Using a largely unamended NEC4 ECC Option C contract with secondary options X1 and X2, the Contractor has submitted a compensation event notification for the increase in employers national insurance contributions. Whilst this has been accepted, the Project Manager has assessed the value as nil, as BCIS (who publish the indices for this contract) have confirmed that their indices are inclusive of the increase in employers national insurance. BCIS have also provided graphical data which shows a significant ājumpā in the indices from March 2025 to April 2025 and beyond, highlighting their statement that the increase in employers national insurance is accounted for within their indices. To me, the Project Managers assessing the value of the compensation event as nil is correct. This is because if a quotation was accepted, it would effectively be a ādouble-bubbleā - the Contractor gets an increase in the prices and benefits for that same increase each period as the indices are applied (which already includes the increase in employers national insurance).
Are there any additional views on this?
Firstly the matter is a compensation event under Option X2, as the corresponding legislation was enacted on 03 April 2025.
The effect of the legislation will not be the same across organisations, however, taking account of the rate change, the secondary threshold change, the employment allowance change and the removal of the liability limit threshold.
The BCIS indices may have accounted for a change to the Class 1 NI, although it is not clear what their calculation is based upon and how it is calculated, presumably taking a āgeneric approachā to the matter.
A compensation event is assessed as the change to the Prices with an amount calculated under Option X1, for main option C (and D), added to the total of the Prices (ātargetā). The PM has rightly questioned this matter to determine whether the compensation event will cause a change to the Prices, taking account of the addition under Option X1.
It seems that the PM has decided that this matter IS ācoveredā by Option X1. There remains the issue, however, of HOW the BCIS indices have been calculated and how they actually apply, notwithstanding the fact that a change to NI contributions may āinfluenceā a particular index, although a detailed analysis of how this is applied, taking account of the indices chosen, the proportions and any non-adjustable component, would be the only way to determine whether this is actually ācoveredā by Option X1.
In principle the PM is correct, although, as is usually the case, the detail is more relevant to actually determining the outcome.
Agree that this is a CE.
I think @S.Mās approach is open to challenge.
I would acknowledge that if you have X1 and X2 there is a reasonable argument that ādouble bubbleā is possible. It is true that NI will influence the indicies, but I rather doubt that it drives them. There is a lot going on in the world. Can you definitively say that the spike you describe is due to Employer NI rather than any of that other stuff? I donāt think you can. Its just one thing on the list.
Therefore my view has always been that while this is a risk, its not a particularly large one, and Iām therefore not going to let a perfect assessment be the enemy of one that is good enough. Iād also say that if the client were bothered by this, they should have thought about that before including both X1 and X2. The PM should just do what the Contract says! Whether they personally agree or not isnāt relevant.
I would also point out that in Option C you should be working out Defined Cost at todayās prices then discounting it for inflation before you implement the CE, per X1.5. This should give confidence that you are only paying the ārealā increase assessed.
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