(You are the Contract Manager for the Engineer in a highway project using FIDIC Red...

Under FIDIC Red Book 1999, Sub-Clause 13.8 [Adjustments for Changes in Cost] governs price adjustment based on cost indices. A key provision addresses the situation where the Contractor fails to complete the Works within the Time for Completion.

In such a case, the contract protects the Employer from adverse cost escalation due to Contractor delay. The adjustment of prices is calculated using whichever index is more favourable to the Employer between:

the index applicable at the time of execution (current index), or

the index applicable 49 days before the expiry of the Time for Completion.

This mechanism ensures that the Contractor does not benefit from price increases occurring after the contractual completion date if the delay is attributable to the Contractor. It reflects a fundamental FIDIC principle: the Contractor bears the financial consequences of delay for which it is responsible.

Option A is incomplete because it ignores comparison with current indices.

Option B is incorrect because it does not account for Employer protection.

Option D is incorrect because the rule is predefined in the Contract, not subject to agreement.

Thus, Option C correctly reflects FIDIC’s balanced risk allocation regarding cost escalation after delay.