3

The Options: An Overview

3.1 General arrangement of the ECC

The principle way in which the flexibility referred to in Section 2.9 is provided by the ECC is
in the arrangement of the conditions. The drafting body developed a system whereby users of
the contract could select from a menu of options to produce a version of the conditions which
was suitable for the project that was being considered.
That said, the arrangement of the ECC is based around nine core clauses that must in used in
every contract:
1. General
2. The Contractor's main responsibilities
3. Time
4. Quality management
5. Payment
6. Compensation events
7. Title
8. Liabilities and insurance
9. Termination
The first part of the flexibility comes when the user, usually the Client or the Project Manager
on the Client's behalf, selects which one of the Main Options the project is going to be carried
out under. The ECC offers six Main Options for the user to choose. The selection of the Main
Option will determine the risk profile that the Client sets for the project subject to minor
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adjustments, resulting from the selection of further options, which will be discussed below.
The six Main Options that are available for selection are:
Option A: Priced contract with activity schedule;
Option B: Priced contract with bill of quantities;
Option C: Target contract with activity schedule;
Option D: Target contract with bill of quantities;
Option E: Cost reimbursable contract;
Option F: Management contract1.

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 It must be emphasised that the ECC requires that just one of the Main Options listed above is
selected. One must be selected, otherwise the contract will not function. The Main Option
chosen dictates which additional conditions are added to the core clauses. Should more than
one Main Option be included, the resulting contract would immediately contain conflicts that it
would not be possible to resolve.
Comments on these Main Options are given in Section 3.5. Details of the additional conditions
added to the core clauses are given in the relevant chapter that refers to the conditions under
consideration.
Once the Main Option has been selected, the user must select one of the three dispute
resolution options:
Option W1 for use where adjudication is the method of dispute resolution and where the
UK Construction Act does not apply; or
Option W2 where the UK Construction Act does apply; or
Option W3 for use where a Dispute Avoidance Board is the method of dispute resolution
and where the UK Construction Act does not apply.
While the ECC states that one of these options must be chosen, there would not, in the author's
view, be anything to prevent users from not selecting any one of the dispute resolution options
and either inserting their own procedures in Option Z or opting to rely on the relevant law. In
the United Kingdom, adjudication would be implied for all contracts that fall within the
definition of a construction contract under the Housing Grants, Construction and Regeneration
Act 1996. In all jurisdictions that I am aware of, reference to the courts is always available.
The next part of the selection procedure that the Client must consider is to decide which, if any,
of the Secondary Options will be included within the Conditions. It must be emphasised that it
is not necessary to select any of the Secondary Options; the core clauses and selected Main
Option, in all six cases, will provide a perfectly workable and sound contract.
The only limit on how many Secondary Options can be selected is determined by the
restrictions on the combination of choices; these restrictions are stated within the notes in
brackets attached to some of the Secondary Options in the Schedule of Options.
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The full list of Secondary Options available for use in the ECC is:
Option X1: Price adjustment for inflation (used only with Options A, B, C and D);
Option X2: Changes in the law;
Option X3: Multiple currencies (used only with Options A and B);
Option X4: Ultimate holding company guarantee;
Option X5: Sectional Completion;
Option X6: Bonus for early Completion;
Option X7: Delay damages;

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 Option X8: Undertakings to the Client or Others;
Option X9: Transfer of rights
Option X10: Information modelling
Option X11: Termination by the Client;
Option X12: Multiparty collaboration (not used with Option X20);
Option X13: Performance bond;
Option X14: Advanced payment to the Contractor;
Option X15: The Contractor's design;
Option X16: Retention (not used with Option F);
Option X17: Low performance damages;
Option X18: Limitation of liability;
Option X20: Key Performance Indicators (not used with Option X12);
Option X21: Whole Life Cost
Option X22: Early Contractor involvement (used only with Options C and E);
Option Y(UK)1: Project Bank Account
Option Y(UK)2: The Housing Grants, Construction, and Regeneration Act 1996;
Option Y(UK)3: The Contracts (Rights of Third Parties) Act 1999;
Option Z: Additional conditions of contract.
The observant reader will have noted that the above list does not run consecutively; Secondary
Option X19 is not used within the ECC.2 This Secondary Options, plus some others numbered
from X23 onwards, are used elsewhere within the NEC4 suite of contracts, as are some of
those listed above. It is a feature of the suite that the wording of the Secondary Options is
consistent across all the contracts. For example, in every contract in the family where
Secondary Option X16 (Retention) is available, the wording for those conditions is identical
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in every contract. This facility makes it relatively easy for a user to move between the different
contracts in the suite and be familiar with the terms and procedures in use.
Detailed comment in relation to the Secondary Options is made either in Chapter 20 or, in
certain instances, with the core clause conditions that a particular Secondary Option is linked
to.

