A Study of the Performance of Price Adjustment Clauses in Long-Duration Government Contracts in North East Nigeria

Price adjustment clauses (PACs) are contractual instruments designed to manage inflationary risk in long-duration construction contracts, yet their performance in Nigerian government contracts remains inadequately studied. This study examines the performance and effectiveness of price adjustment clauses in long-duration government infrastructure contracts in the North East geopolitical zone, covering projects with durations exceeding 24 months in Borno, Adamawa, and Gombe States. A mixed-method design was adopted, with 25 contracts subjected to detailed financial analysis and 160 quantity surveyors and contractors completing structured questionnaires. Regression analysis, cost deviation modelling, and content analysis were applied. Findings show that fewer than 40% of government contracts in the study area include PACs despite contract durations that expose contractors to substantial inflationary risk. Of contracts that do include PACs, 62% use formula types that do not accurately reflect regional material price movements, reducing their protective effect. The study establishes that contracts without PACs in the North East record average cost overruns 9.2 percentage points higher than those with functioning PACs, confirming the risk mitigation value of this contractual mechanism. The North East's unique market conditions, including security-driven supply disruptions, necessitate bespoke index components not captured in national price series. Recommendations include development of a North East construction price index and mandatory PAC requirements in all government contracts exceeding 18 months. Keywords: price adjustment clauses, long-duration contracts, North East Nigeria, inflation, cost management