Rise and fall provisions

The Department of Finance includes rise and fall provisions in standard non-residential building construction contracts where the estimated duration of the contract is greater than 26 weeks. Below is a summary of how Rise and Fall is applied – for full details refer to the applicable contract. 

Rise and fall provisions increase or decrease progress payments to Contractors based on the inflation occurring in the building and construction industry.  

The provisions partially assign the risk of inflation to the Principal and were introduced in mid-May 2022 to address industry concerns about unforeseeable price rises for labour and materials on fixed price contracts. 

Rise and Fall is calculated during the processing of each payment claim and added to, or deducted from, each progress or final payment. The rise and fall adjustment is made in the payment certificate so the head contractor can apportion the payment or deduction to subcontractors as required via the project bank account in the usual way.  

The amount of Rise and Fall depends on two factors:  

• the inflation that has occurred in WA non-residential building construction costs since the time of tender; and  
• the portion of the payment that is eligible to have Rise and Fall applied known as the Effective Value. 

Inflation

Inflation is calculated based on the index numbers published four times each year in the Australian Bureau of Statistics, Cat 6427.0 Producer Prices Indexes, Table 17, 3020 Non-residential building construction Western Australia.  To access the last published value, download Table 17, select “Index Number; 3020 Non-residential building construction Western Australia;” and scroll down to the last published index number.

Ninety five percent of the change in this index is applied in the Rise and Fall calculation on the basis that rise and fall should not be applied to the contractor’s margin, which for the calculation is taken to be five percent.  

The Rise/Fall Rate is determined by the equation:  

Where:

• Base Index Number is the last published index number 14 days prior to the close of tenders; and  
• Current Index Number is the last published index number on the earlier of:  
  • the start of the payment claim period (specifically 28 calendar days prior to the last day of the period to which the valuation for the purpose of the relevant progress or final payment relates); or  
  • the date of Practical Completion (or, if the works comprise Separable Portions, the Date for Practical Completion of the relevant Separable Portion).  

Effective Value

The portion of each payment subject to the rise and fall provision is known as the "Effective Value".  It excludes amounts for work completed on an actual cost basis and other items specifically exempted in the contract documents.  

For variations agreed on the basis of current prices, rise and fall is only applied from the date the variation is agreed with contractor.  

The Effective Value of each payment is determined by the Superintendent’s Representative.  

The calculation

The rise and fall amount is calculated by multiplying the Effective Value by the Rise/Fall Rate. This amount is then added to, or subtracted from, the payment to the contractor.   

The rise and fall amount will be automatically applied to the contract as a non-discretionary variation.   

Worked example