{"id":5822,"date":"2026-07-14T04:08:59","date_gmt":"2026-07-14T04:08:59","guid":{"rendered":"https:\/\/cdrconsulting.pe\/blog\/structuring-the-nec4-ecc\/"},"modified":"2026-09-02T03:52:50","modified_gmt":"2026-09-02T03:52:50","slug":"structuring-the-nec4-ecc","status":"publish","type":"post","link":"https:\/\/cdrconsulting.pe\/en\/blog\/structuring-the-nec4-ecc\/","title":{"rendered":"Structuring the NEC4 ECC"},"content":{"rendered":"
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The real challenge in structuring an NEC contract begins when the parties decide how risks will be allocated, how the Contractor will be paid, and which mechanisms will govern project delivery. This is where the Core Clauses, Main Options, Secondary Options, and Contract Data become particularly important.<\/p>\n\n

The NEC4 ECC contract is structured in five levels:1<\/sup><\/p>\n\n

    \n
  1. Core Clauses<\/li>\n\n\n\n
  2. Main Options<\/li>\n\n\n\n
  3. Secondary Options<\/li>\n\n\n\n
  4. Contract Data Parts One and Two<\/li>\n\n\n\n
  5. Z Clauses<\/li>\n<\/ol>\n\n

    Core Clauses<\/h3>\n\n

    Every NEC4 ECC contract necessarily incorporates nine Core Clauses governing the essential aspects of contract delivery, including general provisions, the Contractor’s responsibilities, time, quality, payment, compensation events, insurance, and termination.2<\/sup><\/p>\n\n

    The Core Clauses are not optional.3<\/sup> They form part of NEC4 from the moment the parties decide to use this contract form and remain unchanged regardless of the Main Option selected.4<\/sup><\/p>\n\n

    The purpose of this common structure is to provide a uniform framework for contract management. Accordingly, matters such as change management, communications, compensation events, and general administration rules remain consistent across all NEC4 ECC contracts.<\/p>\n\n

    This is reflected in their generic drafting, which is intentional rather than problematic: it allows them to apply to any project, regardless of its nature, location, or jurisdiction.<\/p>\n\n

    Main Options: the Economic and Risk Allocation Model<\/h3>\n\n

    The Main Options determine how the contract price will be calculated and, consequently, the mechanism through which the Contractor will be paid during project delivery.5<\/sup> At the same time, this decision defines the contract’s economic profile and establishes the allocation of financial risk between the parties,6<\/sup> particularly regarding delivery costs, possible variations, and how those variations will be borne.<\/p>\n\n

    NEC4 requires the selection of only one Main Option,7<\/sup> which follows the contract’s underlying logic: each option contains specific rules that supplement the Core Clauses to operate a particular payment mechanism.<\/p>\n\n

    However, where a single contract covers different scopes of work, a different Main Option may be assigned to each. For example, a contract covering both design and construction may establish one option for design services and another for construction, provided that each scope has a clearly defined payment mechanism.<\/p>\n\n

    These are the six options provided by NEC:<\/p>\n\n

    1. Priced Contracts: Options A and B<\/h4>\n\n

    Options A and B are priced contracts, although each uses a different mechanism to determine the amount payable to the Contractor.<\/p>\n\n

    Option A is based on an Activity Schedule, a list of priced activities that together make up the total contract price.8<\/sup> The Contractor bears the risk of having correctly estimated the value of each activity during tendering, while the Client obtains greater predictability regarding the project’s final price.9<\/sup><\/p>\n\n

    Under this option, payment becomes due only when the relevant activity has been completed in full.10<\/sup> Option A is therefore particularly suitable when the project scope is sufficiently defined at tender stage and significant changes are not expected during delivery.<\/p>\n\n

    Option B, in turn, is a priced contract based on a Bill of Quantities and is designed as a remeasurement contract.11<\/sup> This means that the final price depends on the quantities actually carried out and measured during construction, applying the unit rates stated in the Bill of Quantities.<\/p>\n\n

