Option A vs Option C

The choice in Option A vs Option C under NEC comes down to who carries the cost overrun. Option A pays a fixed lump sum per activity, so the Contractor keeps any saving and carries any overrun. Option C pays cost plus Fee and shares the difference from a target, so both sides do.

Both use an Activity Schedule, which is why the two get confused. In Option A the schedule is what you get paid; in Option C it is only the target. This page compares them under NEC4 ECC. See the NEC main Options overview for the full list.

Side by side

	Option A	Option C
Monthly payment	Lump sums for finished activities	Forecast Defined Cost plus the Fee
Role of the Activity Schedule	Sets what is paid	Sets the target for the share
Cost overrun	Contractor	Shared at the share percentages
Cost saving	Contractor	Shared at the share percentages
Open book needed for payment	No	Yes
Disallowed Cost	Not applicable	Applies
Cost schedule for compensation events	Short Schedule and People Rates	Full Schedule of Cost Components
Contractor forecasts of total Defined Cost	Not required	Required at the Contract Data interval
Accepted Contractor proposal to change the Client's Scope	Prices reduced by the value engineering percentage (63.12)	Prices not reduced; the saving goes through the share (63.13)
Client's staffing need	Lower	Higher: cost review as well as progress
Contractor's cash flow	Lumpy, driven by finishing	Smoother, following cost

The same overrun under both

A fictional project with illustrative figures. The tender is £3,000,000. There are no compensation events. The Contractor's final cost, including an equivalent Fee, is £3,300,000. Under Option C the share is a flat 50%.

	Option A	Option C
Client pays	£3,000,000	£3,150,000
Contractor's outcome against tender	£300,000 worse	£150,000 worse

And if the final cost is £2,800,000 instead:

	Option A	Option C
Client pays	£3,000,000	£2,900,000
Contractor's outcome against tender	£200,000 better	£100,000 better

In practice, the tender price itself would likely differ. A Contractor taking the whole risk under Option A generally allows more for it. That difference is hard to see at tender, but the Client pays it either way. The fuller numbers are in the Option A worked example and the Option C worked example.

How to choose

Option A is usually the better fit when:

• the Scope is well defined and unlikely to change much;
• the Client needs a figure it can report with confidence;
• the Client lacks people to review Defined Cost;
• the work is familiar and competitively priced.

Option C is usually the better fit when:

• the work has real uncertainty, and pricing it all into a lump sum would be expensive;
• the Contractor's ideas could change the design or the cost;
• both sides are willing to work with open records;
• the Client wants a Contractor involved early, including under Option X22.

For a wider set of questions, see how to choose an NEC main Option, and for how risk moves between options, see risk allocation by main Option.

Common misconceptions

• "Option A is always cheaper for the Client." Not necessarily. The Contractor's risk allowance is in the price, and compensation events are still paid for.
• "Option C needs a less defined Scope." It needs one good enough for a target. Too thin a Scope leads to frequent changes to the target and debates about each one.
• "Under Option C, the Contractor can't lose money." The share of the excess is deducted from what the Contractor gets, and that can eat through its Fee.
• "Under Option A, compensation events are the same as under Option C." Both assess on forecast effects, but different schedules apply. In Option A, the result changes payment. In Option C, it changes only the target. For more, read about events under Option A and events under Option C.

Related guides

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

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.