Schedule of Cost Components: Equipment

NEC equipment cost is calculated differently depending on who owns the item and how it's listed in the Contract Data. Section 2 of the Schedule of Cost Components has separate rules for external hire, owned or group plant, purchased items, special items and consumables, and picking the wrong rule is the most common cause of a pricing error.

Under NEC, Equipment means items the Contractor provides and uses to Provide the Works but which the Scope doesn't require it to include in the works. So scaffolding is Equipment, while a pump that stays in the finished works is Plant and Materials. See the Equipment definition and the NEC payment guide for context. This guide covers NEC4 on Options C, D and E.

Which rule applies

The item is	Item in the schedule	What's counted
Hired from an unrelated company	21	Hire or rental rate × time required
Owned, on hire purchase or lease, or hired from a company in the same group, and not listed in the Contract Data	22	Open market rate × time required
Bought for this work and listed in the Contract Data with an on cost charge	23	Change in value, plus the stated time-related on cost charge
Special Equipment listed in the Contract Data	24	Stated rate × time required
Consumed	25	Purchase price
Materials used to make Equipment	27	Purchase cost

Item 26 adds transport to and from the Working Areas, erecting and dismantling, and any making or modifying caused by a compensation event, unless the hire rate already includes them. Item 28 places operators under people cost unless the hire rate already covers them.

NEC3 follows the same numbering, referring to the parent company where NEC4 refers to the ultimate holding company. In NEC3, anything the Working Areas overheads percentage already pays for stays out of this section.

The phrase that matters: "time required"

Every time-based item charges for the time the Equipment is required, not the time it's on site and not the time it's actually running. A crane kept on site for four extra weeks because nobody off-hired it may not be required for those weeks. Separately, the Disallowed Cost list removes resources that sit unused beyond reasonable availability and use, and anything left in the Working Areas after the Project Manager asked for its removal.

The reverse is also true. An excavator waiting between dig phases can still be required, even when idle, if demobilising wouldn't be sensible. Keep a short record of why.

Worked example: buying instead of hiring

A fictional Option C contract where the Contractor buys a dewatering pump set for the job, listed in the Contract Data at an illustrative on cost of £200 per week.

Line	Amount
Purchase price	£40,000
Open market sale value after 30 weeks	£25,000
Change in value	£15,000
On cost: 30 weeks × £200	£6,000
Defined Cost under item 23	£21,000

The change in value is paid in stages at each assessment date, with a final payment once the end value is fixed. Note the phrase "or the open market sale price": if the Contractor keeps the pump, the open market value is used instead of an actual sale. And if the item wasn't listed at tender, the Project Manager can agree to treat it as listed.

Records to keep

• Hire agreements, off-hire notices and invoices, tied to bank payments.
• A plant register with on and off-hire dates by item.
• Evidence of open market rates for owned plant, such as supplier quotations or published lists. Collect it when you first bring the item to site.
• Ownership details for group hires, since the rule changes from item 21 to item 22.

Our guide to clause 52 covers how discounts and rebates are handled, including year-end rebates from hire suppliers.

What people get wrong

• Charging an internal group hire rate. Even if the Contractor truly pays it, item 22 looks at open market rates.
• Using weekly rates for odd days. The time unit should follow the actual hire basis, and a better rate available on a longer hire may be what the open market test expects.
• Forgetting the short schedule differs. Options A and B use published list rates, as explained in the Short Schedule guide.
• Missing a late addition to the list. An extra item bought mid-job needs the Project Manager's agreement to be assessed as listed, so ask before you buy.

Related guides

• NEC Payment and Defined Cost: The Complete Guide
• Schedule of Cost Components: Plant and Materials
• Schedule of Cost Components: Charges and Overheads
• Subcontractors and Defined Cost
• The Short Schedule of Cost Components
• Schedule of Cost Components: People

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.