    Consequently, the risk associated with variations in quantities no longer falls primarily on the Contractor and is transferred to a significant extent to the Client. Payment is calculated by multiplying the quantities carried out by the agreed unit rates in the Bill of Quantities.12<\/sup><\/p>\n\n

    Unlike Option A, this mechanism does not make payment conditional on the complete execution of a particular activity; instead, it recognizes the quantities actually carried out as the works progress. However, precisely because the final price depends on measurements taken during delivery, this arrangement provides less certainty regarding the project’s final cost.13<\/sup><\/p>\n\n

    2. Target Contracts: Options C and D<\/h4>\n\n

    Options C and D are target contracts. Unlike Options A and B, the initially agreed price is not the final amount received by the Contractor, but a reference value against which the project’s actual cost is compared after completion.14<\/sup><\/p>\n\n

    Under both arrangements, the Contractor is paid the Defined Cost actually incurred plus the Fee stated in the contract.15<\/sup> The difference between that final cost and the target price activates the pain\/gain share mechanism.16<\/sup> This enables the Client and Contractor to share the benefits of more efficient delivery or, conversely, to bear economic overruns jointly.<\/p>\n\n

    Thus, while the Client retains greater control over the project’s actual cost, the Contractor has an economic incentive to manage delivery efficiently, because savings against the target price may result in a shared benefit.<\/p>\n\n

    The difference between the two options lies in how the target price is built. Under Option C, it is developed from an Activity Schedule, which allocates the components making up the contract’s target price.<\/p>\n\n

    Option D, by contrast, uses a Bill of Quantities and therefore incorporates the characteristics of a remeasurement contract. Variations in the quantities carried out are consequently borne by the Client, and the target price is adjusted according to the final measurements of the works.<\/p>\n\n

    3. Cost-Reimbursable Contract: Option E<\/h4>\n\n

    Option E is a cost-reimbursable contract under which the Contractor is entitled to recover the Defined Cost actually incurred, plus the Fee agreed in the contract.17,18<\/sup><\/p>\n\n

    Unlike priced or target contracts, this option does not include a maximum price or economic target against which to compare the project’s final cost. In the absence of a fixed or target price, the risk associated with delivery costs falls mainly on the Client, while the Contractor bears limited risk regarding its remuneration.19<\/sup><\/p>\n\n

    Its principal advantage is the flexibility to begin delivery with incomplete information20<\/sup> and allow the design to continue developing during performance. It is therefore often used where other contracting arrangements are unsuitable or where greater flexibility is required.<\/p>\n\n

    4. Management Contract: Option F<\/h4>\n\n

    Option F is a management contract under which the Contractor manages project delivery and subcontracts all or most of the construction work.21<\/sup><\/p>\n\n

    Under this arrangement, the Contractor manages the design, site services, construction, and installation of the works,22<\/sup> normally through subcontractors. It also prepares forecasts of the total Defined Cost of the works23<\/sup> and is paid the Defined Cost incurred, excluding Disallowed Cost, plus the Fee stated in the contract.24<\/sup><\/p>\n\n

    This option is particularly suitable for projects involving substantial participation by specialist subcontractors that develop their own designs, although it is not usually the most appropriate alternative where the intention is to place full design responsibility on the Contractor.25<\/sup><\/p>\n\n

    Secondary Options: Adapting the Contract to the Project<\/h3>\n\n

    Selecting a Main Option results in a fully operational contract. However, this does not mean that the contract already contains every rule required for a particular project.26<\/sup> NEC4 does not automatically include various matters whose incorporation depends on the selection of Secondary Options.<\/p>\n\n

    Secondary Options are additional clauses that allow the contract to be adapted to the specific needs of each project. Their purpose is not to modify NEC4’s fundamental structure, but to supplement the selected Core Clauses and Main Option with mechanisms governing particular aspects of the contractual relationship.27<\/sup><\/p>\n\n

    One of NEC4’s main innovations is the inclusion of new Secondary Options that respond to current construction-industry needs. These include:28<\/sup><\/p>\n\n

