Can X1.3 be applied after compensantion event implementation

NEC3 and NEC4 Contracts
1

Good morning, we have a few NEC3 contracts, Option Bs and Supply Subcontracts containing clause X1.

It appears that some of the compensation events have not been assessed correctly where clause X1.3 should have adjusted the prices to the base date.

However, these compensation events have been implemented already.

I was trying to find an answer and AI suggest that clause X1.3 can be applied after compensation event implementation.

The logic would suggest that it is the intention of the contract is that prices are adjusted correctly regardles if compensation event was implemented or not.

However some might argue, that once compensation event is implemented, it is then included in BOQ or Price Schedule and should not be reavaluated.

The contra argument would be that we are not reassessing the compensation event itself after implementation, but we are correcting a mistake by applying X1.3 calculation which was missed at compensation event implementation. Without x1.3 adjustment the x1.4 calculation will be incorrect, because incorect prices at the base date will be considered.

I have also read some responses online, where it is suggested that X1 adjustemends for PWDD or goods delivered should not be applied on compensation events if they were assessed using ‘current prices’ for example lump sums. Should the lump sums not be subjected to X1.3 and then X1.4 clauses?

I would appreciate if someone could clarify the above please.

2

For future readers - references here are NEC3. There are differences in NEC4.

What should have happened here (in plain english) is:

  1. Compensation event happens. PM and Contractor follow process. Contractor instructed to produce quotation.
  2. Contractor’s Quotation is done in accordance with X1.3. That means you use rates in the CD Pt2, and everything else at today’s prices, but you then discount today’s prices by inflation, back to the base date.
  3. PM Implements that.
  4. When its paid, the inflation is added back on again, per X1.4 (this being Option B). That means if you do it today you get today’s prices, but if this is a CE for something that was instructed in year 2 of the contract, but the work (or part of it) won’t be done until year 3, you can recover any change in inflation.

What seems to have happened here is that step 2 was forgotten and the CE was implemented without the discount, and @cmantas is wondering if they can correct it.

Sorry, no. X1.3 is for production of quotations (or PM assessments) and can’t be used retroactively. A mistake was made, and its too late now. Once a CE is implemented it is not revisited (65.2).

You need to just put that into the past, alongside any other inaccuracies that exist in your implemented CE’s. Remember - CE Quotations are not supposed to be perfect, just like the original tender was not perfect.

P.S. I really, really wouldn’t trust AI when it comes to NEC. If it doesn’t ‘know’ it just makes stuff up, perhaps based on some other contract. So it could, for example, start regurgitating JCT. Also, as a large language thing, it can find all sorts of, errrr, interesting? opinions off of the internet and make them look authoritative. AI does not have doubt, even when it should.