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      Question

      An escalation clause in a contract is included to:

      A Reduce contract price Correct Answer Incorrect Answer
      B Fix contractor’s profit Correct Answer Incorrect Answer
      C Adjust price for cost changes Correct Answer Incorrect Answer
      D Avoid taxation Correct Answer Incorrect Answer
      E Increase retention money Correct Answer Incorrect Answer

      Solution

      Escalation clause allows revision of contract price due to changes in costs (materials/labour).It protects the contractor from inflation risk.An escalation clause in a contract is included to  allow for an automatic increase in wages, prices, or fees if certain predefined conditions occur , such as inflation, rising costs of raw materials, or increased labor costs.

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