    – Option X10, which includes provisions for the use of Building Information Modelling (BIM)<\/p>\n\n

    – Option X21, aimed at promoting decisions based on whole-life cost<\/p>\n\n

    – Option X22, which governs Early Contractor Involvement<\/p>\n\n

    A review of NEC4’s Secondary Options also reveals a particular feature concerning Option X19, which is expressly identified as “Not used in the Black Book.” This refers to the ECC contract; the option therefore belongs to the NEC4 family but does not apply to the NEC4 ECC.<\/p>\n\n

    For a Secondary Option to apply, it must be identified as an applicable option in Contract Data Part One. If it is not included there, the option does not form part of the contract.<\/p>\n\n

    Contract Data Parts One and Two<\/h3>\n\n

    Once the Core Clauses, selected Main Option, and applicable Secondary Options have been established, the Contract Data must be completed.<\/p>\n\n

    The Contract Data is divided into two parts. Part One is completed by the Client before the contractor-selection process begins. At this stage, the information and decisions required to structure the contract are included, and each field should therefore be reviewed individually.29<\/sup><\/p>\n\n

    Part Two is completed by the contractor during tendering. This section also includes the financial information in the tender, including prices, rates, percentages, and other values used to calculate payments and, where applicable, assess compensation events under the selected Main Option.<\/p>\n\n

    Z Clauses<\/h3>\n\n

    Z Clauses are additional conditions through which the parties may adapt the NEC4 contract to the specific characteristics of a project. They may introduce additional obligations, clarifications, or amendments to the contract’s Core Clauses or Secondary Options.30<\/sup><\/p>\n\n

    Their inclusion must respond to a genuine project need. A poorly drafted Z Clause may create inconsistencies with the rest of the contract and alter the risk allocation originally intended by the parties.31<\/sup><\/p>\n\n

    Their use should therefore be limited and carefully assessed, avoiding provisions that distort NEC4’s structure or create confusion between contractual conditions and matters relating to the scope and execution of the work.<\/p>\n\n

    In light of the above, the following figure summarizes the structure of the NEC4 ECC contract:<\/p>\n\n

    \"\"<\/figure>\n\n

    <\/p>

    Source: NEC, NEC4 Engineering and Construction Contract (ECC)<\/em> (London: ICE Publishing, 2017).<\/p>\n\n

    As shown, structuring an NEC4 ECC contract is not simply a matter of selecting a contract form. It requires defining how risks will be allocated, how the Contractor will be paid, and which additional mechanisms are needed for proper project administration. Each of these decisions directly affects how the contract will be performed.<\/p>\n\n

    Accordingly, selecting the correct Main and Secondary Options, properly preparing the Contract Data and, where necessary, including Z Clauses are decisive steps in realizing the potential of the NEC4 model and reducing future disputes during delivery.<\/p>\n

