# NEC ECC: X1 - Price Adjustment Factor - Proportion Calculation

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Contract: Un-amended NEC3
Option: C

Query: Price Adjustment Factor calculation Proportions

Example:

Price Adjustment factors stated in Contract data:

POWDD increase in month = £10,000

Direct Staff - 10% - BCIS Inflation Index
Labour - 20% BCIS 3E1
Material - 5% BCIS Material Cost Index
SC - 55% - Not adjusted

When working out the proportions do  Price Adjustment Factor how do the proportions come in to play in the forumla. I am confused to how you apply these. Do you take the  (L-B)/B for each of these and add them together i.e.

1:

Direct Staff - 10% - BCIS Inflation Index B = 10 L =12 = (12-10)/10=0.2 @ 10% = 0.02
Labour - 20% BCIS 3E1 B=15 L=20 = (20-15)/15 = 0.33 @ 20% = 0.06
Material - 5% BCIS Material Cost Index B=5 L=7 (7-5)/5= 0.4 @ 5% = 0.02

PAF = 0.02+0.06+0.02= 0.1

PWDD x PAF / 1 + PAF = £10,000 x 0.1 / 1+0.1 = £909.09
edited May 22, 2019

You have applied the correct calculation, although I came up with an adjustment amount of £963.86, due to the number of decimal places, that is 20% x 0,33 (a third) is actually 6.67%.

I usually have a 2 step calculation on an excel spreadsheet, with the first calculation listing the elements in column 1, the stated proportions in column 2, the base indice in column 3 and the latest indice in column 4.

The next step I calculate the increase in the indices as a percentage (L-B)/B for each element and then multiply by the proportion, totalling these to give the PAF (as a percentage)

The Net PWDD is then mulitplied by PAF/(1+PAF) to give the adjustment amount.