X1 - CE implementation

NEC 3 - Option A, with Price Adjustment for Inflation.

X1.3 - Requires the CE quote to be adjusted back to the base date by using: CE/1+PAF. This paragraph is referring to “assessments”.

Option 1: Should the CE be implemented at the deescalated rate i.e. Contractor quotes £1000 for a CE, PM deescalates at gets a figure of £960, this is the implemented value and put in the revised Activity Schedule. Upon completion of the CE works the Contractor applies for the £950 with the PAF that point in time applied ?

Option 2: The CE is implemented at £1000, when the application is made the PM de-escalates to base date using the PAF at the date of implementation and then applies the current PAF to the whole payment application ?

Both methods give you the same end result, the first in effect means all CE’s become a Project Managers Assessment as they are not implemented at quoted value. I believe the correct method is Option 2, but have recently seen Option 1 used.

Assume your 950 and 960 should be the same.

Its Option 1. X1.3 (its X1.5 in NEC4) talks about the assessment being on CD rates for things in the CD, and discounted to base date for everything else.

I don’t agree that they are all PM assessed, though. X1.3 doesn’t say who is doing the assessing. It could be the PM in a PM assessment, but in the first instance it should be the Contractor in their quotation. Might be worth a look at the language in 62.2, which is all about the Contractor assessing, which they do in accordance with 63, as modified by X1.

The reason for doing this is that on long term projects where a CE is implemented in year 2 but not due for payment till year 3, you will get the inflation year 2 > 3. Which is fair.