Choosing the right NEC ECC Option can make a real difference to project success. With six Options available, each offering different levels of risk, flexibility and transparency, it’s important to understand how each works in practice – especially when it comes to how they affect cost, programme and collaboration on your projects.
At Sypro, we manage thousands of contracts across all sectors – from healthcare to infrastructure and energy.While each Option has its place, from the extensive number of NEC contracts we oversee, we can see that Options A and C remain the most popular choices.
Before we dive into the nuances of each, let’s have a quick recap of all six main Options and what they are designed to achieve.
Option A – Priced contract with Activity Schedule: Best for well-defined projects where activities can be clearly specified and paid upon defect-free completion, encouraging accurate scheduling and cash flow control.
Option B – Priced contract with Bill of Quantities: Ideal for projects with a complete design, using measurable quantities and rates for payment rather than activity completion.
Option C – Target contract with Activity Schedule: Suited to complex projects with some uncertainty, incentivising collaboration and efficiency through gain/pain share mechanisms tied to a target price.
Option D – Target contract with Bill of Quantities: Similar to Option C but based on measured quantities, offering clear cost management for projects with detailed designs.
Option E – Cost reimbursable contract: Used for projects with evolving scope or urgency, reimbursing actual costs plus a Fee, offering flexibility but requiring close cost control.
Option F – Management contract: Appropriate when a contractor manages subcontracted works for a lump sum plus Fee, keeping delivery risk with the client while leveraging the contractor’s management expertise.
For a deeper dive into each of these Options, head to our blog that outlines them in more detail.
For now, let’s focus on the most popular Options in practice – A and C.
At a glance, Option A provides a priced contract with an Activity Schedule – essentially a lump sum arrangement – while Option C is a target contract that incorporates a pain/gain share mechanism to encourage collaboration and cost transparency.
While Option A is often perceived as the safer choice for clients seeking fixed prices, Dr Stuart Kings – co-founder of Sypro and co-author of NEC3/4 Practical Solutions – argues that Option C can deliver the same cost certainty alongside live cost data and the potential for gainshare: a win–win from a client’s point of view.
Option A: Priced contract with Activity Schedule
Option A is a traditional fixed-price approach, underpinned by an Activity Schedule that dictates the contractor’s cash flow.
The Activity Schedule must be carefully prepared – breaking the total price into smaller, measurable activities. Payment is only made for activities that are 100% complete, so poorly structured schedules can create major cash flow challenges for contractors.
When it comes to this main Option, wording is crucial, as each activity description may affect payment timing. The term “completed design” might delay payment until formal acceptance by the client, while “design submitted” could trigger earlier release of funds. Therefore, contractors need to structure and word Activity Schedules to mirror the programme and cash flow requirements, as excessive front-loading or large single activities can create payment disputes later in the project.
Once signed, the Activity Schedule can’t be changed, so it’s vital that both client and contractor agree on its breakdown before the contract begins.
Compensation events (CEs) under Option A are added to the Activity Schedule, and payment is only triggered once the new activity is 100% complete. This makes timely agreement of CEs essential, as there are no ‘on account’ payments for partial progress.
What are the pros and cons of Option A?
Option A can be relatively easy to administer if the project is simple and straightforward. With clear risk allocation and greater cost certainty, this Option is beneficial for clients. Because payment is only made once an activity is completed, it also encourages onsite efficiency for contractors.
However, this also means that the contractor bears the risk of impacted cash flow if projects are delayed. This can become an issue if factors such as weather or ground conditions come into play.
Option C: Target contract with Activity Schedule
Option C uses a target cost approach, maintaining an open-book structure where the contractor is reimbursed for defined costs plus a Fee. The contractor forecasts the total cost to completion throughout the project (clause 20.4), giving the client continuous visibility of the project’s financial position.
Monthly assessments are based on forecasted costs to the next assessment date, plus the Fee. This approach encourages prompt payment throughout the supply chain, as contractors can only be reimbursed for costs that will actually be paid before the next assessment.
For example, in a £3 million library refurbishment, if the contractor forecasted external works at £100k but actual costs reached £150k, the client would pay £150k – the actual defined cost. The forecast is continuously updated throughout the lifecycle of the project, so there should be no cost surprises at completion.
Option C also allows for a gain/pain share mechanism: if the final cost is below the target, both client and contractor share the savings; if it exceeds the target, the overspend can be shared in agreed proportions. This mechanism encourages collaboration – the initial intent behind NEC – and efficiency, with both sides having an incentive to identify savings and manage risks jointly.
What are the pros and cons of Option C
Due to its collaborative intent, Option C allows for potential cost savings for both client and contractor, enabling them to work together to reduce costs and avoid overruns. This encourages the kind of collaborative approach the industry needs. Live cost data also supports the assessment of compensation events, meaning there is little room for disputes over accountability or slow agreement affecting payments.
A drawback of Option C is the added administrative burden of open-book auditing. However, if this is carried out within the first month of the contract, it can help ease the burden later down the line.
Where does the risk lie?
Under both Options A and C, the contractor takes on background risk for weather and physical conditions, as defined in clauses 60.1(12) and (13). If conditions are worse than the baseline set out by the Met Office (based on an average one-in-ten-year event), they become a compensation event. However, no contract will eradicate the risk of mother nature.
That said, the impact of these risks differs:
Option A: If risks don’t occur, the contractor retains the unused contingency as profit.
Option C: The unused contingency contributes to the gainshare pot – meaning the client benefits too.
This shared-risk model is one reason Option C is viewed as more collaborative and transparent.
When should each option be used?
Option A is best suited to:
- Straightforward, low-risk projects
- New builds with minimal trades
- Stable market conditions with limited scope change
- Projects where a fair lump sum can be established
Option C is better for:
- Medium to high-value projects (typically £500k+)
- Projects with significant physical or weather-related risk
- Volatile market conditions
- Complex refurbishments or multi-trade projects
- Clients seeking collaboration, cost transparency and shared savings
While Option A offers simplicity and price certainty, Option C encourages teamwork, early problem solving and potential cost savings through collaborative behaviour.
Value engineering
Value engineering is handled differently under each option. If a contractor proposes a cost-saving design change – for example, replacing gold-plated fittings with stainless steel – under Option C, the savings are shared between client and contractor, often 50/50 or as agreed before the contract starts.
Under Option A, however, the saving is applied as a reduction to the contract price, with the share percentage fixed in the Contract Data.
Which NEC Option is right for me?
There’s no one-size-fits-all answer between Option A and Option C. Both can deliver strong outcomes depending on your project’s complexity, risk profile and appetite for collaboration.
Option A provides price certainty and simplicity but can be rigid, with risks and profits sitting squarely with the contractor. Option C introduces flexibility, shared risk and transparency, with the potential for both parties to benefit from efficient working.
When used with clear forecasts, open-book auditing and agreed pain/gain mechanisms, Option C not only manages cost effectively but also promotes the kind of collaborative culture NEC contracts were designed to achieve.
Watch our full webinar with Dr Stuart Kings now to learn more about Option A and Option C and scan the QR code at the end to receive points towards your CPD accreditation.
To request a demo of Sypro or find out more about how it can add a layer of protection, agility and proactive risk management to your construction contract management, get in touch today.
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