Option B NEC is a priced contract paid by measurement: the Contractor prices a Bill of Quantities, and is paid the rates multiplied by the quantities it actually completes. The Contractor carries the risk that its rates are too low, and the Client carries the risk that the quantities are wrong.
This makes it the natural choice for repetitive, measurable work with a settled design, and for teams used to remeasurement contracts. It is one of the six NEC main Options. This page follows NEC4 ECC, with NEC3 differences noted.
How Option B works
- The Bill is usually prepared for the tenderer to price, to the method of measurement named in the Contract Data.
- Payment is by completed work. The Price for Work Done to Date adds together each item's completed quantity times its rate, plus the completed proportion of each lump sum item.
- Part-finished lump sums can earn money. That is different from Option A, where an unfinished activity earns nothing. Preliminaries are often billed this way.
- Work without notified Defects that would delay following work counts as completed.
- Information in the Bill isn't Scope or Site Information (56.1). A description in the Bill can't add to or reduce what the Contractor has to do.
The separate guide to the Bill of Quantities under NEC explains the Bill's status in more depth.
When a quantity change is a compensation event
Under Option B, more or less work of the same kind doesn't normally change a rate, because it is simply measured and paid. Clauses 60.4 to 60.7 deal with what happens when that isn't enough.
| Clause | Situation | Effect |
|---|---|---|
| 60.4 | The final quantity differs from the Bill, not because of a Scope change, and that changes the Defined Cost per unit. The item's rate times its final quantity also has to exceed 0.5% of the Prices' total at the Contract Date | Compensation event. A lower unit cost reduces the rate |
| 60.5 | A quantity difference delays Completion or a Key Date | Compensation event |
| 60.6 | The Project Manager instructs correction of a mistake in the Bill: a departure from the method of measurement, or an ambiguity or inconsistency | Compensation event, which can reduce the Prices |
| 60.7 | An inconsistency between the Bill and another document is corrected | The Contractor is taken to have assumed the Bill was correct |
A quick illustration, with made-up figures. On a job priced at £2,000,000, the 0.5% threshold is £10,000. An item for rock excavation billed at 300 m³ at £60/m³ ends up at 900 m³. Its rate times its final quantity is £54,000, which is above the threshold, so if the larger volume changes the cost per m³, the Contractor can notify a compensation event for a new rate. An item worth only £6,000 at final quantity couldn't qualify under 60.4, though it might still under 60.5 if it causes delay.
The guide to compensation events under Options B and D has more on these clauses.
How other compensation events are priced
Under 63.15, changed Prices are shown as changes to the Bill. For work not yet done with an existing item, the change is a new rate, quantity or lump sum. For work not yet done with no item, it is a new priced item, compiled to the method of measurement unless the parties agree otherwise. For work already done, it is a new lump sum item.
As with Option A, the assessment itself runs on the Short Schedule of Cost Components and the People Rates. Bill rates don't set the price of a compensation event, which surprises many people who come from JCT or ICC backgrounds.
When to use Option B
- The design is complete enough to measure, but the quantities could still move, as with earthworks or some drainage.
- A recognised method of measurement fits the work.
- The Client wants competitive rates and is comfortable with the final price moving as quantities do.
It suits contractor-designed work poorly, because no Bill can be measured until a design exists. The comparison of Option A vs Option B walks through that choice.
Common mistakes
- Forgetting that the Client's budget is not fixed. A Bill total is an estimate of the final account, not a promise.
- Assuming every quantity change reprices the rate. It only does so where the 60.4 tests are met.
- Leaving the method of measurement vague, or amending it in a way that isn't clear, then arguing about mistakes under 60.6.
- Applying NEC3 numbers to an NEC4 job. In NEC3, the same Bill rules are at 55.1, and the form of the assessment is at B63.13. NEC4's Option B also adds People Rates and a value engineering percentage. See NEC4 Option B.
Related guides
- NEC Main Options: A to F Explained
- NEC Option C: Target Contract With Activity Schedule
- NEC Option D: Target Contract With Bill of Quantities
- NEC Option E: Cost Reimbursable Contract
- NEC Option A: Priced Contract With Activity Schedule
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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.