NEC Working Areas overheads are a percentage in the NEC3 Schedule of Cost Components, used to cover site running costs such as security, welfare and small tools. The NEC4 schedule lists charges item by item and has no such percentage, so a rate build-up copied from NEC3 can leave costs unrecovered.
The NEC4 details below come from the NEC4 Engineering and Construction Subcontract as amended in 2019, which closely follows the ECC. Check the charges section and Contract Data part two of your own ECC. This page belongs to the NEC payment and Defined Cost guide.
NEC3 and NEC4 side by side
| Cost | NEC3 ECC schedule | NEC4 schedule text checked |
|---|---|---|
| Water, gas, electricity in the Working Areas | Item 41 | Item 51, adding telephone and internet |
| Charges from public and other authorities | Item 42 | Item 52 |
| Cancellation charges from a compensation event | Item 43(a) | Item 53(a) |
| Buying or leasing land | Item 43(b) | Item 53(b), land or buildings within the Working Areas |
| Crop or building compensation, royalties, inspection certificates, access charges, visits by Others | Item 43(c) to (g) | Item 53(c) to (g) |
| Consumables and equipment supplied for the offices of the Project Manager and Supervisor | Item 43(i) | Item 53(h) |
| Specialist services | Item 43(h) | Not listed |
| Removal and disposal or sale of excavated and demolition material | Not in the Charges section | Item 54, covering payments made and received |
| Catering, first aid, recreation, sanitation, security, copying, communications, surveying and setting out, computing, small hand tools | Inside item 44, by a percentage of people items 11 to 14 | Not listed: on the plain rule in clause 52.1, a cost with no component falls to the Fee |
What the NEC3 percentage did
In NEC3, the Contractor tenders a percentage for Working Areas overheads in Contract Data part two. It's applied to items 11, 12, 13 and 14 under the people section. Nobody audits what the Contractor actually spends on those site services, because the percentage is fixed and is meant to replace those costs. Accommodation sits outside it and is dealt with under Equipment.
In the NEC3 Shorter Schedule, there's a wider percentage for people overheads, applied to the people item, which also takes in utilities and several listed payments.
Worked example: pricing the same site both ways
Fictional figures, purely to show how the tender decision changes.
| NEC3 style | NEC4 style | |
|---|---|---|
| People items, monthly | £200,000 | £200,000 |
| Site services: security, welfare, setting out, IT | £24,000 by the percentage at 12% | No component, so inside the Fee |
| Other Defined Cost | £300,000 | £300,000 |
| Defined Cost | £524,000 | £500,000 |
| Direct fee at an illustrative 5% | £26,200 | Not applicable |
| Fee at an illustrative 10% (higher to absorb site services) | Not applicable | £50,000 |
| Total | £550,200 | £550,000 |
The point isn't that NEC4 costs more or less. It's that if your estimator carries an NEC3 fee percentage into NEC4 without thinking, around £24,000 a month of real site cost has no home. See the Fee and NEC4 cost changes.
Practical checks
- Read Contract Data part two. If it asks for an overheads percentage, your contract has one.
- List every site running cost and mark which component takes it, or mark it as falling to the Fee.
- Check whether a Z clause has altered the schedule. Clients sometimes amend it.
- On NEC4, make sure a site's accommodation and similar items are priced where they belong, such as Equipment, or as land and buildings within the Working Areas.
What people get wrong
- Charging an item twice under NEC3. If security is in the percentage, a security invoice can't also go through as a separate cost.
- Treating cancellation charges as general. Item 53(a) only covers those from a compensation event. Other cancelled orders are at the Contractor's risk.
- Forgetting receipts. Under NEC4 item 54, money received for sold excavated material is part of the calculation, not a bonus for the Contractor.
Related guides
- NEC Payment and Defined Cost: The Complete Guide
- Subcontractors and Defined Cost
- Disallowed Cost Explained
- The Fee Under NEC
- Schedule of Cost Components: Equipment
- Schedule of Cost Components: Plant and Materials
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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.