The correct answer is: B. Variation in cost in materials element, labour element and petrol-oil-lubricant element.
A price variation clause in a construction contract is a provision that allows for the adjustment of the contract price in the event of changes in the cost of materials, labor, or other factors that affect the cost of construction. This type of clause is important because it helps to protect both the contractor and the owner from unexpected cost increases.
The three main elements of a construction project that are typically affected by price fluctuations are materials, labor, and petrol-oil-lubricant (POL). Materials are the raw materials that are used to build the project, such as concrete, steel, and lumber. Labor is the cost of the workers who build the project, such as carpenters, electricians, and plumbers. POL is the cost of fuel and other materials that are used to power construction equipment.
Price variation clauses typically specify a formula that is used to calculate the adjustment to the contract price. The formula will typically take into account the changes in the cost of materials, labor, and POL. The clause may also specify a maximum or minimum amount that the contract price can be adjusted.
Price variation clauses are an important part of construction contracts. They help to protect both the contractor and the owner from unexpected cost increases. By understanding how these clauses work, you can be sure that you are protected in the event of a price fluctuation.
Here is a brief explanation of each option:
- Option A: Increase in rates of only important materials. This option is not correct because price variation clauses typically cover all materials, not just important ones.
- Option B: Variation in cost in materials element, labour element and petrol-oil-lubricant element. This option is correct because these are the three main elements of a construction project that are typically affected by price fluctuations.
- Option C: Variation in total cost of the project on an ad hoc basis. This option is not correct because price variation clauses typically specify a formula that is used to calculate the adjustment to the contract price.
- Option D: Rate of inflation. This option is not correct because price variation clauses typically cover changes in the cost of materials, labor, and POL, not the rate of inflation.