No: a contractor pricing error isn't a compensation event under NEC, and nothing in the core clauses reopens the Prices because you got your tender wrong. What decides how much it hurts is your main Option and whether the error is really a pricing mistake or a document mistake.
Once the contract is signed, a change to it needs both Parties to agree, confirm it in writing and sign it (12.3 in NEC4 ECC). The Client has no duty to agree one just because your price turned out low.
Who carries a wrong price, by main Option
| Option | What happens |
|---|---|
| A, priced activity schedule | Your lump sum stays as it is. You carry the whole shortfall on that activity |
| B, Bill of Quantities | The rate stays. A low rate multiplied by a growing quantity gets worse. Clause 60.4 can reprice in narrow circumstances, set out below |
| C and D, target cost | A low target raises the chance of a share payment by you. You still get Defined Cost and Fee during the job, but your share of the overrun comes off through the share calculation |
| E, cost reimbursable | You are paid Defined Cost plus Fee, so a pricing error mainly affects the Client's forecast |
The few things that aren't really your pricing risk
- A departure from the measurement rules, under Options B and D. If the Bill misdescribes or divides work contrary to the stated method of measurement, or there's an ambiguity or inconsistency, 60.6 has the Project Manager correct it, and that's a compensation event. A rate you priced badly doesn't fit.
- Quantity growth, under Options B and D. 60.4 needs the difference to change the Defined Cost per unit, and the final total for that item to pass a stated size threshold. 60.5 applies when a quantity difference causes delay. See Bill of Quantities events.
- A conflict in the Client's Scope. If you priced one reading of an inconsistent document, that's a Scope ambiguity under 17.1, not a pricing error.
- Something you were misled about. Whether wrong information from the Client gives a remedy outside the contract is a question of law. If you think it applies, take advice early.
What to do this week
- Work out the real size and cause. Separate an arithmetic slip from a method assumption, a missed item, and market movement. Each leads somewhere different.
- Check for genuine events. Pricing problems are often mixed up with real compensation events that you have not notified. Time bars keep running while you investigate, so note the eight weeks (seven under NEC4 ECS) now.
- Consider an early warning of cost. NEC4 ECC 15.1 allows a warning about something that could raise your own total cost, even if it wouldn't change the Prices. It gets a problem onto the table without saying anyone else is at fault.
- Look for a better way to do the work. Clause 16 lets you propose a Scope change to cut what the Client pays. Under Options C and D, the saving comes through the share calculation. Under A and B, you can talk about sharing it.
- Update your cash flow and tell your board. Don't hope to recover the gap through inflated quotations. Those are assessed on forecast Defined Cost, so the attempt won't work and it damages trust.
A useful effect: events don't use your bad rate
Compensation events are usually assessed on Defined Cost and Fee (63.1), and not on tendered rates, unless both sides agree to use rates (63.2 in NEC4 ECC). A fictional example with illustrative figures: on Option B, a Contractor priced brickwork at £70/m² when the real cost is £95/m². A later instruction adds 500m². The extra is priced at around cost plus Fee, not £70. The existing shortfall on the original quantity stays, but it doesn't spread to new work.
What the Client is likely to say
Expect a short answer: this is your risk, and the Prices stand. That's correct under the contract. It may also worry about whether you can finish, as a Client hearing about a serious loss will think about delay, quality and insolvency. Be ready with a plan showing that you can.
In practice, some Clients will talk where the error is obvious and large and finishing the work matters to them, sometimes trading a price change for something they want. That's a commercial decision and not an entitlement. If it happens, record it as a signed change under 12.3. If the error was spotted before acceptance, the conversation is very different, so talk to a lawyer immediately. See also the Prices explained and the rest of NEC questions answered.
Related guides
- NEC Questions Answered: Real Situations on Site
- We Hit Unexpected Ground Conditions: Who Pays?
- We Found Unmarked Utilities: Is It a Compensation Event?
- We Found Contaminated Ground: What Happens Under NEC?
- The Client Wants to Omit Work: Can They?
- The Drawings and Specification Disagree: Which One Applies?
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