Option C and D assessing the target share percentage: The Contractor prepares forecasts of the total Defined Cost for the whole of the works at the intervals stated in Contract Data. For a majority of projects this forecast would be at each application, but for larger projects could be every three months. This means that there will be a regular assessment during the life of the project as to the actual amount spent and the forecasted remaining cost left to go and hence if predicting to be under or over the target price.

a new value engineering reduction percentage clause 63.12, allowing the contractor to share in cost reductions obtained as a result of a contractor proposal; In addition, contract data has been simplified and the schedule of cost components has been changed Subcontractors – this is a new section to NEC4 that now allows subcontractors costs, as a lump sum, to be included rather than having to build up from first principles. For parties on a project that is operational or maintenance based, e.g. maintaining highway signage, where the contract is to ensure that a certain standard is maintained. This contract is not generally used for constructing new works, but can include some amount of betterment. There is also a "Term Service Short Contract" where the project is a relatively low risk project and/or the work is primarily re-active. It is an abbreviated version of the main TSC. Disallowed Cost” is defined by Clause 11.2(25) and are costs that the Project Manager has decided are either:The NEC4 Design, Build and Operate Contract (DBO) allows the procurement of a more integrated whole-life delivery solution. It combines responsibility for design, construction, operation and/or maintenance, procured from a single supplier. Brook M. (2004). Estimating and Tendering for Construction Work Butterworth-Heinemann ISBN 978-0-7506-5864-5

Clause 16 introduces a brand new value engineering provision. This allows the contractor to propose changes that reduce the cost of the works in exchange for a proportion of savings as specified in the contract. This option contains a priced lump sum contract. The lump sum contract is then linked to a contract programme with an activity schedule. Each activity on the schedule is then allocated a price. The two most often used forms of NEC contract are the Option A and the Option C forms of the Engineering Construction Contract. These two forms of contract rely on an activity schedule rather than a bill of quantities. In simple terms, an Activity Schedule breaks the works down into parts (i.e. activities) which a tendering contractor then both prices and has to show in his programme. The sum of the prices for each activity becomes the contract Prices.

Main Option Clauses

In simple terms the Bill of Quantities is produced by breaking the project down into a number of items, and then stating the expected quantity of each item that is anticipated to be required. Contract data part 1 will identify the method of measurement (the measurement techniques followed) that has been used to create the Bill of Quantities. The Contractor will then be able to state a unit rate based on that quantity, and by multiplying the quantity by the rate will give a projected cost of that line item. The sum of all the line items added together represents the overall tender price (the Prices). The Bill of Quantities can also include single lump sum items where the rate will be a single amount. The Contractor will state within contract data part 2 where within their submission the completed Bill of Quantities is, which will form an integral part of the signed contract. The NEC disallowed costs provisions have been drafted carefully as part of the overall allocation of risk and to achieve a commercial balance which motivates both parties and aligns their interests. If not used correctly or if amended, that commercial balance is disrupted and the incentives for better performance under ECC Options C, D and E contracts will be less effective.