3.2 Other documents referred to

The conditions refer to other documents both in the core clauses, the Main Option conditions
and in some of the Secondary Options. The documents that fall under this heading are:

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 the Scope (see Section 22.2);
the Site Information (see Section 22.3);
the Accepted Programme (see Section 12.2);
the Schedule of Cost Components (see Section 14.2);
the Short Schedule of Cost Components (see Section 14.3);
an activity schedule (Main Options A and C) (see Section 13.5.1);
a bill of quantities (Main Options B and D) (see Section 13.5.2);
ultimate holding company guarantee (X4) (see Section 20.3);
undertakings to the Client and Others (X8) (see Section 7.3.2);
transfer of rights documentation (X9) (see Section 7.3.3);
the Information Execution Plan (X10) (see Section 7.4.2);
the Project Information (X10) (see Section 7.4.2);
the Information Model (X10) (see Section 7.4.2);
the Partnering Information (X12) (see Section 20.4);
Schedule of Core Group Members (X12) (see Section 20.4.5);
a Schedule of Partners (X12) (see Section 20.4.4);
performance bond (X13) (see Section 20.5);
advanced payment bond (X14) (see Section 13.10.2);
retention bond (X16) (see Section 13.10.3);
an Incentive Schedule (X20) (see Section 20.8);
Pricing Information (X22) (see Section 20.11.2);
a Trust Deed (Y(UK)1) (see Section 13.10.4); and
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a Joining Deed (Y(UK)1) (see Section 13.10.4).

Whichever documentation is required from this list must be prepared at the appropriate time to
ensure that information is properly passed between the parties at the required stage (be that
during the tender stage, prior to the start date or during the currency of the works).

3.3 Contract Data

The Contract Data is a key element of the ECC and is divided into two parts. Part One is to be
completed by the Client. It is necessary to carry out this exercise before the documents are sent
to the tendering contractors for pricing. In completing Part One, the Client (or whoever
completes the exercise for it) must carefully consider each entry and decide on the entry to be

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 made, if any. The contents of the blank Contract Data can be used as a checklist by the
compiler; it is judged good practice to consider every statement for each project rather than
work from a version prepared for a previous project. Even for repeat streams of work, it is
possible that certain statements will apply to some projects but not to others within the same
work stream.
Part Two of the Contract Data is completed by the tendering contractor during the tender
period. This part of the Contract Data consists of some basic information including details of
the Contractor's key people and the Working Areas. More importantly, pricing information
relating to the Prices, together with various rates and percentages for use in calculating
payments and/or assessing compensation events (depending on the main option in use), is also
included. The inclusion of the required information in Contract Data Part Two is vital if the
Contractor's position in respect of payment is to be properly provided for.
The requirements for completing the Contract Data are considered in detail in Chapter 21.

3.4 The published documents

In respect of the ECC, the following volumes are published with the fourth edition (2017) of
the NEC suite:
the complete Engineering and Construction Contract (NEC Panel 2017a)
six merged versions of the ECC, one for each Main Option
User Guide Volume 2 (NEC Panel 2017c)
User Guide Volume 4 (NEC Panel 2017e)
The above nine documents are only part of the total of 43 documents that make up the suite at
the time of writing. The author considers that anyone who understands and uses the ECC should
be able to understand and use all of the other contracts in the family as they are so closely
related and follow the same principles. Volumes 1 and 3 of the User Guides have not been
mentioned above, as they cover all the family and not just the ECC.
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3.5 Main Options: General outline

The first part of the flexibility within the ECC is generated by the user making the choice of
one of the six3Main Options. In making this choice, the user selects the risk balance between
the parties and sets the basis of the parties' obligations in relation to that risk. The titles of the
six Main Options within the ECC are in Section 3.1 above.
The principle difference between these Main Options lies in the payment mechanism. By
varying the payment mechanism, the allocation of risk between the parties is allocated
differently between the Client and the Contractor. It is generally recognised that Main Option A
carries the least risk for the Client while Main Option F carries the highest risk; the other Main
Options following a sliding scale in between these two extremes.

