Last edited 23 Aug 2018

NEC Option E: Cost reimbursable contract

NEC was first published in 1993 as the New Engineering Contract. It is a suite of construction contracts intended to promote partnering and collaboration between the parties to a construction contract.

The Engineering and Construction Contract (ECC) is the most frequently used, and can be adopted on projects involving the construction of infrastructure or buildings. It is used for the appointment of a contractor for engineering and construction work, including any level of design responsibility.

It allows for 6 options:

NEC Option A: Priced contract with activity schedule.
NEC Option B: Priced contract with bill of quantities.
NEC Option C: Target contract with activity schedule.
NEC Option D: Target contract with bill of quantities.
NEC Option E: Cost reimbursable contract.
NEC Option F: Management contract.

Option E is a cost reimbursable contract in which the contractor is reimbursed the actual costs they incur in carrying out the works, plus an additional fee. The financial risk involved is largely taken by the client.

A cost reimbursable contract might be used where the nature or scope of the work to be carried out cannot be properly defined at the outset, and the risks associated with the works are high, such as, emergency work (for example, urgent alteration or repair work, or if there has been a building failure or a fire requiring immediate reconstruction or replacement of a building so that the client can continue to operate their business).