NEC4 Option C keeps NEC3's target and share arrangement, but changes the machinery around it. The share has moved to clause 54, parts of Defined Cost can now be finalised as the job goes on, and one fee percentage replaces the two in NEC3.
The general guide to Option C explains the basic deal. This page covers what is specific to the NEC4 Engineering and Construction Contract, within the wider NEC main Options section.
Five NEC4 points that change how you run the job
1. Finalising Defined Cost (50.9)
This is probably the most useful addition. When Defined Cost for part of the works has been finalised, the Contractor tells the Project Manager and makes the records available. The Project Manager then reviews them and either accepts them, asks for more, or notifies errors, all within stated periods. A failure to decide within the time stated means the Contractor's assessment is treated as correct, so Project Managers need to diary this. Check the exact periods in your own contract, along with any Z clause amending them.
Used well, this breaks the end-of-job audit into smaller pieces. Agree how to divide up the "parts" at the start, by subcontract package or by month, for example.
2. The share has moved to clause 54
The mechanism is the same as in NEC3, but the number changed, because NEC4 clause 53 now holds the final assessment. A preliminary figure comes when the whole of the works reaches Completion (54.3), and the final one goes into the final amount due (54.4). Old procedures and letters that cite clause 53.3 for the share will be wrong on an NEC4 job.
3. One fee percentage
NEC4 applies one fee percentage, at 11.2(10), to Defined Cost. NEC3 had separate direct and subcontracted percentages. It's a small change that simplifies payment, but tenderers who used to price each separately need to think again about how the blended figure works. The Fee guide has more.
4. Subcontract pricing is visible (26.4)
The Contractor submits the pricing information in proposed subcontract documents, unless the Project Manager has agreed that isn't needed. That's a different requirement from NEC3's, which applied to contract data for NEC subcontracts when instructed. The Client's team can use it to test cost before a subcontract is let, rather than after.
5. A cleaner Defined Cost definition
Under NEC4, Defined Cost is simply the Schedule of Cost Components items, minus Disallowed Cost, without NEC3's long passage about amounts due to Subcontractors. Disallowed Cost itself is at 11.2(26), and the Disallowed Cost guide explains what it catches.
Clause finder
| Topic | NEC4 ECC Option C | NEC3 ECC Option C |
|---|---|---|
| Fee | 11.2(10) | 11.2(8) |
| Disallowed Cost | 11.2(26) | 11.2(25) |
| Subcontract submission | 26.4 | 26.4 |
| Link from Activity Schedule to programme | 31.4 | 31.4 |
| Finalising Defined Cost | 50.9 | No equivalent |
| Records and inspection | 52.2 and 52.3 | 52.2 and 52.3 |
| Share | 54.1 to 54.4 | 53.1 to 53.4 |
| Schedule isn't Scope | 55.2 | 54.1 |
| Accepted Contractor proposal doesn't reduce the Prices | 63.13 | C63.11 |
| Assessments as changes to the schedule | 63.14 | C63.12 |
| Share on termination | 93.4 and 93.6 | 93.4 and 93.6 |
Early contractor involvement
NEC4 offers Option X22 for early contractor involvement, used only with Options C and E. Under NEC3 this needed a tailored clause, and NEC published guidance on how to do it. If your project has a design-stage contractor input, look at X22 before drafting your own.
Things worth checking
- How often does the Contract Data ask for forecasts of total Defined Cost, and does the team have the capacity to review them?
- Are share ranges complete, without gaps around 100%?
- Which amendments apply? NEC published amendments in January 2019, so check the version your contract uses.
- Do Z clauses change Defined Cost or Disallowed Cost? Some clients add to them.
Related guides
- NEC Main Options: A to F Explained
- NEC4 Option D: What to Know
- NEC4 Option E: What to Know
- NEC3 Option A: What to Know
- NEC4 Option A: What to Know
- NEC4 Option B: What to Know
See how this works in practice
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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.