Finance Tools
Supplier Contract Price Escalation Calculator
Estimate contract price changes over time using escalation rates with optional caps and floors for supplier agreements.
Model a supplier contract price escalation clause with an optional cap and floor.
Contract price at Year 0.
Often tied to CPI/PPI or commodity index change.
Up to 20 years for this calculator.
Maximum escalation applied each year.
Minimum escalation applied each year.
| Year | Applied escalation | Unit price |
|---|---|---|
| 1 | 4.00% | $104.00 |
| 2 | 4.00% | $108.16 |
| 3 | 4.00% | $112.49 |
Summary
Final price (Year 3): $112.49
Total increase vs start: 12.49%
This assumes escalation is applied once per year and compounds.
How it works
- Each year, an escalation rate is applied and compounded on the prior year’s price.
- If enabled, the escalation rate is clipped to the cap/floor range.
- This is a simplified annual model for quick contract planning.
FAQ
Is escalation usually compounded?
Often yes, because the new price becomes the base for the next adjustment.
What if escalation happens monthly or quarterly?
This tool uses annual steps. For monthly/quarterly escalation, you’d need a higher-frequency schedule.
How to use this supplier contract price escalation calculator
- Enter the starting contract unit price.
- Enter the annual escalation rate (%), or expected index change.
- Optionally set a cap and floor (%).
- Enter the number of years and review the escalated price schedule.
Example
A contract starts at $100/unit with 6% annual escalation, capped at 4% and floored at 1%, for 3 years.
- Applied escalation each year = min(max(6%, 1%), 4%) = 4%
- Year 1 price = 100 × 1.04 = 104.00
- Year 2 price = 104 × 1.04 = 108.16
- Year 3 price = 108.16 × 1.04 = 112.49
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