NEC Prices are a defined term that changes meaning with the main Option. On Options A and B they are what the Client pays for completed work. On Options C and D they are the target, and on Option E they are a forecast, with the actual payment worked out separately from cost.
Never read "the Prices" in a clause without checking which Option you're on. The term is defined in clause 11.2 of each main Option. This is part of the NEC payment and Defined Cost guide, and there's a shorter definition page too.
The Prices under each Option
| Option | The Prices are | What they do |
|---|---|---|
| A | Lump sums for each activity on the Activity Schedule | They are what gets paid, when each activity is complete |
| B | Lump sums, and rates multiplied by quantities in the Bill of Quantities | Completed work is paid at them, by remeasure |
| C | Lump sums for each activity on the Activity Schedule | Their total is the target for the share |
| D | Lump sums, and rates multiplied by quantities in the Bill | The Total of the Prices, using final quantities, is the target |
| E | NEC4: a forecast of the job's total Defined Cost, plus the Fee. NEC3: Defined Cost plus the Fee | An indication only: no target or share |
| F | NEC3: Defined Cost plus the Fee | As Option E, with management work in mind |
The NEC4 wording for Option E follows the NEC4 Engineering and Construction Subcontract, which shares the ECC's structure. Check your own conditions for Options E and F.
Why Option C feels different from Option A
Options A and C share the same definition of the Prices, and that's a common source of confusion. A £2m Activity Schedule on Option A means the Contractor is paid £2m for completing the work, whatever it costs. A £2m Activity Schedule on Option C means the Contractor is paid Defined Cost plus Fee, and then shares the difference between that and £2m at the end. See the comparison of Options A and C.
| Illustrative outcome | Option A | Option C (50% share throughout) |
|---|---|---|
| Total of the Prices | £2,000,000 | £2,000,000 |
| Defined Cost plus Fee | £1,900,000 (for information only) | £1,900,000 |
| Paid for the work | £2,000,000 | £1,900,000 plus a £50,000 share = £1,950,000 |
How the Prices change
On Options A to D the Prices can only change as the contract allows, and the two main routes are:
- Compensation events. A compensation event on Option A changes the Activity Schedule. On C, it moves the target.
- Rearranging the schedule. A Contractor can submit a revised Activity Schedule for acceptance, for example after changing its planned method (clause 55 in the NEC4 subcontract text, clause 54 in NEC3 ECC). It's a way to reflect how the work is actually being done, but a changed total of the Prices is a reason to refuse it.
Option B and D quantities can also change the total through remeasure, and a material difference in quantity can itself become a compensation event under 60.4 in NEC4. See Bill of Quantities compensation events.
Practical checks
- At tender: make sure each activity on an Activity Schedule is complete and measurable. Vague activity descriptions cause payment disputes, not just pricing ones.
- On each compensation event: update the Prices in the form the contract uses. An implemented event sitting only on a spreadsheet can leave a target out of step.
- At each assessment: keep a current Total of the Prices next to your forecast of Defined Cost, on C and D. It shows whether you're heading for a gain or a pain share.
What people get wrong
- Calling the Prices the "contract sum". NEC has no such term. On Option C the Client's actual outlay can differ a lot from the total of the Prices.
- Thinking Option E has no Prices. It does, as a forecast. It just isn't the basis of payment.
- Confusing the Prices with the Price for Work Done to Date. Prices are an agreed or forecast value of the whole job. The other is the running value in each assessment.
Related guides
- NEC Payment and Defined Cost: The Complete Guide
- Price for Work Done to Date (PWDD)
- NEC Clause 50: Assessing the Amount Due
- NEC Clause 51: Certifying Payment
- Disallowed Cost Explained
- The Fee Under NEC
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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.