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 Main Option A provides a priced contract where the total of the price tendered by the
Contractor against each activity represents the amount it will be paid for that work, including
all matters which are at the Contractor's risk. The Client only carries the risk of the matters
identified as being compensation events and/or its insurable liabilities.
Main Option
A B C D E F
Definition – Prices 11.2(32) 11.2(33) 11.2(32) 11.2(33) 11.2(34) 11.2(34)
Definition – Price for 11.2(29) 11.2(30) 11.2(31) 11.2(31) 11.2(31) 11.2(31)
Work Done to Date
Definition – Defined 11.2(23) 11.2(23) 11.2(24) 11.2(24) 11.2(24) 11.2(25)
Cost
Definition – Disallowed 11.2(26) 11.2(26) 11.2(26) 11.2(27)
Cost
Pricing Document Activity Bill of Activity Bill of
Schedule Quantities Schedule Quantities
Additional 60.4, 60.5 60.4, 60.5
Compensation Events & 60.6 & 60.6
Contractor's Share 54.1 to 54.5 to
Mechanism 54.4 54.8

Figure 3.1Table comparing aspects of the six Main Options. The numbers in the table
correspond to clause numbers in the Main Option. See Appendix 1, Table A1.1 for reference to
the sections of this book where each clause is discussed.
Main Option B is another priced contract but this time with a bill of quantities. Under this
option, the Contractor is paid the actual quantity of work carried out at the rates in the bill of
quantities. There is therefore some uncertainty over the final price as any inaccuracies in the
bill of quantities will be corrected in the remeasurement process, being at the Client's risk.
The Client also carries the risk for those matters identified as being compensation events
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and/or its insurable liabilities.

Main Option C is the first of the target cost options. Target cost contracts are used in varying
circumstances, including, but not limited to:
work that is not fully defined or detailed;
where the risk is perceived to be high; or
where the Client is seeking to encourage efficiency gains over a series of similar contracts.
Under Main Option C, the Contractor tenders the Prices (the target) backed up by an activity
schedule together with relevant percentages and rates. The percentages and rates are used for
calculating the Defined Cost and Price of Work Done to Date (PWDD) (see Section 13.4.5),

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 being what the Contractor is paid based on the resources employed to carry out the works. At
the end, the PWDD is compared to the Prices (adjusted for compensation events). If the PWDD
is less than the Prices, then the Contractor receives a share of the gain; if the PWDD is greater
than the Prices, the Contractor pays its share of the overspend (see clause 54 and Section
13.7).
Main Option D follows the same approach as Main Option C, except that a bill of quantities is
used against which the final Total of the Prices is remeasured. The remeasurement aspect
provides less certainty of final prices than the use of the activity schedule; hence, the Client
carries more risk under Main Option D than under Main Option C. It must also be said that, in
practice, this option probably requires more administration than any other.
Main Option E is a cost reimbursable contract where the Client simply pays for all the
resources utilised by the Contractor to carry out the works, following a formula employing
various tendered rates and percentages, subject only to the disallowing of costs resulting from
the Contractor's inefficient use of resources.
Main Option F provides a management contract option under which the Contractor is paid a fee
for carrying out prescribed duties. Each subcontract is entered into between the Contractor and
the subcontractor and the Client pays the actual cost of each such subcontract to the Contractor.
The Contractor's fee will increase in line with any increases in the cost of the subcontracts.
Figure 3.1 gives a simple comparison of the key additional clauses of the six Main Options. It
can be seen from this table that whilst there are common factors between some of the main
options, no two are identical. It is this variance that creates the changing risk profile as the user
considers one option against another. The primary change is how the definition of the term
Price for Work Done to Date acts to determine the amount due for each payment. These
differences can be seen in more detail by referring to Sections ).

Notes
1The ECS does not include Option F. This procurement route is not suitable for a subcontract
situation.
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2Option X22 is not used in the ECS; otherwise the lists are the same.
3Five in the ECS.

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