An NEC share range is a band of final cost, stated as a percentage of the target, with its own Contractor's share percentage. You set them in the Contract Data for Options C and D, and together they decide how any saving or overrun is split. The contract provides the table but no default figures, so this is a commercial decision for each job.
This guide covers how to fill the table in and what different shapes do to the outcome. The same mechanism applies under NEC3 and NEC4 ECC. For the calculation in general, see target cost and the Contractor's share, and for the wider picture, the NEC main Options section.
How the table works
The Contract Data lays out rows like this, with the Client filling in the numbers:
| Band of final cost | Contractor's percentage |
|---|---|
| Below ___% | ___% |
| ___% up to ___% | ___% |
| ___% up to ___% | ___% |
| Above ___% | ___% |
A few points follow from how the share is defined:
- Each limit is a ratio of final cost (the Price for Work Done to Date) over the total of the Prices, so limits are percentages of the final target and they shift in money terms as compensation events are implemented.
- Each slice of the difference takes the percentage of the range it falls in. Going into a higher band doesn't reprice the earlier slices.
- The ranges need to cover everything, including outcomes well away from 100%, with no gaps or overlaps. You can add or remove rows.
- Options A, B, E and F don't use share ranges at all.
Three shapes on the same overrun
Illustrative figures. The final target is £5,000,000 and the final cost is £5,800,000, or 116%. That's an excess of £800,000.
| Shape | Ranges above 100% | Calculation | Contractor pays | Client pays of the excess |
|---|---|---|---|---|
| Flat | 50% for the whole excess | £800,000 x 50% | £400,000 | £400,000 |
| Capped exposure | 100% to 110% at 50%; above 110% at 0% | £500,000 x 50% | £250,000 | £550,000 |
| Rising | 100% to 105% at 25%; 105% to 115% at 50%; above 115% at 100% | £62,500 + £250,000 + £50,000 | £362,500 | £437,500 |
The same excess produces three different results, and each shape sends a different message.
What each shape does
| Shape | Good for | Watch out for |
|---|---|---|
| Flat around 100% | Simplicity. Both sides understand it immediately | Exposure for both is open-ended |
| Capped Contractor exposure | High uncertainty, or smaller contractors who couldn't carry a large overrun | Once past the cap, the Contractor has little reason to control cost, and the Client takes everything that follows |
| Rising Contractor share | Clients who want a firm upper limit in effect. At 100%, the Contractor takes all further excess | Price loads up at tender. It can create distress or disputes if the job goes badly |
| Lower share on large savings | Discouraging an inflated target. A big saving may just mean the target was too high, so the Client keeps more of it | Could reduce the incentive to chase further savings |
Questions to work through
- How good is the target likely to be? The less reliable it is, the wider the middle range tends to need to be.
- What can each party stand? Work out the excess at, say, 110%, 120% and 130% of target. Is that survivable for the Contractor's balance sheet? Is it within the Client's budget?
- How does the share fit with the Fee? A high share on top of a low fee percentage brings the Contractor's zero-margin point much closer. The pain/gain share illustration shows how to find it.
- Who controls the cost? If a large part of the work is outside the Contractor's real control, a large share just adds a risk premium.
- Are there funding or approval limits? Some clients have hard budget ceilings, which may explain a rising shape.
- Will your subcontracts have shares too? The Engineering and Construction Subcontract has its own table for Options C and D, so a main contractor needs to think about how they fit together. See back-to-back NEC subcontracts.
Mistakes to avoid
- Leaving a gap. "Less than 90%" and "from 95% to 105%" leave no answer for 92%. Read the table as one continuous line.
- Using a 100% share without thinking. A 100% share means one party takes the whole of that slice. That may be intended, but check that it is.
- Treating the range limits as fixed money. A table that looks tight at tender widens or narrows in pounds as compensation events are added.
- Applying the top band to the whole difference. Each slice takes its own percentage. The Option C worked example shows the correct sum and the common error.
- Copying a table from a past project. Figures from a job with a different risk profile and fee may be wrong for this one.
No percentage here is a recommendation, and a job with X22 or Z clauses needs careful reading of how they interact. Check your contract's wording before you tender or sign.
Related guides
- NEC Main Options: A to F Explained
- NEC Option G Term Contracts: What It Means
- PSC Main Options
- TSC Main Options
- Target Cost and the Contractor's Share
- Pain/Gain Share Explained
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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.