The cost of poor NEC contract administration usually shows up as a few specific losses: an entitlement barred, a quotation accepted by default, a cost that can't be evidenced, and staff time spent rebuilding what should already be known. We don't have a reliable industry figure for it, and we'd be wary of anyone who offers one.
What you can do is estimate it for your own contracts. Each example below is fictional, with illustrative figures and a formula you can reuse. Not all of them are problems software solves, and we say which. This page is part of the NEC contract management software guide.
Example 1: the late notification (Contractor)
On a fictional NEC4 Option A contract, a Contractor finds an obstruction and copes with it, but notifies in week eleven. The event doesn't arise from an instruction or any other action of the Project Manager or Supervisor, so the bar in 61.3 applies, and the Prices and dates don't change.
| Item | Illustrative figure | Your figure |
|---|---|---|
| Defined Cost of the extra work | £46,000 | |
| Fee on that cost | £4,000 | |
| Delay to Completion that would have been granted (weeks) | 2 | |
| Delay damages rate in Option X7, per week | £3,000 | |
| Cost = Defined Cost + Fee + (weeks × rate) | £46,000 + £4,000 + (2 × £3,000) = £56,000 |
This assumes the event would have been accepted at that value, which it might not have been, so discount your figure if you're unsure. The delay element applies only if the delay causes you to miss the Completion Date. Would a system have helped? Only from the moment someone recorded the event. The cause here was site reporting, so the fix needs a reporting habit. See avoiding missed time bars.
Example 2: the quotation nobody answered (Client)
On a fictional NEC4 contract, a quotation for £180,000 and three weeks' delay goes unanswered, through a failure notice and the further two weeks. It's treated as accepted (62.6). The Project Manager's surveyor believes the right figures were £135,000 and one week.
Cost = (quotation − your view of the proper value) + (extra weeks × delay damages rate you can no longer charge)
£180,000 − £135,000 = £45,000, plus 2 weeks × £3,000 = £6,000, which comes to £51,000.
The second part only counts if the Contractor would otherwise have finished late. A route through dispute resolution may remain, at its own cost and subject to short time limits. Would a system have helped? Very likely, since the failure here was purely one of attention. This is the most direct case, and it's explained in avoiding treated acceptance.
Example 3: the warning not given (Contractor)
A subcontractor's supply problem was visible weeks before it became a compensation event, and nobody raised it. The Project Manager says an experienced contractor could have warned (61.5). The event is then assessed as if a warning had been given.
Cost = what the event would cost as it happened − what it would have cost with a warning. Suppose £40,000 as it happened and £25,000 with an early change of supplier. The Contractor carries the difference of £15,000.
Would a system have helped? A little. An easy way to raise a warning removes one excuse, but the person still has to raise it. See missed early warnings.
Example 4: the cost without records (Contractor)
On a fictional Option C contract, £22,000 of equipment hire can't be supported from the accounts and records. It becomes Disallowed Cost, so the Price for Work Done to Date falls by that sum and by the fee on it of, say, £1,800.
Cost = unsupported cost + fee on it = £23,800, before any effect on the share. The Contractor has still paid the hire company.
Would a system have helped? Not a contract register. Clause 52 records live in your cost and site systems. This is about clause 52 discipline, and we've included it because it would be misleading to leave it out.
Example 5: the hours nobody counts (both sides)
This is the cost that actually arises every week. A fictional surveyor spends six hours a week maintaining a tracker, chasing replies and rebuilding the monthly picture.
Cost = hours per week × internal hourly cost × working weeks. At an illustrative £55 an hour for 48 weeks: 6 × £55 × 48 = £15,840 a year for one person on one contract.
Don't count all of that as savings. Using a system takes time too, so count only the difference you expect. Time freed up is only worth something if it goes to work that matters. Would a system have helped? Partly, and try it on a real week to see.
What these examples don't show
- A loss to one side is often a gain to the other. Examples 1 and 2 are transfers between the Parties. The contract's total cost barely changes. Your business case depends on which side you sit on.
- Relationships. Losing an entitlement to a time bar, or winning by a treated acceptance, can leave a mark on the rest of the job. It can't be worked out with a formula, so don't try.
- Frequency. These are single events. Whether you have one in five years or one a quarter makes all the difference. Look at your own history before multiplying anything.
- Doing nothing is sometimes correct. If you add it up honestly and the total is small, your present method is fine. See do we actually need NEC software?
Software addresses only some of these, and a Contract Status register, like any other, can't record a warning nobody raised. To turn your figures into a proposal, see building the business case.
Related guides
- NEC Contract Management Software
- Building the Business Case for NEC Software
- Moving a Live NEC Contract Onto Software
- Answering Your Finance Director's Questions on NEC Software
- How Good Records Reduce NEC Disputes
- Keeping NEC Knowledge When People Move On
See how this works in practice
Click through Contract Status with sample contracts: raise the notice, reply to it, and watch both sides of one record.
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This guide is general information in our own words, not legal advice. Your contract and its Contract Data always govern. NEC, NEC3 and NEC4 are trade marks of Thomas Telford Ltd; Contract Status is not affiliated with or endorsed by NEC.