NEC TSC - How does X1 adjustment for inflation work with CE's?

NEC Option A: Term Service Contract

Contractor is arguing option X1 applies to the full “amount due”. Including CE’s.

I argue that it should only apply to those items tendered within the pricing schedule (its an option A but does not suit the use of an option A where the contractor is paid plant and labour on rates tendered, and materials on invoice – probably more similar to Option E).

I am aware for a CE it should be revised to base date levels and revised again using current day indices. Can you explain how this works? I am happy to apply X1 to tendered items e.g. Foreman at £20/hour as it was tendered in 2016 so say add on an increase of 7%. But if a sub-contractor is hired to do Traffic management works, at a rate that stands in 2019 which is current market rates. They still want the 7% increase on this as it applies to the “amount due”.

Where do I stand?

Under a main option A, the Prices (‘Contract Sum’) is determined by totaling all the extended amounts in the Price List. This is prepared and priced reflecting the base date stated in Contract Data Part 1.

A compensation event quotation is assessed in the form of changes to the Price List, that is either by adding to the existing quantities, where appropriate, or by adding new items. The assessed amount is then adjusted according to clause X1.3, that is where current rates are used then they are ‘backdated’ but where existing Price List rates are used then they remain.

The changes to the Price List are included in the notification implementing a compensation event. They are now ‘available’ to be assessed as part of the Price for Services Provided to Date, for payment purposes.

Each payment assessment includes a price adjustment amount calculated in accordance with clause X1.4, which applies a price adjustment calculation to the ‘interim amount’ due.

Whatever it actually costs to undertake the work is not relevant as the payment mechanism is based on the amount of work done under the Price List, as adjusted by compensation events, with a price adjustment calculation added, which reflects when the work is actually done.