Option A vs Option B

The main difference in Option A vs Option B under NEC is quantity risk. Under Option A the Contractor prices its own lump sums and carries the risk of quantities being higher than expected. Under Option B the work is remeasured against a Bill, so the Client carries that risk and the final price moves with the quantities.

Both are priced contracts, and neither involves open-book payment. Compensation events under both use the Short Schedule of Cost Components and People Rates, and the same value engineering rule applies. The rest of this page compares them under NEC4 ECC. The main Options overview covers the other letters.

Side by side

	Option A	Option B
Pricing document	Activity Schedule, written by the Contractor	Bill of Quantities, usually written for the tenderer to price
Basis of payment	Finished activities only	Completed quantities at rates, plus the finished part of lump sums
Quantity risk	Contractor	Client
Rate risk	Contractor	Contractor
Design needed at tender	Enough to price; can suit Contractor design	Enough to measure
Rules for measurement	None	Method of measurement named in the Contract Data
Mistakes in the pricing document	The Contractor corrects them (55.1 and 55.3)	The Project Manager instructs a correction, a compensation event (60.6)
Quantity differences as compensation events	No	Yes, if the tests in 60.4 or 60.5 are met
Client's final price certainty	Higher, subject to compensation events	Lower
Administrative effort	Lower: is the activity finished?	Higher: regular measurement
Change to the pricing document in a compensation event	Activity Schedule (63.14)	Bill (63.15)

Worked comparison: a fictional retaining wall

Illustrative figures. Tender drawings suggest 2,000 m³ of excavation at £40/m³, or £80,000. Actual excavation comes to 2,600 m³ because the ground profile differed from what the Contractor expected. The drawings and Scope have not changed, and the ground isn't a physical conditions event.

	Option A	Option B
Allowance in the tender	Inside a £80,000 lump sum activity	2,000 m³ at £40/m³
Paid for this work	£80,000	2,600 m³ at £40/m³ = £104,000
Who pays the extra £24,000	Contractor	Client

Under Option B, the Contractor might also have a compensation event under 60.4 if the bigger volume changes its cost per m³ and the item passes the 0.5% test. Or under 60.5 if the extra volume delays Completion.

In exchange for taking the quantity risk under Option B, the Client doesn't pay a Contractor's risk allowance on quantities. On jobs where quantities can swing widely, that can be a good deal.

Which fits your project?

Situation	Better fit	Why
Contractor designing most of the work	A	You can't measure a design that doesn't exist yet
Building with a complete design and a Client wanting price certainty	A	The Contractor can take on quantity risk at a known price
Earthworks or civils where quantities are a genuine unknown	B	A lump sum would need a heavy risk allowance
Client team with QS measurement skills and a preference for rates	B	The Bill provides a familiar basis for valuing work
Short programme with little time to prepare a Bill	A	No Bill to prepare

These are tendencies rather than rules. A building job with a big basement could go either way, for example. Look at how to choose an NEC main Option for other factors.

Common misconceptions

• "Option B reprices every change at Bill rates." It doesn't. A compensation event is assessed on its effect on Defined Cost, and the result is then written into the Bill. Bill rates apply to plain measurement. See the guide to the Bill of Quantities under NEC.
• "Option A activities are like Bill items." No: there's no part payment and no measurement. See the Activity Schedule guide.
• "Option B payment is on cost." Not at all. Cost matters only when assessing compensation events.

Related guides

• NEC Main Options: A to F Explained
• Option C vs Option E
• How to Choose an NEC Main Option
• The Activity Schedule
• NEC3 Option E: What to Know
• Option A vs Option C

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.