A mandatory provision
Article 60 of the public contracts code provides at paragraph 1 that the inclusion of price revision clauses relating to the performance covered by the contract is mandatory in the initial tender documents of award procedures. Inclusion is mandatory and not left to the contracting authority.
The article was amended by Legislative Decree 209 of 2024, which also introduced Annex II.2-bis dealing with how the clauses are to be applied. Prevailing commentary describes the outcome of this evolution as an automatic contractual rebalancing mechanism, replacing the previous regime which left a far wider margin to negotiation.
The threshold and extent for works
Paragraph 2 of article 60 provides that the clauses do not make changes altering the general nature of the contract and are triggered on the occurrence of particular objective conditions. Activation is tied to the occurrence of predetermined conditions.
For works the regime is as follows. Revision is triggered by a variation in the cost of the works, whether upwards or downwards, exceeding 3 per cent of the overall amount, and operates to the extent of 90 per cent of the value exceeding the 3 per cent variation, applied to the performance still to be carried out.
| Element | Works |
|---|---|
| Activation threshold | Variation exceeding 3 per cent of the overall amount |
| Direction | Upwards and downwards |
| Extent of adjustment | 90 per cent of the value exceeding the threshold |
| Scope of application | Performance still to be carried out |
Three features of this structure deserve emphasis because they are the most commonly misread. They concern the threshold, the extent and the moment of activation.
The first is that it works both ways. The mechanism operates downwards as well, and is therefore not a one sided protection for the contractor.
The second is the deductible. The 3 per cent threshold is not a condition of access to full adjustment: revision operates on the value exceeding the threshold, not on the whole variation.
The third is the temporal scope. Revision applies to performance still to be carried out, not to work already executed. The moment the threshold is crossed therefore determines what share of the contract is affected.
For services and supplies the threshold and extent differ, and distinguishing the two regimes is one of the changes introduced by the corrective decree. Distinguishing the two regimes is one of the changes introduced.
A worked calculation
The mechanics of the deductible are clearest on a case. Take a works contract with an overall amount of 900,000 euros, of which performance worth 500,000 euros remains to be carried out when the threshold is crossed, and assume an established cost variation of 7 per cent.
| Step | Calculation | Value |
|---|---|---|
| Variation established | 7.0 % | |
| Activation threshold | 3.0 % | |
| Excess over the threshold | 7.0 less 3.0 | 4.0 % |
| Base of application | Performance still to be carried out | 500,000 |
| Value of the excess on remaining performance | 500,000 at 4.0 % | 20,000 |
| Extent of adjustment | 90 % of 20,000 | 18,000 |
Three readings of this calculation. The first is that the adjustment does not amount to 7 per cent of the remaining performance, which would be 35,000 euros, but to 18,000: the 3 per cent deductible and the 90 per cent extent reduce the figure to a little over half. The second is that the base is not the overall contract amount but only the portion still to be carried out, which makes the timing of the threshold being crossed decisive for the size of the adjustment. The third is that the same scheme operates downwards, with the amount accruing to the contracting authority.
Had the established variation been 2.8 per cent, the mechanism would not have been triggered at all. The values are illustrative and the actual calculation depends on the indices and methods referred to in the contractual clause.
The application rules
Annex II.2-bis governs in detail how the clauses are to be applied. Compliant clauses refer to article 60, specify the threshold and extent applicable to the contract type and identify the basis for calculating the variation, which refers to official indices.
The actual wording of the clause and the indices it refers to should be checked in the tender documents of the individual award, because that is where the general regime takes operational form. That is where the clause takes its operational form.
The resources drawn on
Paragraph 5 of article 60 identifies the resources contracting authorities use to meet the additional costs arising from revision, and the list has direct consequences for the cost framework. The list is exhaustive and ordered by priority.
Up to a limit of 50 per cent, the resources specifically set aside for contingencies in the cost framework of each project are used, save for sums relating to contractual commitments already made, together with any further sums at the authority's disposal allocated annually to the same project. The limit explains why a token provision does not suffice.
Also used are sums arising from tender discounts, unless a different destination is prescribed, and sums available in respect of other completed projects of the same authority for which final inspections have been carried out or certificates of satisfactory completion issued, within accounting procedures and the limits of the residual authorised expenditure available. Sums available on other completed projects are added to them.
Reading these provisions together leads to an operational conclusion. The contingency provision is not a free reserve: it is the first resource to be drawn on for revision, subject to a 50 per cent ceiling. Sizing it without regard to that function exposes the project to a requirement with no internal cover.
The effects on the accounts
Revision does not alter the bill of quantities, which remains the design deliverable, nor the rates in the schedule attached to the contract. It affects the amounts payable for performance still to be carried out.
In documentary terms this means the effects of revision must be recorded in the works accounts and carried into the cost framework, in the column relating to the stage after the tender. The cost framework is therefore the document in which revision becomes visible and governable, which is why a framework updated by overwriting loses the ability to document the origin of a divergence.
How it differs from a variation
The two are regularly confused and rest on different premises. One concerns the price, the other the performance.
A variation arises when the subject of the performance changes: something different, or a different quantity, is executed. Its economic effect is assessed by applying the rates in the contract schedule or, for work not previously provided for, by determining new rates through a formal procedure.
Revision arises when the performance stays the same and its cost changes. It requires no design change and operates by virtue of the contractual clause once the threshold is crossed.
The distinction has immediate practical weight: a cost increase caused by price movement is not managed as a variation, and the reverse holds too. The legal regime governing contractual modification within the award procedure belongs to the rules on public procurement.
In private construction
In private work price revision is not mandatory and, absent a clause, the price stays as agreed, with the risk falling entirely on the contractor. The risk falls entirely on the contractor.
On projects running over several years this produces undesirable effects for both parties: the contractor either builds a safety margin for uncertainty into the price, or omits it and carries the exposure. A clause defining a reference index, an activation threshold and the share adjusted transfers the risk explicitly and reduces the premium implicit in the initial price.
Note: the legislative references in this page relate to Italy and are current as at the date of publication. The price revision regime has been subject to recent amendment: the version in force and the tender documents of the individual award should be checked before any operational use.