15-CPI-U Based Price Adjustment Calculations.pdf
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- ITB - Construction of Sidewalks and Related Items at Various Locations for Harris County Precinct 4
- Solicitation number
- 25/0242
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- Harris County, Texas
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This document details the CPI-U (Consumer Price Index of All Consumers) Based Price Adjustment Calculations for contract renewal pricing. The methodology applies to contracts expiring in November or December, using the Houston, Texas CPI-U data published by the U.S. Bureau of Labor Statistics (BLS). The calculation involves determining the average inflationary or deflationary effect by analyzing six twelve-month periods prior to contract expiration.
The price adjustment process calculates the renewal year pricing by comparing the current contract year to the preceding year, using an average of six different twelve-month periods. The CPI-U measure covers approximately 80 percent of the total population, including wage earners, clerical workers, professionals, managerial and technical workers, self-employed individuals, retirees, and others not in the labor force. The document provides a detailed example of how these periods are calculated, specifically referencing a contract expiring in November or December 2008, with precise month-by-month breakdown of the measurement periods.
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CPI-U Based Price Adjustment Calculations
CPI-U Based Price Adjustment Calculations
For any year in which a current contract is renewed, the renewal year pricing will be determined by adjusting the current contract year pricing by the average inflationary/deflationary effect, as reported in the Consumer Price Index of All Consumers (CPI-U) for Houston, Texas, between the current contract year as compared to the year preceding the current contract year of the contract. The CPI-U, as published by the U.S. Bureau of Labor Statistics (BLS), is a measure, over time, of the average change in prices in a fixed market basket of goods and services and covers approximately 80 percent of the total populations, including wage earners, clerical workers, as well as groups such as a professional, managerial, and technical workers, the self-employed, retirees and others not in the labor force.
The average inflationary/deflationary effect will be determined by totaling, and dividing by six (6), the inflationary/deflationary effects of six (6) twelve (12) month periods occurring prior to expiration of the current contract. Since the inflationary/deflationary effect for the Houston area is calculated by the BLS every other month beginning in February, and since the intention to renew a contract should be determined in the eighth month of the contract, all required data for calculating the average adjustment rate need be current only five (5) or six (6) months prior to the scheduled expiration of the current contract.
For example, assuming a contract expires in November or December, the end of the most recent twelve (12) month period will be June of the year of the current contract. The end of each of the other five (5) twelve (12) month periods will be the second month before the end of the immediately preceding twelve (12) month period.
Therefore, the six (6) twelve (12) month periods applicable to a contract expiring in November or December, 2008, are:
Period #: 1 2 3 4 5 6
From: 6/07 4/07 2/07 12/06 10/06 8/06 To: 6/08 4/08 2/08 12/07 10/07 8/07
Period #1 is from June of the first year before the contract period to June of the year of the contract period, Period #2 is from April of the first year before the contract period to April of the year of the contract period, Period #3 is from February of the first year before the contract period to February of the year of the contract period, Period #4 is from December of the second year before the contract period to December of the first year before the contract period, Period #5 is from October of the second year before the contract period to October of the first year before the contract period, Period #6 is from August of the second year before the contract period to December of the first year before the contract period.
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