Price adjustment in French public works: the parametric formula, the indices and the calculation

Price adjustment is not a contractual option, it is a legal obligation on public works contracts running more than three months that require, for their performance, a large share of supplies, in particular raw materials, whose price is directly affected by fluctuations in world market prices (art. R2112-14 of the code). A works contract with no adjustment clause is legally incomplete, and it exposes the contractor to economic imbalance if material prices rise significantly during the works.

The administrative case law treats the absence of an adjustment clause in a contract subject to the obligation as an irregularity the contractor can rely on to seek a rebalancing variation. The economist should check systematically that the formula is present in the conditions of contract before the tender package goes out.

ℹ The three conditions that trigger the obligation First, a duration over three months, counted from the instruction to commence through to completion. Below three months a fixed price is the rule. Second, a significant proportion of supplies at variable prices, to be assessed contract by contract: a building contract does not meet it as a matter of principle, concrete, steel, timber, aluminium, copper. Only purely labour-based contracts such as simple decorating or cleaning can do without. Third, a contract placed by a public buyer subject to the code; on private contracts adjustment is free, not compulsory, but strongly advisable beyond six months.

Outside that case, the price is adjustable where the parties are exposed to major hazards arising from the reasonably foreseeable change in economic conditions during the period of performance (R2112-13); the contract then sets the date on which the initial price was established, the method for calculating the adjustment and how often it is applied.

The building cost indices are published monthly by INSEE. They measure the movement in production costs in each trade, taking in material, energy and wage costs. There are some forty BT indices, numbered up to BT55, some of which have been discontinued (BT12, for example), covering every building trade, and a separate series for civil engineering.

The commonest, BT06 for reinforced concrete, BT40 and BT41 for mechanical services and BT47 for electrical, deserve to be known by heart, because between them they cover 60 to 70 % of the value of a typical public building refurbishment. The economist should check that they match the packages in the pricing schedule before drafting the conditions of contract.

ℹ Where the indices come from, and the publication lag The indices are published on the INSEE website under construction price indices. Publication runs two to three months behind, so the July index appears in September or October. That lag has a practical consequence: to calculate the adjustment on a September valuation, the economist often does not have the index for the exact month. The conditions of contract must provide a rule for the periods where the index is not yet published: apply the last one published and regularise once it appears.

The standard parametric formula for a public works contract takes the form: the revised amount equals the original amount multiplied by the sum of a fixed part, a materials term and a labour term.

• The revised amount: what the buyer actually pays.

• The original amount: the amount for the period before adjustment, that is the scheduled rates times the quantities executed in the period.

• The fixed part: the non-adjustable share, representing the overheads and structural costs not subject to price movement. The standard value is 0,15.

• The materials coefficient: the share of supplies and materials in the cost of production.

• The labour coefficient: the share of labour in the cost of production.

• The index ratios: the movement in the trade index, and in the construction wage index, between the period of execution and the reference period.

The fundamental constraint is that the three coefficients add to one. If the sum is above or below one, the formula is mathematically incorrect and inconsistent: with the indices unchanged, it does not give back the original price.

A single multi-package formula is an acceptable simplification only where the frame is the majority of the contract. On a contract where the services packages weigh heavily, using BT01 across the whole contract understates the adjustment on those packages in a period of rising energy and electrical material prices, and can lead to contractor claims at final account.

The example below sets out the adjustment across four quarters on an all-trades contract worth 279 000 €, applying the formula with 0,15 fixed, 0,70 on the all-trades index BT01 and 0,15 on wages. For simplicity the wage index is assumed constant, so only BT01 moves. The two ends of the series are the values published by INSEE on the 2010 base: 132,0 in January 2025 and 134,7 in January 2026. The intermediate quarterly values are interpolated between those two points for the purposes of the demonstration.

Over twelve months of moderate inflation the adjustment comes to 2 175 € on a contract of 279 000 €, that is 0,78 %. The order of magnitude looks small, and that is precisely what leads some buyers to neglect the clause. The reasoning does not hold: from January 2021 to January 2022, the BT01 index rose from 114,4 to 121,4 (values published by INSEE on the 2010 base), an increase of 6,1 %, three times that of the example; since the adjustment is proportional to the rise in the index, the same formula on the same contract would have produced roughly three times that. An adjustment clause is an insurance whose cost shows up exactly when it is needed, and its absence explains a good share of the variation claims during construction and of the contractor failures at the end.

• One, coefficients that do not add to one: this makes the formula unenforceable. Check it systematically before the conditions of contract are signed.

• Two, an index that does not suit the package: using BT01 on an aluminium joinery package understates the adjustment when aluminium is volatile. The index has to reflect the main variable cost of the package.

• Three, an ambiguous reference period: the conditions must state explicitly whether the reference is the month tenders were returned, the month of notification, or a fixed date. Any ambiguity will be exploited by one side or the other.

• Four, no rule for unpublished indices: where the index for the month has not been published by the date of the valuation, the conditions must set the substitution rule, the last index published, then regularisation.

• Five, one formula across every package: acceptable where the frame exceeds half the contract, problematic beyond that. Prefer a formula per package or per family of packages.

• Six, no fixed part: a formula with no fixed part over-indexes the contract, since the fixed part represents the structural costs that do not move with prices.

Updating is distinct from adjustment. For a works contract concluded at a fixed price, it is compulsory (art. R2112-10 of the code): the price is updated if more than three months pass between the date on which the tenderer set its price in the tender and the date on which performance begins, to the economic conditions of a date three months before performance begins (art. R2112-11); the updated price remains fixed throughout performance (art. R2112-9). In a contract that refers to the CCAG-Travaux 2021, the date the price is set is that of the tender, or of the final tender after negotiation (art. 9.4.2).

The updating formula has the same structure as the adjustment formula, but it applies to the total of the pricing schedule rather than to the valuations. The conditions of contract must state whether updating applies and which formula governs it. The conditions of contract must therefore provide for updating. If the contract refers to the CCAG-Travaux 2021 without defining the index, the updating coefficient is set by variation from the INSEE BT or TP index corresponding to the nature of the works (art. 9.4.3).

The price is adjustable where the parties are exposed to major hazards arising from the reasonably foreseeable change in economic conditions (R2112-13); a contract running more than three months that relies on a large share of supplies priced on world markets includes an adjustment clause referring to them (R2112-14). The formula combines a fixed part with a materials term and a labour term, and the three coefficients must add to one. The code allows a fixed term to be included in the formula without imposing any minimum value (R2112-13): its value is a drafting choice for the contract. The most used indices are the reinforced concrete (BT06), heating and ventilation (BT40 and BT41), electrical (BT47) and aluminium joinery (BT43) series. The recommended formulas put 0,70 on the trade index for the frame and for aluminium joinery, split three indices for mechanical services (BT40, BT41 and BT38), and raise the labour share to 0,25 for electrical work. Over twelve months of moderate inflation, with BT01 up 2,0 %, the adjustment comes to around 0,8 % of the contract, and roughly three times that from January 2021 to January 2022 (BT01 up 6,1 %). The six classic errors are coefficients that do not add to one, the wrong index, an ambiguous reference period, no rule for unpublished indices, one formula across technical packages, and no fixed part. Updating before commencement is a separate mechanism and needs its own clause.

The nature of the figures quoted

The percentages and amounts quoted on this page are orders of magnitude for framing, not measurements. They illustrate mechanisms and proportions, and they substitute neither for a tender exercise nor for an estimate prepared on drawings.

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