fixed term. Each variable term multiplies a coefficient (the material's weight in that works typology) by the ratio between the index of the certification month and the index of the tender month. Schematically, for a building: revision coefficient = a × (steel t / steel 0) + b × (cement t / cement 0) + c × (energy t / energy 0) + ... + fixed term.

Three practical readings follow from that anatomy. First: the fixed term (representing the non-revisable share, labour included) usually sits at a significant fraction of the total, so even a general index rise does not pass through in full. Second: the formula's coefficients may not match the real cost structure of the specific project; a project abnormally intensive in steel under a formula that weights steel lightly is under-covered, and that is detected on bid day by comparing the formula's weights with the cost study's breakdown. Third: the time reference matters; the indices at tender time are base 0, so bidding at a price peak works in the contractor's favour and bidding in a trough against it.

A 36-month, EUR 3,000,000 project concentrates around 45 per cent of its cost in revisable materials. At month 20, the indices for those materials accumulate a 9 per cent rise.

Without price revision, the theoretical extra cost is around 3,000,000 × 0.45 × 0.09 = EUR 121,500 on the remaining works, borne entirely by the margin: if the bid closed at 4 per cent (EUR 120,000), the rise swallows it whole.

With revision provided for, relief arrives conditioned: nothing until month 24 or until 20 per cent execution is crossed; from there, each certificate is corrected with the formula's coefficient, which will capture the rise partially (the fixed term and labour stay outside). In a realistic scenario, revision recovers on the order of half the impact on works certified after the thresholds. The difference between the two scenarios, in the range of EUR 60,000 to 120,000, is exactly what should have been priced on bid day.

Practical reading of the documents thus adds one box to the analysis: is there a revision clause and with which formula? In long contracts without revision, risk cover is built into the bid: supplier prices locked with extended validity, early stockpiling of the dominant materials planned in the works programme, and an explicit risk premium in the discount, decided with the scenario method of the article on preparing a public works bid. In contracts with revision, the specific formula is modelled: its coefficients say which share of the risk remains the company's own.