A practical guide from DRS
Let’s face it: working with NEC contracts can be a bit overwhelming. The structure, options, and legal terms can make it hard to know where you stand — especially when you’re trying to keep a project moving.
At DRS (Dispute Resolution Services), we work with these contracts every day. Here’s a straightforward breakdown of the NEC world and how to make it work for you.
What is an NEC Contract?
NEC (New Engineering Contract) is a set of construction and engineering contracts developed by the Institution of Civil Engineers. They’re designed to support:
- Better collaboration
- Transparency in cost and time
- Clear risk allocation
Unlike older-style contracts, NEC encourages a team approach — helping all parties work together instead of pointing fingers when things go wrong.
The Main NEC Contract Types (Simplified)
The most used NEC contract in building and infrastructure is the ECC – Engineering and Construction Contract. Under ECC (whether NEC3 or NEC4), there are six different pricing models called Main Options:
Option A – Priced Contract with Activity Schedule
- You agree a fixed price for each activity
- Simple payment structure
- Good for cost certainty
- Downside: No payment for part-completed tasks
Option B – Priced Contract with Bill of Quantities (BoQ)
- Works like Option A but uses a BoQ
- Better cash flow control
- Used where quantities matter (e.g., earthworks)
Option C – Target Contract with Activity Schedule
- Shared financial risk (open book)
- Team incentive to stay on budget
- Requires careful cost tracking
Option D – Target Contract with BoQ
- Same as C, but adds structured quantities
- Helpful on civil projects with variable scope
Option E – Cost Reimbursable
- Client pays actual costs
- Fast and flexible
- High risk for the client
- Often used for emergency or fast-track work
Option F – Management Contract
- Used mainly in construction management setups
- Client carries more risk, but gains flexibility
Key Tips When Using NEC Contracts
Here’s what you really need to know to make NEC work for your project:
Understand the Option You’ve Signed
Don’t assume it’s “just NEC” — Option A and Option C are totally different beasts when it comes to cost and risk.
Check the Extras
Look out for added clauses like:
- X15 – Design liability
- X18 – Limits on liability
- Z clauses – Custom changes (these can completely change your risk)
Use Early Warnings
NEC encourages early problem solving. Raise issues before they explode into disputes — this can affect whether you get paid.
Manage Compensation Events Properly
These are NEC’s version of variations. Timely and detailed notifications are critical to claim time or money.
Define the Scope & Document Hierarchy Clearly
Avoid “my drawing says this / your spec says that” battles. Nail down which documents take priority.
Who Should Care?
While NEC contracts are used mostly on larger projects (councils, infrastructure, utilities), anyone involved in design, pricing, risk or payments should care — especially:
- QSs and PMs
- Subcontractors under NEC back-to-back terms
- Clients and Employers managing supply chains
Real Talk: NEC is Clear — But Only If You Know It
Yes, NEC contracts aim for simplicity and collaboration. But in practice, they’re only simple if you really understand how they work. We often support clients who are caught out by:
- Missed compensation event deadlines
- Misunderstood pricing models
- Conflicting Z clause amendments
How DRS Can Help
At DRS, we help contractors, consultants, and clients manage their NEC obligations with clarity and confidence — from day one to final account.
Got a live NEC contract and need a second opinion on risk, payment, or entitlement? Reach out — we’re happy to help.