NEC X14 lets the Client pay the Contractor a stated sum up front, which is then repaid in instalments deducted from later amounts due. It helps a Contractor fund early costs such as long-lead Plant and Materials, or mobilisation, without building a large finance charge into its Prices.
The Option is available in the ECC and ECS in both NEC3 and NEC4, with three clauses. The heading says "to the Contractor" in the NEC3 ECC, or "to the Subcontractor" in a subcontract. It's a financing tool, unlike most other NEC secondary Options.
The three clauses
| Clause | Rule | Contract Data entry |
|---|---|---|
| X14.1 | The Client makes an advanced payment of the stated amount | The amount |
| X14.2 | Covers the optional bond from an accepted bank or insurer; a late advance is a compensation event | Whether a bond is needed |
| X14.3 | The Contractor repays in instalments, each included in amounts due after a stated period | The instalment and when instalments begin |
When the money is paid
This differs by edition, so read your own text. The NEC3 ECC allows four weeks from the Contract Date. If a bond is needed, the four weeks run from whichever comes last, that date or the Employer getting the bond. The NEC4 subcontract, as amended in 2019, instead brings the advance into the assessment at the first assessment date, or the next one after the bond arrives. Check how your NEC4 ECC handles this, including any later amendments, because a late advance leads to a compensation event.
The bond, if used, covers the amount not yet repaid. The provider can be refused if it isn't financially strong enough to carry the bond. That's the same test as the X13 performance bond, though this is a separate document, and the Scope sets out its form.
A worked example
A fictional contract with illustrative figures. A rail contractor needs to order specialist switchgear early. The Contract Data states:
- Advanced payment: £300,000
- Instalment: £30,000
- Repayment starts after three months
- Advanced payment bond required
The Contractor's chosen bank is accepted and the bond is received. The advance is paid. From month four, each amount due is reduced by £30,000. It takes ten instalments to clear the debt, so repayment ends in month 13. The Contractor's cash flow shows a large early inflow, then lower monthly receipts while it repays.
| Month | Work valued in month | Instalment | Paid this month | Still to repay |
|---|---|---|---|---|
| 1 | £50,000 | None | £350,000, including the advance | £300,000 |
| 4 | £200,000 | £30,000 | £170,000 | £270,000 |
| 13 | £220,000 | £30,000 | £190,000 | £0 |
Points for each side
For the Client
- You give up cash early. The reward should be a lower tender price, so ask tenderers to show the benefit.
- Think about security. The bond covers repayment risk, but it has a price, which comes back through the tender.
- Check how public funding rules treat payment in advance of work done. Your finance team may have to approve it.
- Diarise the payment. A delay is a compensation event under X14.2, which is an avoidable cost.
For the Contractor
- Reflect repayments in your cash flow forecast. The advance is a loan in effect, not extra income.
- Think about whether instalments begin before you've built up income. If the job starts late, the stated period may need review.
- A subcontract advance is a separate commitment, so don't assume the main contract's advance funds it.
Common questions
Does it affect retention? X14 doesn't refer to Option X16. Retention depends on the Price for Work Done to Date, not the advance, so the advance doesn't count towards the retention free amount.
What if the contract ends early? Check the amounts due on termination, where any unpaid balance of the advance is deducted.
Is it the same as paying for materials off site? No. Paying for Plant and Materials outside the Working Areas is a separate rule about valuing work. X14 is a sum that isn't tied to any particular item, so it's simpler to operate but gives the Client no title to goods.
Related guides
- NEC Secondary Options: X, Y, W and Z Clauses Explained
- X15: The Contractor's Design
- X16: Retention
- X17: Low Performance Damages
- X12: Multiparty Collaboration
- X13: Performance Bond
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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.