NEC X21 lets the Contractor propose changes to the Scope that would reduce the cost of operating and maintaining the finished asset. If the Client accepts the Contractor's quotation, the Scope, the Prices and the dates all change accordingly, and the change isn't a compensation event.
X21 is new in NEC4, with no NEC3 equivalent, and it's available in the ECC, ECS, TSC and Term Service Subcontract. It's a useful addition to the NEC secondary Options where the Client will own and run the asset for decades. The process below follows the NEC4 subcontract wording, using ECC role names, so confirm the details in your own contract.
The process
- Proposal. The Contractor suggests a change to the Scope aimed at lowering operating and maintenance cost.
- Decision to consider. If the Client's side is prepared to look at it, the Contractor submits a quotation. Otherwise, it stops there.
- Quotation. This includes a detailed description, the forecast saving over the asset's whole life, an analysis of the risks to the Client, what happens to the Prices, and an updated programme with any movement in the Completion Date and Key Dates.
- Consultation and reply. The Project Manager consults the Client and the Contractor, and replies within the period for reply. Any reason can be given for not accepting.
- Change. On acceptance, the Project Manager changes the Scope, the Prices and the dates, and accepts the revised programme.
Nothing changes until a quotation has been accepted. The Contractor shouldn't begin the changed work earlier, or assume it will be paid for design work spent on a proposal that isn't taken up.
How this differs from similar routes
| Route | Aim | Contractor's reward |
|---|---|---|
| X21 proposal | Lower cost to run the asset | Whatever the quotation's Prices reflect, if accepted |
| Proposed instruction (NEC4, core clause 16.1) | Lower total of the Prices or other benefit to the Client | Depends on the main Option, including a value engineering percentage in Options A and B |
| Share on Options C and D | Lower Defined Cost against the target | A share of any saving |
See NEC4 proposed instructions for the second route.
The commercial catch
X21 saves money for the owner, sometimes years after the Contractor has left, and the Option doesn't include a set reward. A proposal may add capital cost even as it reduces running cost. If the Contractor gets only the extra cost and Fee, it may decide that it's not worth the effort. A Client wanting real ideas should say how it will value them.
A fictional example with illustrative figures shows the point. The Contractor on a depot proposes higher-specification air-handling units.
| Item | Amount |
|---|---|
| Extra capital cost, in the changed Prices | £180,000 |
| Forecast whole life saving to the Client, over 25 years | £620,000 |
| Client's net benefit, before discounting | £440,000 |
The Client compares the figures on its own discount rate, and looks at the analysis of risk. It accepts. The Prices rise by £180,000, the Contractor's programme updates and the Completion Date moves by a week.
What to do before relying on X21
- Client: provide baseline operating cost data, or tenderers have nothing to measure a saving against. Decide who assesses the forecast.
- Client: if you plan to reward savings beyond the Prices, add this by a Z clause or in the Scope.
- Contractor: be open about what your forecast rests on. A forecast saving is an estimate, and the Option doesn't say the saving is guaranteed. Don't promise a result you won't stand behind in writing.
- Both: agree how design liability works for the changed item. Whether Option X15 applies could change who bears the risk.
- Both: check the Scope changes won't affect any performance target, warranties or planning conditions.
Whole life questions come up most at the start of a job. If the Contractor is involved early, Option X22 can bring the same thinking in during design, when changes are easier to make.
Related guides
- NEC Secondary Options: X, Y, W and Z Clauses Explained
- X22: Early Contractor Involvement
- Early Contractor Involvement Under NEC
- Y(UK)1: Project Bank Account
- X19: Task Order (NEC3) and Termination by Either Party (NEC4)
- X20: Key Performance Indicators
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