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NEC4 Option B: What to Know

NEC4 Option B is still a remeasurement contract: the Contractor is paid completed quantities at the Bill's rates. The main NEC4 points are that correcting a Bill mistake is now framed as an instruction, a value engineering percentage has arrived, and the Bill's rules have moved to clause 56.

The general guide to Option B explains how it works from first principles. This page picks out what is particular to the NEC4 Engineering and Construction Contract, and it forms part of the NEC main Options section.

Clause finder

TopicNEC4 ECC Option BNEC3 ECC Option B
Bill information isn't Scope or Site Information56.155.1
Quantity difference changing unit cost60.460.4
Quantity difference causing delay60.560.5
Correcting mistakes in the Bill60.660.6
Inconsistency between the Bill and another document60.760.7
Change that reduces Defined Cost63.12 (with the value engineering percentage)63.10 (Prices reduced)
Assessments as changes to the Bill63.15B63.13
New People Rate63.16No equivalent term

The points that catch people out

Correcting a mistake is an instruction

Under NEC4 60.6, the Project Manager gives an instruction to correct a mistake, either where the Bill departs from the rules in the method of measurement or where it contains an ambiguity or inconsistency. The correction is itself a compensation event, and the wording makes clear that it may lead to lower Prices. So a correction isn't a one-way route to more money. An item measured twice can be corrected downward.

If you spot a mistake, tell the Project Manager rather than pricing around it. The instruction is what triggers the event.

Value engineering under 63.12

If the Contractor's proposal to change the Scope the Client provided is accepted and reduces Defined Cost, the Prices drop by the value engineering percentage of the assessed saving. The default is 50%. The Contract Data can set a different figure. Under NEC3's 63.10, the whole reduction came off the Prices in the same situation, so there was less reason for a Contractor to bring forward such ideas.

The 0.5% test stays

The test for 60.4 hasn't changed. The rate multiplied by the final total quantity has to exceed 0.5% of the Prices' total at the Contract Date, on top of the other two conditions. Remember it is measured on the final quantity at the rate, not on the size of the difference. A large item with a small change can pass the 0.5% limb, though it still has to show the unit cost has changed. For worked cases, see compensation events under Options B and D.

How a compensation event appears in the Bill

Clause 63.15 sets out three forms, depending on what is being priced:

Part of the eventItem in the Bill?Form of the change
Work not yet doneYesA changed rate, quantity or lump sum
Work not yet doneNoA new priced item built to the method of measurement, unless otherwise agreed
Work already doneNot relevantA new lump sum item

Here's an example with illustrative figures. An instruction adds 120 metres of new drainage to a run already in the Bill. If the work hasn't started and the existing item fits, the quantity rises. If the changed conditions make the unit cost different, a new rate is the better form. If half the extra run was done before the assessment, that part is a lump sum, and the rest stays as measured work. Getting the form right matters for future measurement, because it decides what gets paid when the quantity finally differs.

Practical checks

  • Is the method of measurement stated in the Contract Data, and does it list any amendments? Any later dispute about a mistake starts there.
  • Do the People Rates cover likely categories? As with Option A, the assessment of compensation events runs on the Short Schedule of Cost Components.
  • Is measurement agreed regularly? A long gap between measures makes applications and assessments harder to settle, especially under the 50.2 application route.

Thinking of using a Bill with shared savings? NEC4 Option D keeps the Bill and adds the target mechanism. The guide to the Bill of Quantities under NEC looks at the Bill itself.

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.