Open Book and Cost Records

NEC open book means the Client can see what the Contractor has actually paid, because payment on Options C, D and E depends on it. The contract doesn't use the phrase, but clauses 52.2 and 52.3 create the same result: keep the specified records, and let the Project Manager inspect them.

Options A and B aren't open book. A Project Manager there has no standing right to the Contractor's accounts, though a quotation may be supported by evidence. For the clause itself, see clause 52, and for the wider context, the NEC payment and Defined Cost guide.

What open book changes

Area	Priced contract (A, B)	Cost contract (C, D, E)
Basis of payment	Completed work at the Prices	Defined Cost plus the Fee
Who sees the Contractor's costs	Nobody, routinely	The Project Manager, and those acting for the Client
Main commercial question	Is it finished?	Is it paid, proved and allowed?
Team needed	QS and measure	Cost accountant or commercial team with ledger access
Overruns	Contractor's own cost	Shared through the target and share, or the Client's on Option E

The records, and what they look like in practice

Required under 52.2	In practice
Accounts of Defined Cost payments	A job ledger listing transactions, by section of the schedule
Proof the payments were made	Bank statements or payment run reports, with a clear link back to each ledger line
Communications and assessments of Subcontractor compensation events	A subcontract file for each package, with notices and assessments
Other records the Scope asks for	Whatever the Scope says: often timesheets, plant registers or tender records

Timesheets and allocations aren't named in the first three rows, but the Disallowed Cost test requires records that justify the cost. So you will need them in practice anyway.

Setting up cost codes

Illustrative structure on a fictional Option C job. Mirror the schedule, and don't try to make it mirror your own cost report.

Code	Section	Examples
1.x	People	Direct labour, staff, agency
2.x	Equipment	External hire, group hire, purchased items, consumed items
3.x	Plant and Materials	By material type
4.x	Subcontractors	By package
5.x	Charges	Utilities, authorities
6.x and 7.x	Off-site fabrication and design	Hours by rate
9.x	Not Defined Cost, Fee only	Head office and similar, held in a clearly separate code

That last code matters. Holding costs that aren't recoverable in the same ledger, clearly marked, means a sample won't trip over them and your own report still reconciles to your accounts.

What to report each month

1. Defined Cost paid to date, by section.
2. Forecast Defined Cost to be paid before the next assessment date, and how it was worked out.
3. Items the Contractor has identified as possibly disallowed.
4. A forecast of total Defined Cost at Completion, updated at the Contract Data interval. It's a contract requirement on these Options, and the explanation of changes is too (20.4 in NEC3).
5. A reconciliation with the previous assessment.

On NEC4 Options C to E, there's a further tool. Clause 50.9 lets the Contractor finalise Defined Cost for a part of the works, with timed steps for review. Used well, this reduces the end-of-job burden, as the guide to finalising amounts explains.

Common failures

• Payment proof held only in head office. Set up access before the first inspection.
• Using allocations made after the event. A staff percentage decided at the end of the year is hard to defend.
• Discounts and rebates sitting in another ledger. Clause 52.1 takes those off, so a process is needed for them.
• Subcontract pricing not submitted. The NEC4 subcontract text requires pricing information at 26.4 unless the other side has agreed otherwise. Check your own main contract wording.
• Staff who view open book as an intrusion. It's the basis of being paid. Train them early, and explain what's in it for them.

If you're on the Client's side, read auditing Defined Cost next.

Related guides

• NEC Payment and Defined Cost: The Complete Guide
• Auditing Defined Cost
• Common NEC Payment Mistakes
• Payment for NEC Subcontractors
• The Final Assessment
• Closing Out the Final Account

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.