X22 in NEC4 is the Early Contractor Involvement Option. It splits one contract into two stages: Stage One, where the Contractor helps develop the design and prices the work, and Stage Two, where it builds, if the Project Manager tells it to proceed. It's used only with main Options C and E, and only in the NEC4 Engineering and Construction Contract (ECC).
The Engineering and Construction Subcontract doesn't have X22. NEC3 had no X22 either, which is why NEC published guidance on tailored clauses. For a comparison of those routes, read early contractor involvement under NEC. This page covers the Option itself. See also the secondary Options overview.
The two-stage process
- Contract signed, Stage One starts. The Contractor works with the Client's team on design and pricing, and is paid on the main Option's terms while it does so. The Contract Data sets out what the Budget is.
- Proposals for Stage Two (X22.3). The Contractor prepares its design and priced proposals in consultation with the Project Manager.
- Key people held in place (X22.4). The Contractor can't simply replace a key person during Stage One, because their involvement is part of why it was chosen.
- Decision (X22.5). The Project Manager notifies whether the Contractor is to go ahead with Stage Two. If not, an instruction can remove the Stage Two work from the Scope, and that isn't a compensation event.
- Stage Two. The Contractor completes the outstanding design and builds the works.
- Budget incentive (X22.7). Once the whole of the works is complete, the Project Manager makes a provisional assessment of the incentive, then a final one later.
The clauses at a glance
| Clause | Subject |
|---|---|
| X22.3 | Proposals for Stage Two |
| X22.4 | Key persons during Stage One |
| X22.5 | Notice to proceed, and taking Stage Two out of the Scope |
| X22.6 | Changes to the Budget |
| X22.7 | The Budget incentive |
The earlier clauses cover definitions and the Stage One forecast. Published references number them differently, so look those up in your own contract.
Why the Budget matters
The Budget is the Client's money for the whole scheme, and it can include more than the Contractor's own prices. That gives the Contractor a reason to think about the total project cost, rather than only its own target.
Here's a fictional illustration, and the figures are not from any contract. The Budget is £40m, including £33m for the Contractor's work and £7m for the Client's other project costs. The incentive percentage is 25%. The Contractor suggests changes during Stage One that reduce the Client's other costs by £800,000, and the works finish with a total Project Cost of £39.2m. The saving against the Budget is £800,000, so the Contractor earns an incentive of £200,000. Under the Option, the Project Manager assesses this provisionally once the whole job is complete and finally later.
The Project Manager also assesses changes to the Budget (X22.6), so what counts as a change matters. Tenderers need to read the Contract Data entries that say which events alter it.
Things to think through
- Who owns the design between the stages? If the Client doesn't proceed, it will want to use what it has paid for. Check the rights in the Scope and against Option X9.
- How is Stage Two priced? Agree in advance how its Prices will be built up, because a Client has lost its competition once it's in Stage One. Fee percentages tendered at the start help.
- What's your walk-away point? A Client should decide what it would do if the Stage Two price exceeds the Budget.
- Which main Option? X22 fits Option C and Option E only. If you want a lump sum for construction, you need a different approach.
- How long will Stage One take? If the decision to proceed is late, the Completion Date and the Contractor's team both come under pressure. Build in a period for the Client's approvals.
What people get wrong
A common error is to treat Stage One as a low-priority pre-contract exercise. It's a live contract, so early warnings, programme duties and compensation events apply from day one. Another is to assume the Contractor has an automatic right to build: the decision is the Client's, through the Project Manager, and if it decides not to go on, the Contractor should expect to be paid for Stage One but not for the construction it had hoped to win.
Related guides
- NEC Secondary Options: X, Y, W and Z Clauses Explained
- Early Contractor Involvement Under NEC
- Y(UK)1: Project Bank Account
- Y(UK)2: The Construction Act
- X20: Key Performance Indicators
- X21: Whole Life 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.