Choosing the right NEC ECC Main Option depends on project complexity, risk appetite and the desired level of cost control. Each option offers distinct advantages, promoting collaborative working relationships and efficient project delivery to a client’s requirements.
Our most recent webinar – hosted by NEC expert Dr Stuart Kings – broke down the six main options under NEC, helping the attendees understand the appropriate use and nuances behind each.
Option A – Priced contract with Activity Schedule
One of the most popular options under the NEC ECC contract, Option A is suitable for projects with a well-defined scope and where the contractor’s cost can be easily estimated. The Activity Schedule specifies the timing and sequence of work – with descriptions being clinical around payments.
For example, for an activity in the schedule to be ‘complete’ it must be free from defects that would delay immediately following work. If that activity was not complete without defect, payment would not be made. Contractors need to consider the cash flow down supply chains and avoid overpayments through frontloaded schedules – and can consider breaking larger activities into percentage based activities, or introduce Z clauses that trigger payments at certain points.
Option B – Priced contract with Bill of Quantities
This option involved a priced Bill of Quantities (BoQ), which breaks the works down into measurable items with defined quantities. This makes Option B ideal when the project design is complete by the Client and detailed, allowing for wholly accurate measurement of works based on the BoQ.
As with Option A, updating with progress is critical for triggering payment with the BoQ, but unlike the priced contract under Option A, this is based on quantities times the Bill rate – rather than an activity being 100% complete with no defects.
Option C – Target contract with Activity Schedule
Alongside Option A, this is another of the most popular options utilised across the industry and provides definite benefit on more complex projects. Under Option C, the Contractor is incentivised to complete works efficiently within a defined target price.
Costs incurred are reimbursed and a fee added based on performance against targets. A lump sum at tender stage establishes a project value ceiling, so commercially successful projects will come in with an overall expenditure less than the ceiling. This means a gain share model will need to be agreed – but equally so will a pain share model for projects that go over the ceiling. This gain/pain should never be a surprise at the end of works as project teams should be on top of progress and impacting factors, with regular forecasting updated and reporting throughout.
This option suits projects that have a level of uncertainty within the scope or duration, encouraging collaboration and cost control between parties.
Option D – Target contract with Bill of Quantities
As the name suggests, this is similar to Option C but with a BoQ for measuring works throughout the project lifecycle. The Contractor is here incentivised to manage costs effectively while achieving project goals – and payment wise is the same as Option C.
Option D is benefit for projects where detailed measurement of works is possible and a largely completed design, providing a clear basis for cost management and control.
Option E – Cost reimbursable contract
This option does not have a cost ceiling and involves reimbursing the Contractor for actual costs incurred plus a fee, making it suitable for projects with evolving requirements or significant uncertainties, allowing flexibility in scope and budget.
This is especially helpful for larger-scale emergency works where the contractor needs to begin on site straight away – such as the flood alleviation works in Whaley Bridge several years ago that needed to mobilise immediately to save thousands of homes.
This option was hugely improved from NEC3 to NEC4, has safeguards against disallowed costs – and should use the same schedule of cost components and forecasting as Options C and D.
Option F – Management contract
This option is for appointing a Contractor to manage and coordinate construction works. The Contractor prices up its specific piece of work – which may be purely health and safety or site management – then all work is subcontracted with a tight protocol.
This tends to be when getting prices from the supply chain is unfair for the Contractor, so it is given a lump sum for their work with an uplift for managing that supply chain. The main contractor administers their services, contracts and costs, but under Option F the risk is borne by the Client.
The option was particularly well-used post-covid when the market was especially turbulent and is most commonly used when specialised expertise in project management is required, allowing the employer to retain more control over the construction process.
Z clauses and amendments
With any Main Option under NEC ECC, there are optional Z clauses that can be added to the contract to address specific project needs, risks, or legal requirements not covered by the standard clauses. They can offer flexibility and adaptability where suitable, but applying amendments through Z clauses does add further complexity to contracts, so it’s important to ensure full understanding across the project team on their use.
Sypro Contract Manager provides the effective solution to managing even the most complex contracts – whether that’s through project complexity or the need for multiple Z clauses to suit clients desired outcomes.
For more top tips, best practice and the latest updates on NEC ECC, sign up to our free monthly NEC webinars, hosted by NEC expert Dr Stuart Kings – you can even earn CPD credits by attending. The next edition will take place at 11am on 6 June and will dive into Selecting the Most Appropriate Secondary Options.