    <\/div>\n\n\n

    \r\n
    \r\n\r\n
    \r\n
    1.<\/div>\r\n
    NEC, Engineering and Construction Contract<\/em> (NEC4 ECC, 2017).<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    2.<\/div>\r\n
    Ibid., 3-30.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    3.<\/div>\r\n
    Michael Rowlinson, A Practical Guide to the NEC4 Engineering and Construction Contract<\/em> (2019), 17.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    4.<\/div>\r\n
    Bronwyn Mitchell and Barry Trebes, NEC4 Managing Reality. Book One: Introduction to the Engineering and Construction Contract<\/em>, 3rd ed. (London: ICE Publishing, 2018), 9.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    5.<\/div>\r\n
    Ibid., 10.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    6.<\/div>\r\n
    Frances Forward, Architect’s Guide to NEC4<\/em> (2018), 24.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    7.<\/div>\r\n
    NEC, Engineering and Construction Contract<\/em>, 1.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    8.<\/div>\r\n
    Forward, Architect’s Guide to NEC4<\/em>, 25.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    9.<\/div>\r\n
    Brian Eggleston, The NEC4 Engineering and Construction Contract: A Commentary<\/em> (2019), 17.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    10.<\/div>\r\n
    NEC, Engineering and Construction Contract<\/em> (NEC4 ECC, 2017), Option A, cl. 11.2(32).<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    11.<\/div>\r\n
    Forward, Architect’s Guide to NEC4<\/em>, 28.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    12.<\/div>\r\n
    NEC, Engineering and Construction Contract<\/em> (NEC4 ECC, 2017), Option B, cl. 11.2(33).<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    13.<\/div>\r\n
    Eggleston, The NEC4 Engineering and Construction Contract: A Commentary<\/em>, 22.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    14.<\/div>\r\n
    Forward, Architect’s Guide to NEC4<\/em>, 30.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    15.<\/div>\r\n
    NEC, Engineering and Construction Contract<\/em> (NEC4 ECC, 2017), Options C and D, cl. 11.2(31) and 50.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    16.<\/div>\r\n
    Eggleston, The NEC4 Engineering and Construction Contract: A Commentary<\/em>, 27.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    17.<\/div>\r\n
    NEC, Engineering and Construction Contract<\/em> (NEC4 ECC, 2017), Option E, cl. 11.2(31), 11.2(34) and 50.2.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    18.<\/div>\r\n
    Eggleston, The NEC4 Engineering and Construction Contract: A Commentary<\/em>, 30.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    19.<\/div>\r\n
    Ibid., 20.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    20.<\/div>\r\n
    Forward, Architect’s Guide to NEC4<\/em>, 36.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    21.<\/div>\r\n
    Eggleston, The NEC4 Engineering and Construction Contract: A Commentary<\/em>, 31.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    22.<\/div>\r\n
    NEC, Engineering and Construction Contract<\/em> (NEC4 ECC, 2017), Option F, cl. 20.2.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    23.<\/div>\r\n
    Ibid., Option F, cl. 20.4.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    24.<\/div>\r\n
    Ibid., Option F, cl. 11.2 (31).<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    25.<\/div>\r\n
    Eggleston, The NEC4 Engineering and Construction Contract: A Commentary<\/em>, 20.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    26.<\/div>\r\n
    Forward, Architect’s Guide to NEC4<\/em>, 25.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    27.<\/div>\r\n
    Mitchell and Trebes, NEC4 Managing Reality. Book One<\/em>, 10.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    28.<\/div>\r\n
    NEC, Engineering and Construction Contract<\/em> (NEC4 ECC, 2017).<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    29.<\/div>\r\n
    Rowlinson, A Practical Guide to the NEC4 Engineering and Construction Contract<\/em>, 20.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    30.<\/div>\r\n
    Rowlinson, A Practical Guide to the NEC4 Engineering and Construction Contract<\/em>, 288.<\/div>\r\n<\/div>\r\n\r\n
    \r\n
    31.<\/div>\r\n
    Forward, Architect’s Guide to NEC4<\/em>, 50.<\/div>\r\n<\/div>\r\n\r\n<\/div>\r\n<\/div>\r\n\n","protected":false},"excerpt":{"rendered":"

    The real challenge in structuring an NEC contract begins when the parties decide how risks will be allocated, how the Contractor will be paid, and which mechanisms will govern project delivery. This is where the Core Clauses, Main Options, Secondary Options, and Contract Data become particularly important. The NEC4 ECC contract is structured in five […]<\/p>\n","protected":false},"author":1,"featured_media":5831,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[68,68],"tags":[],"class_list":["post-5822","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-nec-contracts"],"jetpack_featured_media_url":"https:\/\/cdrconsulting.pe\/wp-content\/uploads\/2026\/09\/BANNER-03-ingles.jpg","_links":{"self":[{"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/posts\/5822","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/comments?post=5822"}],"version-history":[{"count":2,"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/posts\/5822\/revisions"}],"predecessor-version":[{"id":5836,"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/posts\/5822\/revisions\/5836"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/media\/5831"}],"wp:attachment":[{"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/media?parent=5822"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/categories?post=5822"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cdrconsulting.pe\/en\/wp-json\/wp\/v2\/tags?post=5822"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}