NEC4 Option A vs Option C: programme, activity schedule, cost and risk
Updated: 2 days ago
By Roman Bazelchuk | NEC Accredited Project Manager | APMG Project Planning and Control
Founder, NEC Planning Solutions Ltd
NEC4 Option A and Option C both price the works in an activity schedule. Option A pays the Prices of completed activities and leaves the underlying cost risk with the Contractor, subject to compensation events. Option C pays forecast Defined Cost plus the Fee and shares any overrun or saving against the target at Completion.
Usually the Client makes the choice before the tender goes out, and the Contractor inherits it: a way of being paid, a way of carrying risk and a different job for its programme. On paper the two options sit close together, sharing the core clauses, the programme clauses that apply to every option and the core list of compensation events. From the first assessment date they behave like two different contracts.
The programme is where the difference shows first. Under Option A the completion dates of the activities on the programme are the cash curve, and clause 31.4 ties the activity schedule to every programme submitted for acceptance. Under Option C the programme should provide the basis for the forecast of Defined Cost, but nothing in the contract requires the target to stay connected to the plan. NEC3 applied clause 31.4 to both options; NEC4 kept it for Option A alone, one of the changes between NEC3 and NEC4 that are easy to miss because the clause number did not move. Only its reach did.
This guide sets the two options side by side from the desk where planning and commercial management meet. Two neighbouring subjects have guides of their own: designing an Option A activity schedule for cashflow, and why Defined Cost recovery breaks down on Options C and D.
NEC4 Option A vs Option C at a glance
The table sets the two options against each other clause by clause. Three defined terms carry most of it. The Prices are the lump sums against the activities on the activity schedule. The Price for Work Done to Date is what each assessment pays for the work. Defined Cost is cost as the contract's schedules of cost components define it.
NEC4 Option A | NEC4 Option C | |
Type | Priced contract with activity schedule | Target contract with activity schedule |
Each assessment pays | The Prices for each completed group of activities and each completed activity not in a group | The Defined Cost the Project Manager forecasts will have been paid before the next assessment date, plus the Fee |
The activity schedule | Sets the lump sums that are paid | The total of the Prices is the target; it does not determine the Price for Work Done to Date |
Tie to the programme | Clause 31.4, on every programme submitted for acceptance | None in NEC4; NEC3 applied 31.4 to Option C as well |
Revising the activity schedule | Clause 55.3, subject to acceptance under 55.4 | No equivalent in NEC4, unless a Z clause adds one |
Forecasts of Defined Cost | Not required | Clause 20.4, at the intervals in the Contract Data |
Cost records | Needed to price compensation events | Accounts and records open to the Project Manager; Disallowed Cost, 11.2(26); finalisation under 50.9 |
Compensation events | Short Schedule of Cost Components; changes to the Activity Schedule, 63.14 | Full Schedule of Cost Components; changes to the Activity Schedule, 63.14, which move the target |
Cost risk | With the Contractor, subject to compensation events | Shared through the share ranges, clause 54 |
When the risk settles | Month by month, activity by activity | At Completion, then in the final assessment |
Where it goes wrong | Coarse activities starve cash flow | Target, programme and forecast drift apart |
The last three rows carry the argument of this guide. Option A settles risk every month, activity by activity, in cash. Option C settles it once, through the share.
Where Options A and C sit among the six main options
The ECC's six main options differ first by pricing document: an activity schedule in Options A and C, a bill of quantities in Options B and D, and neither in Option E, the cost reimbursable contract, or Option F, the management contract. Every option needs a programme under clause 31, but only Option A now ties its pricing document to it, as Figure 1 shows.
NEC4 Option A: paid for completed activities
Option A is a priced contract. The Contractor divides the works into activities, prices each as a lump sum, and the activity schedule adds up to the tendered total of the Prices. Each assessment pays the Price for Work Done to Date, which on Option A is the total of the Prices for each group of completed activities and each completed activity which is not in a group. An activity is either complete or it is not, and there is no payment for one that is 80 per cent done. Grouping raises the stakes: an activity inside a group earns nothing until the whole group is complete.
That makes the structure of the activity schedule a cash decision taken at tender. An activity priced at £400,000 that runs across four months of the programme pays nothing until the month it finishes. A contractor who prices coarse activities and then plans in fine operations has built a funding gap into the contract, and usually finds it at the second or third application. The programme sets the dates on which the money arrives.
Clause 31.4 makes that connection a contractual duty. The Contractor provides information showing how each activity on the Activity Schedule relates to the operations on each programme it submits for acceptance. The duty attaches to every programme submitted, not only the first. The two documents need not mirror each other line for line, and usually should not, but the relationship has to be demonstrable every time.
