How do you calculate an abrasives price escalation clause using the PPI?
Divide the current value of BLS series WPU113603 (Nonmetallic Abrasive Products (Including Diamond Abrasives)) by its value at contract signing, then apply that ratio to the abrasives part of the price. Over the 12 months to September 2026 the ratio was 1.059. A usable clause also names an averaging window, a rule for revised values and missing months, and a cap.
Latest · WPU113603
309.711
Sep 2026Revisable
Year on year
+5.9%
from 292.5
5 years
+48.8%
from Sep 2021
Record
High
highest since 2016
The mechanism
An abrasives escalation clause indexes the abrasives-affected portion to a published series instead of fixing it at signing. The benchmark is the BLS producer price index for Nonmetallic Abrasive Products (Including Diamond Abrasives), series WPU113603.
Abrasives is a real input cost in metal fabrication consumables, foundry and casting cleanup, and surface finishing work. Its price can move further over a contract term than a fixed-price contingency is built to absorb, so indexing it moves that risk onto the published series instead of onto one party.
What's specific to abrasives
Grinding wheels and cutting discs are mineral grain held in a bond. The grain itself, such as aluminum oxide and silicon carbide, is made in electric furnaces that use a lot of power. A fabrication-shop consumables clause tied to steel follows the wrong cost.
Nonmetallic Abrasive Products (Including Diamond Abrasives) against the commercial electricity price index, both set to 100 in the first month they share
Sep 2026WPU113603 168Commercial electricity price index 150
Since 2016, this index has followed the commercial electricity price index in the same month and moved about two thirds as far as it over a year.
Over the 12 months to Sep 2026, the commercial electricity price index rose 2.9% and this index rose 5.9%.
Same month
Lag behind the commercial electricity price index. Monthly changes line up best in the same month.
+0.9% to +19.6%
Range of 12-month changes since 2016.
5%
Share of months that moved more than 3%. The median month moved 0.14%.
The index has followed electricity prices over time and has not followed steel. A clause that names an energy series is a better fit than a steel series.
The calculation, step by step
Base index value. The index value at the base period, usually the month of contract signing or bid submission.
Current index value. The index value at the adjustment date, usually the month of delivery or invoicing.
Ratio. Current value divided by base value.
Adjustment. Apply the ratio to the abrasives-affected portion only.
Take a contract signed in September 2025 with $60,000 of abrasives scope, invoiced in September 2026.
Base index, Sep 2025
292.5
Current index, Sep 2026 (revisable)
309.711
Ratio, 309.711 ÷ 292.5
1.0588
Amount at signing
$60,000
Adjustment added to that amount
+$3,530
Live figures from the stored series, updated when the provider publishes. Sep 2026 can still be revised, so a clause should say whether the invoice uses the first published value or is trued up later.
Where clauses go wrong
BLS publishes other series a abrasives clause could be read against, and they do not move together. A clause that only says "the abrasives index" leaves the two sides to pick different ones.
Over the 12 months to Sep 2026, these series moved differently. On the same $60,000, the gap between the highest and lowest is $13,017.
Write the series code, WPU113603, into the contract text, with the BLS title next to it.
No rule for revised valuesBLS can revise each value for 4 months after it is first published. Right now that covers Jun 2026 to Sep 2026. Say whether the first published value is final for invoicing, or whether invoices are trued up once BLS revises it.
Price escalation in a construction contract is a clause that adjusts the contract price for movements in the published price of a named material, fuel, or labor cost after the bid. It shifts material-price risk from the contractor to the owner, within a defined base period, formula, and cap.
A fixed-price contract sets one price for the term and puts all cost-index risk on whichever side accepted that price. An escalation clause instead shifts a defined slice of that risk to the buyer as costs actually move, in exchange for a starting price with no built-in risk premium. Short-term, low-volatility contracts usually do not need escalation. Long-term or volatile-input contracts usually do.
A working escalation clause needs six defined terms: the named index series, the base period, the averaging window, the publication-lag treatment, the review frequency, and a cap or floor. A template that leaves any of those as vague language ("the applicable index," "as published") is where disputes start. Below is a skeleton with each term marked for the specific values a real contract needs to fill in.