Engineering contracts - Appendix 3: Financial provisions

These financial provisions are particularly important. In practice, the evolution of project management contracts is characterized by the particular care taken by drafters in financial matters. Some contracts, particularly in the public sector, and especially in the hospital sector, contain such a wealth of detail that one might be tempted to think that a project management contract is first and foremost a financial contract, and secondarily an engineering contract. Managing the financial aspects of such contracts can become a profession in itself, sometimes requiring the use of specific software.

As imagination knows no bounds, only the most common cases are presented here, acceptable for projects not involving a customer subject to the French public procurement code.

Paradoxically, this financial theme is the most difficult to anticipate. Different possibilities are open to participants, and it's not always easy to choose one option over another. A reminder of certain definitions is essential.

The term "adjustment" refers to the operation whereby the parties, in application of a clause included in the project management contract, re-evaluate the agreed price(s), to take account of economic variations that have occurred even before the services began. To take account of the effect of inflation during the current period, a new initial price is calculated according to the formula agreed between the Parties, from the date of submission of the Prime Contractor's offer, or the date of formation of the Prime Contractor's Contract, to the date of commencement of performance of the services. It is advisable to include a discount clause whenever a significant period of time can be foreseen between the determination of the price and the start of services.

The term "escalation" refers to the operation whereby the Parties, in application of a clause included in the project management contract, proceed to a new determination of the agreed price(s), in order to take into account variations in costs on the economy of the contract. It is advisable to include a revision clause whenever the estimated duration of the contract exceeds twelve months.

Based on an annual, monthly or other comparative period, the index ("index") is the term used to determine a price change at the end of the period in question.