When the plan changes, the schedule can follow it. Clause 55.3 has the Contractor submit a revised activity schedule for acceptance when it changes a planned method of working at its discretion so that the activities no longer relate to the operations on the Accepted Programme, or when it corrects the activity schedule so that the activities relate to the Scope. The Accepted Programme is the programme identified in the Contract Data or, once one has been accepted, the latest programme the Project Manager has accepted. Under clause 55.4 the Project Manager can refuse a revision that does not relate to the operations on the Accepted Programme, distributes changed Prices unreasonably between the activities not yet completed, or changes the total of the Prices. The last two reasons stop a revision being used to bring money forward.
Outside compensation events, the cost risk is the Contractor's. Sharpe Pritchard's introduction to the pricing options, published on NEC's own website, puts it plainly: an Option A contractor that prices its activities wrongly cannot recover the further cost of doing the work. The Fee, the amount the Contractor's tendered fee percentage adds to Defined Cost, plays no part in the monthly payment; it is used in assessing compensation events and in some calculations on termination. The Contractor provides no forecasts of Defined Cost.
NEC4 Option C: Defined Cost plus Fee, against a target
Option C is a target contract. The Contractor still prices an activity schedule at tender, but the total of the Prices is not what it will be paid. It is the target. Each assessment pays the Price for Work Done to Date, which on Option C is the Defined Cost the Project Manager forecasts the Contractor will have paid before the next assessment date, plus the Fee. Defined Cost here is built from the full Schedule of Cost Components, less Disallowed Cost.
Because payment runs on forecast cost rather than on completed activities, Option C is kinder to cash flow than Option A. The price of that comfort is transparency. The Contractor keeps accounts and records of its Defined Cost, the Project Manager can inspect them, and clause 20.4 has the Contractor forecast the total Defined Cost for the whole of the works at the intervals the Contract Data sets, explaining what has changed since the last forecast.
Risk settles through the Contractor's share under clause 54. The difference between the total of the Prices and the final Price for Work Done to Date is divided into increments across share ranges, each shared at the percentage the Contract Data sets for its range. Below the target the Contractor is paid its share of the saving; above it, the Contractor pays its share of the excess. Take a target of £10 million, with a Contractor's share of 50 per cent between 90 and 110 per cent of it. A final Price for Work Done to Date of £10.6 million is an excess of £600,000, of which the Contractor's share is £300,000. The numbers are illustrative; the Contract Data sets the real ones. Figure 2 runs the same job under both options.
The share is not taken month by month. The Project Manager makes a preliminary assessment at Completion of the whole of the works, using forecasts of the final figures, and a final assessment in the final amount due. Doosan Enpure Ltd v Interserve Construction Ltd [2019] EWHC 2497 (TCC), a dispute between joint venture partners, concerned NEC3 rather than NEC4, but the principle remains relevant because NEC4 clause 54 contains the equivalent post-Completion share mechanism. The court held that during the works the Contractor is paid the Price for Work Done to Date, and that pain or gain is allocated after completion, not on an interim basis.
Two clauses decide which cost counts at all. Disallowed Cost, defined in clause 11.2(26), removes cost the Contractor's accounts and records do not justify, and cost incurred only because the Contractor did not give an early warning the contract required, which makes the early warning register a commercial document on Option C. Clause 50.9, new in NEC4, lets the Contractor put parts of Defined Cost forward as finalised, with the records to prove them. The Project Manager has thirteen weeks to accept them or notify that they have not been correctly assessed, or four weeks from receiving any further records it asks for, and if it does neither the Contractor's assessment is treated as correct.
Option C and the programme: the link NEC4 stopped requiring
NEC4 took clause 31.4 out of Option C and gave it no equivalent of the Option A revision clause. The logic is defensible. Payment runs on Defined Cost, so nobody relies on the activity schedule to release money, and a schedule out of step with the programme breaks nothing in the monthly assessment.
Some Clients amend the contract to restore a similar mechanism. A SCAPE Civil Engineering Gen3 delivery agreement for Option C, published on Contracts Finder in January 2025, adds the Option A revision clauses, 55.3 and 55.4, by Z clause. On any Option C job the Z clauses deserve a read before the NEC4 default is assumed.
What the deletion removed was an obligation, not a need. The activity schedule still holds the target, and implemented compensation events change the Prices recorded in it. If the schedule drifts away from the programme over the life of the job, the target and the plan are describing different projects by the time the share is assessed, and reconciling them then, from records that may be years old, is the least reliable moment to try.
