The difference in one sentence
A percentage clause applies the index's percentage move to the contract price. A delta clause applies the index's actual dollar move to a metered quantity. One scales a ratio. The other prices real consumption.
Why the mechanics differ
A percentage clause only needs the index ratio: current value divided by base value, applied to the contract price or an affected portion of it. It never needs to know how much of the underlying input the contract actually consumes.
A delta clause needs a real quantity. It converts the index's move into a per-unit dollar change, then multiplies that by however much of the input the contract actually used. This only works when the contract specifies a metered quantity, tons of steel, litres of fuel, kilograms of resin, not just a dollar value.
When percentage makes sense
Percentage clauses suit contracts without a metered bill of materials: services, labor-heavy work, or anywhere physical consumption isn't tracked line by line. They are simpler to administer, since neither side has to audit actual quantities used. They work best when the indexed input really is a stable, proportional share of total cost, the assumption the percentage math depends on.
When delta makes sense
Delta clauses suit contracts with a known, metered bill of materials, typical in manufacturing and commodity supply. They price the actual dollar cost change on the actual quantity consumed, not an approximation based on an assumed cost share. That precision costs more to administer: someone has to report and verify the real quantities each period.
A worked example
A $500,000 contract is weighted 30% to steel. The steel index rises 10% over a review period.
Percentage method: $500,000 × 30% × 10% = $15,000.
The same contract actually consumes 200 tons of steel. The index move implies steel rose from $800 to $880 per ton, an $80 per-ton increase.
Delta method: 200 tons × $80 = $16,000.
The two methods diverge because the percentage method assumes the 30% weighting exactly matches real consumption. The delta method doesn't need that assumption. It prices what was actually used.
The two methods can be mixed
A single contract can use percentage for stages without a clean metered quantity and delta for a specific line item that does have one, a fixed steel tonnage in the bill of materials, for example. Choosing per stage, rather than one method for the whole contract, usually produces the more defensible clause.
Which to choose
Use delta when quantities are metered and the goal is to track the actual dollar cost of actual inputs. Use percentage when quantities aren't tracked, administration needs to stay simple, or the indexed input is a genuinely stable share of cost. When in doubt, the presence of a real bill of materials is the deciding fact: no metered quantity, no real delta clause to write.