I’m PM on a NEC4 Option B Contract. Contractor has notified a Compensation Event under X2 for the change in law as use of marked gas oil (red diesel) cannot be used in construction plant from April 2022. I have accepted this and instructed a quotation.
The Contractor believes that amount claimed in the CE should be the difference in tendered cost for red diesel and the current cost for white diesel. I disagree and believe that the difference should only be for the change in duty i.e. 46.91 pence a litre, (current levels of duty per litre heavy oil (diesel) 57.95 p/litre, gas oil (red diesel) 11.14 p/litre) and any further costs are inflationary and not covered by the CE.
Any feedback gratefully received.
On the face of it, I agree with you, as inflationary costs should be addressed under X1, if it is incorporated in the contract.
Other aspects of the contract which may be impacted by the change in fuel cost could include: -
Clause 60.1(17) Correction to an assumption in a compensation event, if a CE was implemented on the basis of a forecast quotation which was prepared before the Change in Law regarding fuel duty, but not completed before the change in the fuel duty.
Clause 60.4 Bullet 2, if a difference between the final total quantity of work done and the quantity stated in the BoQ causes the Defined Cost [fuel duty] per unit of quantity to change.
Clause 60.5 If an increase in quantity has caused a delay into the period with increased fuel duty.
Clause 60.7 If a correction of an inconsistency increased the quantity and there was a consequential delay into the period with increased fuel duty.
