NEC3 Option C is the April 2013 ECC's target contract with activity schedule: the Contractor is paid Defined Cost plus the Fee, and the difference against the target is shared at the end at clause 53. Teams who also run NEC4 jobs should watch the clause numbers, the two fee percentages and the way subcontract cost is treated.
The general principles are in the guide to Option C, and the wider picture is in the main Options section. This page is for NEC3 contracts still in progress or being closed out.
Clause finder
| Clause | What it does |
|---|---|
| 11.2(8) | The Fee: subcontracted percentage on subcontracted work, direct percentage on the rest |
| 11.2(20) | The Activity Schedule |
| 11.2(23) | Defined Cost: amounts due to Subcontractors, plus the Schedule components for other work, less Disallowed Cost |
| 11.2(25) | Disallowed Cost, as decided by the Project Manager |
| 11.2(29) | Price for Work Done to Date, forecast to the next assessment date plus the Fee |
| 11.2(30) | The Prices: the target |
| 20.3 and 20.4 | Advice on design and subcontracting; forecasts of total Defined Cost |
| 26.4 | Proposed subcontract contract data, where the subcontract is on NEC terms and the Project Manager asks for it |
| 52.2 and 52.3 | Records and inspection |
| 53.1 to 53.4 | The Contractor's share, preliminary at Completion and final with the final amount due |
| 54.1 to 54.3 | Status of the schedule, revisions and reasons for not accepting them |
| 63.11 | When a reduction in Defined Cost reduces the Prices |
| 63.12, 63.14, 63.15 | Form of assessment; agreed rates and lump sums; use of the Shorter Schedule by agreement |
| 93.4 and 93.6 | Share on termination |
Differences that change the numbers
Two fee percentages
The Fee is worked out in two parts. A fictional month, with illustrative figures:
| Item | Defined Cost | Percentage | Fee |
|---|---|---|---|
| Subcontracted work | £500,000 | 4% | £20,000 |
| Other work (direct) | £300,000 | 12% | £36,000 |
| Total | £800,000 | £56,000 |
So on NEC3 it matters whether work is classed as subcontracted, and a Project Manager should check the split. NEC4's single percentage removes this question. Don't apply one blended percentage on an NEC3 job unless the contract has been changed to say so.
Subcontract cost is part of the definition
NEC3's Defined Cost picks up the payments due to Subcontractors without taking off amounts deducted for several listed items, such as retention and correcting Defects after Completion. That list decides what passes through and what the Contractor can recover. Read the definition in your contract rather than assuming the NEC4 approach.
Contractor proposals and the target
Under C63.11, an accepted Contractor proposal to change Works Information the Employer provided doesn't reduce the Prices. This is the same idea as NEC4's 63.13. Other changes to the Works Information that reduce total Defined Cost do reduce the target, as does the correction of an assumption.
The Shorter Schedule, by agreement
Under 63.15, the two sides can agree that the Contractor prices an event from the Shorter Schedule of Cost Components, which often makes smaller events quicker to price, and the Project Manager can use it for its own assessments. This doesn't appear among the Option C clauses in the NEC4 subcontract text, so check before assuming it carries over to an NEC4 main contract.
No final assessment clause
Under NEC3, there's no general mechanism for finalising Defined Cost in stages, and no final assessment clause with a conclusive effect. That means Defined Cost can stay open for a long time on an NEC3 job, so closing it out takes planning. Consider agreeing a staged audit schedule, even though the contract doesn't require one, and read the guide to closing out the final account.
Checks for a live NEC3 Option C contract
- Are the forecast intervals in the Contract Data actually being met?
- Is the direct and subcontracted split being checked, not just the total?
- Does the current target include every implemented compensation event?
- Has a preliminary share been assessed at Completion under 53.3? It belongs in the next amount due once the whole of the works reaches Completion, so check it has been done.
- Are templates using NEC3 clause numbers? References to clause 54 for the share, or 50.9 for finalising, are NEC4 numbers and would be wrong here.
For the calculation itself, see target cost and the Contractor's share.
Related guides
- NEC Main Options: A to F Explained
- NEC3 Option E: What to Know
- Option A vs Option C
- Option A vs Option B
- NEC4 Option E: What to Know
- NEC3 Option A: What to Know
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