Making an NEC Payment Application

An NEC payment application is the Contractor's statement of the amount it considers due at the next assessment date, with details of how it got there. Under NEC4 clause 50.2 it must go in before the assessment date, and missing that date can limit what is due.

Under NEC3 the application was optional: the Project Manager simply considered any sent on or before the date. This guide follows the NEC4 Engineering and Construction Contract, as part of our guide to NEC payment and Defined Cost.

What goes in each main Option's application

Option	The main calculation	Supporting details
A	The Activity Schedule with each activity marked complete or not	Completion evidence, and a note of any Defects that affect following work
B	Measured quantities at Bill rates, plus the proportion complete of lump sums	Measurement records and sketches
C and D	Defined Cost paid to date, forecast to be paid before the next date, plus the Fee	Cost ledger by schedule section, forecast build-up, subcontract account summaries. Also a current view of the target for the share
E	As C and D, but no target	As C and D

All Options then add the same lines below: other amounts due to the Contractor, retention, delay damages and any other sums payable by the Contractor. See clause 50 for the sum.

A checklist before you submit

1. Is it going in before the assessment date, through the communication route the contract requires?
2. Does it follow the form the Scope sets out? The NEC4 subcontract text requires this, so check your Scope for a form or template.
3. Does it show a figure at the assessment date, including what you expect to finish by then?
4. Have implemented compensation events been included, and is the updated Activity Schedule attached?
5. Has any previous correction or agreed error been carried in?
6. Are X7, X14 and X16 lines included where those Options apply?
7. Have you dealt with the first programme? If not, expect a quarter of the work's value to be held back under 50.5.
8. Does the reconciliation to the previous application make sense in one glance?

Example summary for an Option A application

Illustrative figures on a fictional highways scheme. It's short enough to read in a minute, and the detail sits behind it in the supporting pages.

Line	Amount
Completed activities, per the attached schedule	£620,000
Implemented compensation events' activities, completed	£45,000
Price for Work Done to Date	£665,000
Retention under X16: 3% above a £100,000 free amount	(£16,950)
Amount the Contractor considers due	£648,050
Amount due at the previous date	(£540,000)
Change	£108,050

If you miss the date

Under clause 50.4 the amount due becomes the lesser of the Project Manager's own assessment and the amount due at the previous date. So the amount due can't rise. It may fall if the Project Manager's own assessment is lower. The missing value isn't lost, because you can apply for it next time. However, it could mean a whole interval without cash. Tell your site team that a late application is a real cost and not a minor administrative slip. On the Project Manager's side, say plainly that 50.4 is being applied.

What not to do

• Don't include unimplemented claims as if they were agreed. If you believe a compensation event should be paid, list it separately. A figure with no basis undermines the rest of the application.
• Don't assume the application replaces a notice. Compensation events need their own notification, and a mention in an application isn't a safe substitute.
• Don't pad a forecast on cost Options. It comes back at the next assessment and damages trust.
• Don't confuse this with the invoice. Many Clients need a VAT invoice as well, usually after the certificate. Check for a Z clause.

For the Project Manager

You still make your own assessment. Consider the application, then certify with details of how you reached the amount. Keep a simple note of where you've departed from the application and why, as the clause 51 certificate needs that information anyway. If you and the Contractor hold a short walk-round before the assessment date, both figures will be better for it.

Related guides

• NEC Payment and Defined Cost: The Complete Guide
• Pay Less Notices Under NEC
• The Final Assessment
• Closing Out the Final Account
• The NEC Payment Timeline
• Assessment Date and Assessment Interval

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.