NEC4 Option A keeps the same deal as before: lump sums for activities, paid as each one finishes. What changed is the detail, including a reward for Contractor value engineering, a defined set of People Rates and a tighter test for when an activity counts as completed.
If you are new to the Option, start with the general guide to NEC Option A. This page is for people who know the basics or are moving across from NEC3, and it sits within the NEC main Options section.
What is specific to NEC4
Value engineering percentage (63.12)
Say the Contractor proposes a change to the Scope the Client provided, the Project Manager accepts, and the assessment shows a reduction in Defined Cost. Under NEC4 the Prices come down by only a percentage of that reduction. The percentage is in the Contract Data: it is 50% unless the Client states another figure. The Contractor keeps the rest.
The rule doesn't cover changes the Client asks for itself, so it isn't a general protection for omitted work. It is there to make ideas worth suggesting, and if the Client wants to adjust the incentive, the Contract Data is the place to do it before tender.
People Rates (63.16)
Option A compensation events use the Short Schedule of Cost Components with a tendered set of People Rates. If a required category of person has no rate, the two sides can agree a new one. If they don't, the Project Manager assesses one based on the existing People Rates, and it then becomes a People Rate. Tenderers should cover the likely categories, or they risk this being decided for them.
The completed activity test
Under NEC4 an activity counts as complete unless a notified Defect exists whose correction will delay following work. Two practical effects follow. An un-notified Defect can't hold back payment. And the NEC3 limb about work being covered by following work has gone. The assessment asks one question: would correcting this notified Defect delay what comes next?
Revising the Activity Schedule (55.1, 55.3 and 55.4)
The Contractor has to correct the schedule if its activities don't relate to the Scope, and submit a revision where it does so or where it changes its method so the activities stop matching the Accepted Programme. There are three reasons for not accepting a revision:
- it doesn't match the operations on the Accepted Programme;
- changed Prices aren't reasonably spread across activities not yet completed;
- the total of the Prices has changed.
The "not completed" point matters. Prices can be moved only between work still to come, which limits how a schedule can be reshaped to improve cash flow late in a job. For a wider look, see the Activity Schedule guide.
What applies to Option A from the core clauses
Several NEC4 core changes touch Option A contracts day to day:
- Application for payment. The Contractor applies for payment under 50.2 before each assessment date.
- No first programme. Under 50.5, the Project Manager holds back a quarter of the amount assessed for work done until there is a first programme containing what the contract requires.
- Final assessment. Clause 53 is new, with the final amount due assessed after the Defects Certificate or a termination certificate, and it becomes conclusive under 53.3 unless disputed in time. See the final assessment.
- Terminology. The Client replaces the Employer, and the Scope replaces Works Information. The comparison of NEC3 and NEC4 covers the rest.
Clause finder
| Topic | NEC4 ECC Option A | NEC3 ECC Option A |
|---|---|---|
| Activity Schedule linked to the programme | 31.4 | 31.4 |
| Schedule isn't Scope or Site Information | 55.1 | 54.1 |
| Revising the schedule | 55.3 | 54.2 |
| Reasons for not accepting a revision | 55.4 | 54.3 |
| Reduced Defined Cost from a change | 63.12 (with the value engineering percentage) | A63.10 (Prices reduced) |
| Assessments as changes to the schedule | 63.14 | 63.12 |
| Grouping ignored on termination | 93.3 | 93.3 |
What to check on your own contract
- Is another value engineering percentage stated in the Contract Data?
- Do the tendered People Rates cover the categories you are likely to need?
- Are activities grouped, and how does that affect payment and termination?
- Have any Z clauses changed the completed activity test? Some clients amend it, so read the amendments before you assume the standard wording holds.
- Which January 2019 or later amendments apply? Check what your contract's version includes.
Related guides
- NEC Main Options: A to F Explained
- NEC4 Option B: What to Know
- NEC4 Option C: What to Know
- NEC4 Option D: What to Know
- NEC Option C Worked Example
- NEC Option E Worked Example
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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.