We Can Save the Client Money: How Do We Propose It?

Send the Project Manager a written contractor proposal under NEC4 ECC clause 16.1, showing how a change to the Scope the Client provided would lower what the Client pays. Who decides, and who keeps the saving, depends on whose design it is and which main Option applies.

This is the NEC route most people mean by value engineering. It is new in NEC4: NEC3's clause 16 is about early warnings. More situations like this are collected in our NEC questions answered.

First: whose design are you changing?

What you want to change	Route	Is it a compensation event?
Scope the Client provided	Proposal under 16.1. The Project Manager answers under 16.2	Yes, if accepted and instructed. The price effect depends on the Option (see below)
Your own design, where the Scope you provided stays within what the Client asked for	Resubmit the design for acceptance under clause 21.2. No clause 16 proposal is needed	No. 60.1(1) excludes a change to your design made at your request, so the Prices stay put
Your own method, where the Scope sets no constraint	Revise the programme and get on with it	No

Who keeps the saving

Main Option	Effect of an accepted proposal
A and B	The Prices come down by the assessed effect multiplied by the value engineering percentage. That percentage is 50% unless the Contract Data says otherwise. You keep the rest
C and D	The Prices are not reduced, so the target stays where it is. Lower Defined Cost then flows through the share calculation
E	There is no target and no share. The Client benefits through lower cost, and your reward is whatever you negotiate

In the NEC4 subcontract, the A and B rule is 63.12 and the C and D rule is 63.13. The ECC's Option clauses are numbered differently in places, so check your contract under the term "value engineering percentage".

The arithmetic

Illustrative figures on a fictional culvert. You propose precast units in place of the in-situ design in the Client's Scope, with an assessed effect of £100,000 less Defined Cost.

Option A at 50%: the Prices drop by £50,000. Your cost falls by more than your income, leaving you £50,000 better off and the Client £50,000 better off.
Option C with a 50% share: the target is unchanged. The £100,000 widens the saving against target, and your share of it depends on where the final figure falls in the share ranges.

What to do

Raise it before the work is committed. A proposal has more value when there is still time to use it. The early warning meeting is a good place for a first conversation.
Submit in writing. Name clause 16.1, identify the Scope affected and set out the saving, the effect on time and any effect on performance, maintenance or whole-life cost.
Diarise the reply. The Project Manager has four weeks under the ECC (16.2). The NEC4 subcontract allows five. The Project Manager consults the Client and you during that time.
Be ready to quote. One possible answer is an instruction to quote for a proposed instruction.
Don't start until you have the instruction. Acting on your own idea without it leaves you in breach of the Scope, whatever the merits of the saving.

Sample wording

Under clause 16.1 we propose changing [Scope reference] from [current requirement] to [proposed requirement]. We forecast this will reduce Defined Cost by about £[x] with [no effect / this effect] on Completion and Key Dates. Performance in use is [unchanged / changed as follows]. The attached sketch and cost comparison give the detail. To keep the saving, we need a decision by [date], when [work] is due to be ordered.

What the Project Manager may say

The Project Manager can refuse for any reason (16.2), and that refusal is not a compensation event, so there is no contract route to force the change through. Likely objections are:

Design responsibility, including who stands behind the changed element.
A warranty, a third-party approval or planning condition tied to the original design.
Higher maintenance costs that sit in a different budget.
Doubt about your figures, in which case ask to go to a quotation.

Answer these in the proposal rather than waiting. Expect resistance, too, if you later point to 60.1(20) after your own idea reaches the quotation stage and is declined. The wording of that event has no carve-out for it, but the assessed effect may be small.

On NEC3

NEC3 ECC has no proposal clause and no value engineering percentage. Use the risk reduction meeting to raise the idea and agree in writing how any saving is split before the Project Manager gives an instruction, because the contract won't do that for you.

See how this works in practice

Click through Contract Status with sample contracts: raise the notice, reply to it, and watch both sides of one record.

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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.