Contract Practice — Level 3
Core Philosophical Contrast
NEC is collaborative and proactive. It is built around early communication, joint risk management, and contemporaneous resolution. Mechanisms such as early warnings, the Accepted Programme, and the compensation event process are designed to surface and resolve issues in real time. A party that fails to use the mechanisms correctly loses protections the contract would otherwise have given them.
JCT is adversarial and reactive by comparison. It allocates risk clearly between parties and provides mechanisms for resolving disputes arising from events. There is no equivalent to the NEC collaborative management ethos built into the contract. The professional adviser's role under JCT is to ensure the client's position is protected by timely notice, accurate records, and correct use of the contractual machinery when issues arise.
Key Mechanisms — Contrast Table
| Area | NEC3 / NEC4 | JCT (SBC / D&B / ICD) |
|---|---|---|
| Change / Variation mechanism | Compensation Event (CE). Triggered by a defined list of events. Contractor notifies within 8 weeks of becoming aware (NEC4). PM may also notify. Assessed prospectively on Defined Cost forecast. | Architect's / Contract Administrator's Instruction (AI/CAI). Valuation under Schedule 2 or at contract rates. Assessed retrospectively on actual cost or agreed rates. No strict notification deadline equivalent to NEC CE. |
| Time entitlement | Extension of time assessed as part of the CE — time and money assessed together in a single quotation. Programme impact is a CE assessment component. | Extension of Time (EoT) assessed separately from loss and expense. Relevant Events give time only. Loss and Expense is a separate application process. Architect must review EoT periodically. |
| Cost recovery for delay | Within the CE assessment — Defined Cost of prolongation included in the quotation or PM's own assessment. No separate loss and expense application. | Loss and Expense — separate application required. Contractor must give notice and provide information. Must demonstrate actual direct loss, not estimate. "Ascertain" carries specific legal weight. |
| Programme obligations | Accepted Programme is central — contractually significant. Contractor must maintain and resubmit. Failure to maintain limits CE entitlement assessments and signals contractor default. PM must accept or reject with reasons. | Master Programme required but not contractually central in the same way. Programme is evidence for EoT and loss and expense but not a mechanism in its own right. |
| Risk management | Early Warning Register — proactive, collaborative. Both parties can add risks. Risk Reduction Meetings. Failure to give early warning may reduce CE entitlement. | No equivalent early warning mechanism in standard JCT. Risk is managed through professional advice, records, and timely notices rather than a contractual risk register. |
| Payment | Assessed amount (PWDD) certified by PM. Pay Less Notice required within prescribed period if disputing. Final date for payment is fixed by contract data. | Interim Application → Interim Certificate → Pay Less Notice window → Final date for payment. Pay Less Notice failure means the notified sum is payable. Housing Grants Act provisions apply to both. |
| Termination | Core clause 90–92. Grounds include contractor insolvency, persistent default, corruption. Amounts due on termination calculated under the applicable option. Clear process. | Section 8. Employer and contractor termination provisions. Grounds differ — default, insolvency, specified events. Financial consequences differ between employer and contractor termination. Wrongful termination carries significant risk. |
| Dispute resolution | Adjudication under W1 or W2. Senior Representatives meeting required first under Option W2. Arbitration if specified. Tribunal clause determines final forum. | Adjudication (statutory right under HGCRA 1996). Mediation encouraged. Arbitration or litigation as specified. No pre-condition of senior representative meeting. |
| Design liability | Contractor design liability defined by Works Information / Scope. Contractor takes reasonable skill and care unless fitness for purpose specified. | SBC — employer carries design through consultants. D&B — contractor takes on design through Employer's Requirements and Contractor's Proposals. ICD — Contractor's Designed Portion provisions define the split. Fitness for purpose risk in D&B unless excluded. |
NEC — Depth Knowledge for Level 3
The mechanism: Under NEC4, compensation events are assessed as the effect on Defined Cost plus the Fee. A quotation submitted by the contractor uses forecast Defined Cost. The PM may instruct their own assessment if the contractor fails to submit or if the quotation is not accepted.
What assessors test: Do you understand the difference between Defined Cost and cost in the conventional sense? Can you identify when a contractor's quotation includes costs that are not Defined Cost? Do you know the deemed acceptance consequence (clause 62.6) and how to advise a client to prevent it? Do you understand the difference between an NEC4 quotation and an NEC3 quotation in terms of assessment methodology?
The Level 3 answer: Goes beyond describing the CE process to explain how you assess a CE quotation, what you look for, how you handle a contractor who inflates Defined Cost, and how you advise a client on the consequences of the process not being followed correctly.
What it is: The latest programme accepted by the PM. Under NEC, the Accepted Programme is the contractual baseline — it is the document against which delay and disruption are assessed and CE impacts are calculated.