On Option C the programme should be reconciled with two money documents rather than one. The activity schedule holds the target; the clause 20.4 forecast shows where Defined Cost is expected to go. A forecast built from the Accepted Programme, resource by resource, tells the Project Manager something about the future. One rolled forward from last month's accounts reports only what has been spent. This is the Programme-to-Money Bridge at its most exposed: when the planner and the quantity surveyor stop describing the same job, Defined Cost becomes hard to defend.
NEC Planning Solutions keeps the programme, the activity schedule and the Defined Cost forecast in one monthly cycle as part of its live project controls and reporting service, so they are reconciled every month rather than at the share assessment. Retainers start from £1,400 a month plus VAT.
Compensation events under Option A and Option C
The time half of a compensation event is the same under both options. Under clause 62.2 a quotation comprises the proposed changes to the Prices and any delay to the Completion Date and Key Dates, with details of the assessment and, if the programme for remaining work is altered, the alterations to the Accepted Programme. Delay to the Completion Date is assessed against the Accepted Programme current at the dividing date, under clause 63.5. The money half is where the options part company.
Both assess the change to the Prices as the effect on the actual Defined Cost of the work done by the dividing date, the forecast Defined Cost of the work not yet done and the resulting Fee (clause 63.1). Option A prices that cost from the Short Schedule of Cost Components and Option C from the full Schedule, and on either the Project Manager and the Contractor can agree to use rates or lump sums instead (clause 63.2). Under both, the changed Prices take the form of changes to the Activity Schedule (clause 63.14), so a compensation event quotation on either option is incomplete until it says which activities change and by how much.
What the changed Prices mean is not the same. On Option A they are the Contractor's whole recovery for the event: an event worth £200,000 assessed at £100,000 leaves the Contractor £100,000 short, in full. On Option C the changed Prices move the target while the Contractor goes on being paid forecast Defined Cost plus the Fee. The same under-assessment leaves the target £100,000 lower than it should be, and with the outturn in the 50 per cent range of the earlier example, the Contractor bears £50,000 of that when the share is assessed. An over-assessment works the other way: on Option A the Contractor keeps all of it, on Option C only its share.
Value engineering follows the same split. Take a change to the Scope provided by the Client that the Contractor proposes, the Project Manager accepts and that reduces Defined Cost. On Option A, clause 63.12 reduces the Prices by the value engineering percentage of the saving, 50 per cent unless the Contract Data states another, and the Contractor keeps the rest. On Option C, clause 63.13 leaves the Prices alone and the saving passes through the share.
Commercial attention moves accordingly. On Option A every compensation event is argued at full value, because the Contractor carries all of it. On Option C the quotation still matters, but the larger arguments are about what counts as Defined Cost, what is disallowed, and whether the target still describes the job.
Option B: the priced alternative with a bill of quantities
Option B is the option most often weighed against Option A, because both are priced contracts. The pricing document is a bill of quantities, and the Price for Work Done to Date is the quantity of work completed at the bill's rates, plus the completed proportion of each lump sum. The Client carries the quantity risk, having set the quantities, and the Contractor carries the risk of its rates.
There is no clause 31.4 in Option B: payment follows measured quantities, so the bill does not need to match the operations on the programme. Compensation events are built from the Short Schedule of Cost Components unless the Project Manager and the Contractor agree to use the bill's rates, and clauses 60.4 to 60.6 add events for quantities that differ from the bill and for corrections to it. The bill and the programme still meet in every compensation event, where the change has to be located in both at once.
Tendering and planning for Option A or Option C
The Sharpe Pritchard introduction on NEC's website treats the options as a spectrum of cost risk, with Option C between Option A and the cost reimbursable Option E, and notes that Option A may not be practicable where the works are not straightforward or are particularly risky. The Contractor rarely chooses the option, but it does decide how to tender and how to plan, and each option rewards a different discipline.
On Option A the activity schedule should be built from the tender programme, not alongside it. Activities that match operations, or groups of operations, give clause 31.4 something to show and give the cash curve a shape the Contractor chose. Long-lead procurement deserves payment activities of its own, and the schedule needs enough lines that no single activity holds months of unpaid work.
On Option C the target should have a cost-loaded programme behind it: the same activities, resourced, so that the first clause 20.4 forecast is the tender programme carried forward rather than a new document. In delivery, each clause 32 programme revision is the natural moment to reconcile the target, the Accepted Programme and the forecast, because a revision that moves operations without touching the money documents has changed the plan and left the money behind.
On a £50 million-plus NEC3 Option A gas infrastructure package, NEC Planning Solutions ran the monthly cycle from inside the contractor's team: clause 32 submissions in Primavera P6, earned value reporting and compensation events integrated with the programme through to completion. The gas infrastructure case study sets out how the work was organised.
