Material Price Increases

We are on an NEC Option B with no inflation clause. Would the increased cost of materials be recoverable beyond the contracted completion date if we are delayed through no fault of our own.

By saying that “we are delayed through no fault of our own”, you are implying that a compensation event occurred, which has been notified (if not, it should asap).

By no inflation clause, I assume you mean that X1 has not been chosen in CD. If that is the case, when it comes to the assessment of the compensation event, the Defined Cost (cost of the components in the Shorter Schedule of Cost Components) will take into account “current” costs, so there should be no issue with the increased cost of materials.

I hope this helps.

Hi, I would just add to Peter’s note that clause 63.8 (NEC4), 63.6 (NEC3) requires the assessment of a compensation event to allow for time and cost risk allowances, so any CE for the delay should not only be based on current cost but also allow for potential increases during the delay period as well as any further delays caused from procuring materials. CE assessments are mainly based on a forecast so anything which is the Contractor’s risk under the contract should be included within each CE assessment.

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Thanks for the replies. The main issue is that we have been delayed due to late information, we are on an option B - BOQ. We have no inflation clause X1. We are looking to adjust the rates after the initial completion date due to increased costs of materials. We will bear the increased costs prior to completion, but are looking to claim increased costs of materials after the completion date. Do we have a case and under what clause?

You would have to notify a CE for one of the reasons stated in clause 60.1 and subject to any time-bar if you became aware of the delay more than 8 weeks ago (unless there was an instruction).

When you come to the quotation stage, you will build-up the Defined Cost based on current costs, adding risk allowances as Steve Brown correctly mentioned.

So in short, I would suggest that you have a case, but you need to follow the process carefully as set out in your contract - read carefully Section 6 - Compensation Events, additional sub-clauses under clauses 11, 60, 63 and 65 for Option B, and the Shorter Schedule of Cost Components (SSCC).

All the above, assuming that there are no relevant amendments in your contract, by way of z-clauses or otherwise. If you are not familiar with these processes, I would strongly suggest that you seek professional advice.

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