The Schedule of Cost Components is the closed list of what can count as Defined Cost on NEC Options C, D and E. If a cost doesn't fit a component, it isn't Defined Cost, and clause 52.1 treats it as covered by the Fee.
The schedule sits at the back of the contract, after the secondary Options. This guide explains its structure under the NEC4 Engineering and Construction Contract (ECC) and how it moved from NEC3. It forms part of our guide to NEC payment and Defined Cost.
The two tests at the top
Before you look at any section, each amount has to pass two opening tests. It can sit in one component only, so there's no double counting. And it must have been incurred in order to Provide the Works, so costs that belong to another contract or to general business don't qualify.
The second test is the one worth pausing on. A regional manager's car might fall neatly within a listed item, but if it's used across five sites, you still need to show the part that relates to this job. Keep the allocation method on file.
The sections compared
| Subject | NEC4 section | NEC3 section | Short guide |
|---|---|---|---|
| People | 1 (items 11 to 14) | 1 (items 11 to 14) | People costs |
| Equipment | 2 (items 21 to 28) | 2 (items 21 to 28) | Equipment costs |
| Plant and Materials | 3 (items 31, 32) | 3 (items 31, 32) | Plant and Materials |
| Subcontractors | 4 (item 41) | Not in the schedule: part of the Defined Cost definition | Subcontractors |
| Charges | 5 (items 51 to 54) | 4 (items 41 to 44, including Working Areas overheads) | Charges and overheads |
| Manufacture and fabrication off site | 6 | 5 (with its own overheads percentage) | See below |
| Design off site | 7 | 6 (with its own overheads percentage) | See below |
| Insurance deductions | 8 | 7 | See below |
Section numbers for NEC4 come from the NEC4 Engineering and Construction Subcontract in its 2019 amended form, which shares the ECC's layout. It uses Subsubcontractors where the main contract would say Subcontractors. Check the same pages in your own ECC, because NEC has amended the schedule since first publication.
The sections with no separate guide
Manufacture and fabrication. This covers Plant and Materials wholly or partly designed for the works and made outside the Working Areas. In NEC4 it's the people rates in the Contract Data multiplied by the appropriate time. If the Contractor buys a standard item, it belongs in Plant and Materials, not here.
Design. Off-site design of the works and of Equipment works the same way, using Contract Data rates, plus the listed design people's travel between their base and the Working Areas. Design done by people who are based in the Working Areas falls under People.
Insurance. This is a deduction, not an addition. The cost of events the contract requires the Contractor to insure against is taken off, along with other costs insurers pay the Contractor. So a claim paid to the Contractor doesn't also reach the Client. The deduction applies whether the Contractor actually took out that cover or not, on a plain reading, so ask for advice if you find a gap.
A question to run on any cost
- Was it incurred in order to Provide the Works?
- Which single component does it belong to?
- Does the component set a rate or a basis, such as open market rates? If so, use that, not the invoice figure.
- Is it reduced by discounts, rebates or recoverable tax under clause 52?
- Does anything on the Disallowed Cost list take it out?
- Do the records prove it?
A cost that fails at step 1 or 2 falls to the Fee. One that passes those but fails at 5 or 6 is removed as Disallowed Cost. The result is the same for the Contractor, but the argument and the evidence are different.
What people get wrong
- Using it on Options A and B. Those Options use the Short Schedule of Cost Components.
- Tendering without reading the Contract Data for it. On C, D and E the schedule depends on rates and listed items that the Contractor enters at tender. Blank entries can cost real money later.
- Assuming NEC3 habits carry over. The move of Subcontractors into the schedule and the changes to overheads are not cosmetic. See NEC4 cost changes.
Related guides
- NEC Payment and Defined Cost: The Complete Guide
- The Short Schedule of Cost Components
- Schedule of Cost Components: People
- Schedule of Cost Components: Equipment
- What Is Defined Cost?
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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.