Why it matters commercially: If the contractor fails to maintain and submit revised programmes, their CE assessments have no reliable baseline to work from. If the PM fails to accept or reject programmes within the contractual period (2 weeks under NEC4), the submitted programme may be treated as accepted. A project with a poorly maintained Accepted Programme is a project where CE disputes are harder to resolve.
Professional advice: At project outset, advise the client to establish a programme compliance protocol — requiring the contractor to submit revised programmes at agreed intervals and ensuring the PM's responses are timely. At dispute stage, advise on the weight the Accepted Programme carries in assessing CE claims and the implications of a programme record that does not reflect what actually happened on site.
What it is: Under NEC Options C and E, the client pays the contractor's Defined Cost plus Fee — but not all costs the contractor incurs are Defined Cost. Disallowed Cost is the category of costs that cannot be included in Defined Cost and therefore cannot be recovered by the contractor.
Disallowed Cost includes: Costs not justified by records, costs the contractor incurred due to their own default (such as correcting defects), costs for resources not used to provide the Works, and costs resulting from failures to give early warning.
Professional advice context: On a target cost contract, identifying and disallowing cost that should not be included is a professional responsibility. An adviser who simply accepts the contractor's Defined Cost build-up without scrutiny is not protecting the client. The Level 3 answer demonstrates that you understand what can be disallowed, how you identify it in the contractor's records, and how you advise the client to raise and substantiate a disallowance formally.
JCT — Depth Knowledge for Level 3
The mechanism: Under JCT, a contractor suffering loss and expense from specified matters (Relevant Matters) may make a written application. The Architect or Contract Administrator must ascertain — or instruct the Quantity Surveyor to ascertain — the amount of loss and expense. "Ascertain" means to find out with certainty — it requires actual loss to be established, not estimated.
What assessors test: Do you understand the distinction between ascertainment and estimation? Do you know the Relevant Matters that trigger entitlement? Can you explain how you would assess a loss and expense application in practice — what information you require, how you verify it, how you handle a claim that is largely unsubstantiated?
Common heads of claim: Prolongation costs (site preliminaries during extended period), financing charges, head office overheads (often assessed using the Emden or Hudson formulae), and loss of productivity (disruption). Each requires different evidence and a different assessment methodology.
The Level 3 answer: Describes your actual approach to ascertaining loss and expense — what you ask for, how you verify it, how you deal with a contractor whose application is formulaic rather than evidence-based, and how you advise the client on their liability.
What it is: The JCT Intermediate Building Contract with Contractor's Design (ICD) is used where the employer wishes to retain design responsibility for the majority of the project but transfer specific design elements to the contractor. The CDP Provisions in Section 2 govern the contractor's design obligation for the Contractor's Designed Portion.
Design liability: The contractor is liable for the CDP to the standard of reasonable skill and care unless a fitness for purpose obligation has been expressly included. The CDP must be identified clearly — typically through the Employer's Requirements and Contractor's Proposals documents.
Relevance to your project: In a lift installation project, the lift system itself is likely to fall within a Contractor's Designed Portion. The interface between the contractor's design obligations for the lift system and the employer's design obligations for the building structure and safety systems is a professional judgement question — particularly in the context of Building Safety Regulator requirements where design responsibility and compliance are closely linked.
Professional advice: At procurement, advise the client to define the CDP scope precisely and ensure the Employer's Requirements clearly set out the performance specification and compliance standards the contractor must meet. At the dispute or claim stage, advise on whether a specific issue falls within the contractor's CDP design liability or within the employer's retained design responsibilities.
The mechanism: Under JCT (and required by the Housing Grants, Construction and Regeneration Act 1996), if the employer wishes to pay less than the sum notified by the contractor in their application (or certified by the CA), a Pay-Less Notice must be issued by the prescribed date — typically 5 days before the final date for payment. The notice must specify the sum the employer considers due and the basis on which that sum is calculated.
The consequence of missing the deadline: If no Pay-Less Notice is issued in time, the employer must pay the notified sum in full by the final date for payment. Failure to do so gives the contractor the right to suspend performance under section 112 of the HGCRA. The employer cannot subsequently withhold the amount — they would need to recover it through adjudication or other proceedings.
Professional advice: Advise clients to implement a payment review calendar that sits inside the Pay-Less Notice deadline for every interim application. Ensure the Contract Administrator's valuation programme aligns with this calendar. If an application is received that the client disputes, ensure the Pay-Less Notice is issued before advising on the quantum of the dispute — protecting the client's right to withhold is the priority; the quantum argument comes second.
Choose an NEC example that involves a specific contractual mechanism — compensation event, early warning, programme management, or Disallowed Cost — where you gave professional advice that went beyond routine administration. The AMEY change management role or the NEC3 Option C highways renewal programme are strong vehicles.
Opening Answer — READY Structure
The Manchester City Council lift installation project under JCT ICD is the recommended vehicle. The Building Safety Regulator delay, the CDP provisions, and the commercial management of the delay costs give you technically rich material that most candidates cannot match. Prepare to present the ICD specifically — not JCT generically.