The author's view
Option C is often presented to contractors as the gentler option, because the Client shares the overrun. For the planner I think it is the harder one. Option A punishes a badly structured activity schedule every month, in cash, where the finance director can see it, so the problem gets fixed early. Option C lets the target, the programme and the forecast drift apart for the life of the job, because NEC4 no longer obliges anyone to keep them together, and then settles the difference once, through the share, when the evidence is oldest.
On paper, the removal of clause 31.4 from Option C reads as a tidy-up. In practice it took away the one line a planner could point at when a commercial team wanted the activity schedule left alone. My position is that the correlation should be kept on every option that has a pricing document, whether or not the contract compels it. Not because the contract might be read against the Contractor, but because two documents describing the same works in different terms is how a project loses the ability to explain itself.
The moment that matters is never the month it happens. It is the compensation event eighteen months later, or the share assessment at Completion, when someone asks which activity the change fell into and the honest answer is that nobody knows.
Summary
NEC4 Option A and Option C share an activity schedule and little else. Option A pays the Prices of completed activities, ties the schedule to every programme submitted under clause 31.4 and leaves the cost risk with the Contractor, subject to compensation events. Option C pays forecast Defined Cost plus the Fee and shares the overrun or saving against the total of the Prices, the target, under clause 54.
The programme does a different job under each. On Option A it sets the cash curve, and the contract requires the link. On Option C it should inform the forecast, and the link to the target is the Contractor's own discipline unless a Z clause restores it. Compensation events are assessed the same way under both and mean different things: the Contractor's whole recovery on Option A, a move in the target on Option C.
Download the Option A and C checklist
Two pages to keep the activity schedule, the programme and the money telling the same story: the activity schedule at tender, the Option A programme duties, the Option C target and forecast, compensation events, and the records that decide Defined Cost. Direct download, no sign-up.
Frequently asked questions
What is the difference between NEC Option A and Option C?
Both price the works in an activity schedule. Option A is a priced contract: the Contractor is paid the Prices of completed activities and carries the risk of its own costs, subject to compensation events. Option C is a target contract: the Contractor is paid forecast Defined Cost plus the Fee, the total of the Prices is the target, and any overrun or saving is shared at Completion.
Does clause 31.4 apply to NEC4 Option C?
No. In NEC4 the duty to show how each activity on the Activity Schedule relates to the operations on each programme submitted for acceptance sits in Option A only. NEC3 applied it to Options A and C. NEC4 Option C has no facility to revise the activity schedule either, unless a Z clause adds one, so keeping the target tied to the programme is a management decision.
How are compensation events assessed under Option A and Option C?
Both assess the effect on actual Defined Cost of work done by the dividing date, forecast Defined Cost of work still to do and the resulting Fee. Both express the result as changes to the Activity Schedule (clause 63.14). Option A uses the Short Schedule of Cost Components, Option C the full Schedule. On Option A that is the whole recovery; on Option C it moves the target.
When is the Contractor's share paid under NEC4 Option C?
Not month by month. The Project Manager makes a preliminary assessment at Completion of the whole of the works, using forecasts, and a final assessment in the final amount due. In Doosan Enpure v Interserve (2019), an NEC3 case on the mechanism NEC4 keeps in clause 54, the court held that pain or gain is allocated after completion, not on an interim basis.
Can the activity schedule be revised under NEC4 Option A?
Yes. Clause 55.3 requires a revision for acceptance when the Contractor changes a planned method of working at its discretion so that the activities no longer relate to the operations on the Accepted Programme, or corrects the schedule to relate to the Scope. Under clause 55.4 the Project Manager can refuse one that does not relate to those operations, distributes changed Prices unreasonably between uncompleted activities or changes their total.
Which suits a contractor better, Option A or Option C?
It depends on what the Contractor can control. Option A rewards accurate pricing and an activity schedule built from the programme, and leaves every overrun with the Contractor. Option C protects cash flow and shares the overrun, but asks for open accounts, credible forecasts of Defined Cost under clause 20.4 and a target that still matches the plan when the share is assessed.
About the author
Roman Bazelchuk is the Founder of NEC Planning Solutions Ltd, a UK project planning and controls consultancy supporting contractors with NEC programme compliance, compensation event assessments and live project controls. He is an NEC Accredited Project Manager and holds the APMG Project Planning and Control qualification, with a BEng in Mechanical Engineering and postgraduate training in Planning and Control.
NEC Planning Solutions provides contract-aware planning support through a QA-governed delivery model, helping project teams keep programmes accepted, current and commercially useful from tender through to live delivery.
Schedule and forecast telling different stories?
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