Yes under Options A and B: an NEC quotation saving stays with the Contractor, because clause 66.3 (65.2 in NEC3) stops the assessment being revised just because the forecast proved wrong. Under Options C, D and E, the answer is different, because payment depends on actual Defined Cost.
So it depends on the main Option, and on whether the difference comes from a better outcome or from a wrong assumption. The rule cuts both ways: the Contractor who overruns bears the same principle in reverse. For more of these situations, see NEC questions answered.
Where the saving goes, by Option
| Main Option | What happens to the saving | Who benefits |
|---|---|---|
| A: Activity Schedule | Prices stay at the accepted figure; you're paid on completed activities | Contractor |
| B: Bill of Quantities | Prices stay at the accepted figure, in the Bill form | Contractor |
| C and D: target cost | The target rose by the quotation, but you're paid actual Defined Cost. The saving goes through the share mechanism | Split between Contractor and Client |
| E: cost reimbursable | You're paid actual Defined Cost plus Fee, whatever the forecast said | Client |
A fictional example
An event on a bridge deck is accepted at £60,000, mostly on a forecast. The Contractor finds a local supplier and a better method. It costs £44,000. Illustrative figures, ignoring Fee.
| Option | Result of the £16,000 difference |
|---|---|
| A or B | The Contractor keeps it |
| C with a 50% share in the relevant range | The final share calculation improves by £16,000 before splitting, so the Contractor gets about £8,000 and the Client gets about £8,000 |
| E | The Client pays £16,000 less. The Contractor's Fee is also lower, because it's calculated on the lower cost |
If you're the Client or Project Manager
- Don't try to reopen the assessment. Without a clause that allows it, this isn't open.
- Check whether a stated assumption has turned out wrong. If the Project Manager stated one under 61.6, notify a correction. Under NEC4 this event, 60.1(17), can reduce the Prices (63.4).
- Check whether the Scope has changed. Where the Contractor's own proposal to change the Client's Scope was accepted, NEC4 Options A and B reduce the Prices by the value engineering percentage of the saving (63.12), not by all of it. See proposing a saving.
- On Options C, D and E, audit properly. The cost basis is open to you. On A and B, you normally have no interest in how much the work cost.
- Next time, look at the forecast before you accept. Your moment of control is the reply to the quotation under 62.3. If the figure is high, instruct a revision with reasons, or assess.
If you're the Contractor
- Don't advertise the difference as a reason to reprice other events. It's not relevant to them, because each event stands alone.
- Expect closer attention on your next quotation. Be ready to show your forecast was reasonable at the time.
- Keep records under cost-based Options. On Options C, D and E, the records decide what you're paid. Clause 52 asks you to keep them, and cost that accounts and records don't justify can be disallowed.
- Consider what you know when you quote. If you've already bought the material at a known price before the dividing date, it's actual cost, and it should be in your figures as such.
Likely argument and answer
A Client may say: "You've made a windfall on our change, so give it back." The contract's answer is no, at least on A and B. The Contractor took the risk that the forecast could go the other way, and the contract doesn't ask whether it went well. The Client isn't left without protection: it could have tested the figure before acceptance, or asked for alternative quotations under 62.1.
A harder case is a quotation that was knowingly false, rather than simply wrong. That goes beyond the contract's assessment rules, and it's a matter for legal advice. It isn't the normal situation this page covers.
In practice
The contract says no revision. In practice, a Contractor that repeatedly comes in well under accepted figures on Option A will see its quotations challenged harder, and the working relationship can suffer. Keep your forecast honest. See events under Option A and under Option E.
Related guides
- NEC Questions Answered: Real Situations on Site
- The Contractor Has Not Submitted a Quotation: What Can the PM Do?
- The PM Keeps Asking for Revised Quotations
- How Do We Claim Prolongation Under NEC?
- The Work Is Already Done: How Do We Quote?
- Actual Cost Came In Higher Than Our Accepted Quotation
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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.