NEC TSC: Under option A, Option X1 - Adjustment Calculation for inflation

I encountered a problem while dealing with the adjustment calculation under X1.3. As the adjustment shall be made at the time the compensation event is assessed and this assessment takes a period of time, so at which timeline of this period of time should we base on when determine the PAF used to convert the Defined Cost to base date level?

For example, we give an instruction to quote on 1st of November and the Contractor provides the quote on 14th of November and the assessment date of IP is on 7th November. If we consider 1st of November as the timeline, then the PAF used in October’s IP will be used in the adjustment calculation. However, if we consider 14th of November as the timeline, the PAF used in November’s IP will be used then.

I would suggest that you apply the PAF calculation that is ‘current’ at the time you make the assessment, that is when you actually assess the quotation.

For example, the payment assessment date may be 07 November, but that is the point in time when the work is valued up to. A payment is certified within 1 week and would include an adjustment under Option X1, stating the PAF calculation. If this is known at the point in time when you assess the quotation then you would use this, otherwise you would use the previous payment assessment PAF.

A further point is whether you make an adjustment for ‘provisional’ indices used in the PAF calculation applied to a compensation event, although this is not clear from the wording under X1, unless the bullet points under X1.4 or X1.5 apply to this in the wording of ‘previous amounts’.