Exploring the Key Differences Between JCT and NEC Construction Contracts

Exploring the Key Differences Between JCT and NEC Construction Contracts

The construction industry is operating in one of its most challenging environments in recent memory. Ongoing global conflicts, volatile material costs and tightening public sector budgets have placed greater pressure than ever on procurement teams to demonstrate value for money and manage risk effectively. 

Selecting the right procurement route and contract type from the outset is therefore critical. A poorly matched contract can expose clients and contractors to unnecessary cost overruns and disputes, whilst the right one can drive collaboration and protect project outcomes.

In this article, Will Cooper, Key Account Coordinator (East and West), with additional commentary from Ben King at EDGE, explores the key differences between JCT and NEC to help you determine which route is most suitable for your project.

How does Two-Stage Tendering work?

Two-stage tendering offers the flexibility of an ‘open book’ approach to sub-contracted tender lots. Contractors submit bids based on an initial project design and compete for preferred contractor status. It is a more collaborative undertaking than the traditional ‘single stage’ procurement method, with a pricing schedule and programme of works submission that reduces the time and resources needed to complete the bid, subsequently reducing levels of risk to the contractor.

Only the preferred bidder moves to the second stage. The client then appoints the successful contractor under a Pre-Construction Services Agreement (PCSA), which is an agreement between the client and the contractor to progress the project without a full design or fixed sum to carry out the works.

How this first stage is managed differs depending on your chosen contract type. Under a JCT contract, the PCSA allows pre-construction works to be undertaken during the first stage of the tendering process. Under NEC, this stage is ordinarily managed using the Early Contractor Involvement (ECI) option, which embeds the contractor’s expertise into the design and planning process from the outset.

Broadly speaking, JCT centres on the allocation of liabilities and risk in the way a traditional contract would, whereas NEC commands and enables a proactive, collaborative approach to managing the contract. Understanding the details of both is critical when assessing which route is right for your project.

JCT or NEC: What’s the Difference?

JCT contracts have been in use since 1931, formed by the Royal Institute of British Architects (RIBA). The NEC is a more modern approach, introduced in 1993 by the Institution of Civil Engineers (ICE) and now in its fourth generation – NEC4, published in 2017 – designed for greater flexibility and collaboration between client and contractor.

JCT has recently published its 2024 edition suite, its first major update since 2016, introducing several changes that modernise contract administration and better reflect the realities of today’s construction environment. Notably, JCT 2024 now explicitly requires parties to act cooperatively, in good faith and with mutual respect under Article 3, principles that will already be familiar to anyone working with NEC. While the two contract types remain structurally different, this signals a narrowing of the philosophical gap between them.

It is worth noting that many of the changes introduced in JCT 2024 are not entirely new concepts — rather, they formalise and standardise amendments that were increasingly being made to JCT 2016 contracts in practice, as the industry adapted to a more collaborative way of working. In that sense, JCT 2024 reflects where the industry had already been heading, rather than representing a wholesale change in direction.

That said, the fundamental distinction remains. The JCT contract concentrates on the transfer of risk and liabilities, whereas NEC focuses on an equal balance of risk between both parties and requires a proactive approach to contract management and administration. The best option for your project will depend on the complexity of the work, the risk profile involved, and the experience and resources available to your project teams. The two approaches exhibit the following key differences:

Project Manager Vs Contract Administrator

Under a JCT contract, a Contract Administrator is responsible for administering the contract on behalf of the client. They must act as an impartial intermediary between client and contractor, with their prime focus on payment administration and guiding both parties through the procedures and processes set out in the contract. The risk with this approach is that the relationship can become overly contractual in nature, causing the client and contractor to become polarised by process and fostering an adversarial ‘them and us’ attitude.

Under NEC, it is the Project Manager who takes responsibility for contract administration. Their prime focus is to remove friction from contract management by advocating unity between client and contractor through trust and cooperation. Sharing risks and responsibilities and making decisions collaboratively reduces disputes further down the project lifecycle and helps teams work efficiently toward delivery.

It is worth noting that JCT 2024 has taken a step in this direction. What was previously an opt-in supplemental provision around dispute avoidance and good faith negotiations has now been made mandatory under the 2024 edition suite, appearing in the main contract above mediation and adjudication. 

In practice, this means JCT now contractually requires parties to attempt cooperative resolution before escalating disputes, a principle long embedded in NEC. While the two contracts remain structurally different in how they are administered, this change reflects a broader industry shift toward collaboration that both contract types now formally recognise.

The Programme

Under the JCT, there is a submission of a master programme, but this is not considered a contractual document and is not reviewed or updated during the project timeline unless a time extension is requested.

However, under the NEC, the programme is completely centric to the contract, as this is what forms the basis of the shared risk and collaborative approach to the management of the contract. It demands regular updates, full acceptance, and is signed off by the Project Manager ahead of implementation, making the assessment of progress more transparent. 

Early detection of delays allows for potential problems to be highlighted and tackled to mitigate lengthy time extensions or conflicts. The NEC contract contains clauses relating to time risk allowances, compensation events procedures and “float”, a term used to describe the time difference between when the contractor will actually finish work versus when they are contractually required to finish.

It is the methodical and frequent updating of the programme that makes the NEC contract an administration-intensive process, so the correct experience and resources must be assigned for this route, but it can show rewards via efficient and more streamlined project delivery.

Pricing and Payment

The standard JCT contract is a traditional fixed price lump sum contract, which may or may not contain quantities. It contains provisional sums as an estimate of the cost of works, and a Contract Sum Analysis (CSA) takes place as part of the tender pricing review. Payment under JCT is straightforward — it is contained within one section of the contract, making it relatively easy to adhere to.

NEC, by contrast, offers greater flexibility through six pricing options (A-F), allowing the contract structure to be tailored to the nature and complexity of the project. Rather than provisional sums, NEC operates an open book procedure distinguishing between ‘defined costs’, those recoverable by the contractor, and ‘disallowed costs’, those that cannot be recovered. 

Payment under NEC is referenced across three locations: clause 5, Y(UK)2 and Contract Data Part 1, which can require more careful administration but provides greater transparency throughout the project.

The JCT Target Cost Contract 2024

The most significant recent development in this space is the introduction of the JCT Target Cost Contract 2024 (TCC 2024), the first of its kind in the JCT suite and the final addition to the JCT 2024 edition. Developed in response to rising industry risk levels and increased supply chain insolvency rates since 2016, TCC 2024 represents a meaningful shift in how JCT approaches cost and risk.

Rather than a fixed contract sum, TCC 2024 introduces a cost-reimbursable model where the contractor is reimbursed for allowable costs plus a contract fee. A pain/gain share mechanism then allocates any difference between the actual cost incurred and the pre-agreed target cost between the employer and contractor – meaning cost risk is now shared, unlike traditional JCT Design and Build forms. This brings JCT meaningfully closer to NEC’s Option C and D target cost models, which have long been used on larger and more complex public sector projects.

TCC 2024 is best suited to projects with a value of £5 million or above, such as office blocks, hospitals and large housing schemes, where the employer has defined a clear scope but designs are not yet fully developed at the tender stage. For organisations familiar with JCT but looking for greater cost transparency and collaborative risk sharing on larger schemes, it offers a compelling middle ground without the need to transition fully to NEC.

Unanticipated Ground Risk

Even the most experienced contractor can encounter unforeseen ground conditions that could not have been factored into the cost or management of a project at the start of the process. In the JCT contract, ground risk is with the contractor, meaning they have no entitlement to an extension of time for completion of the works or any additional cost. 

However, the NEC offers a much fairer approach, and allows for provisions to be made under a Compensation Event clause, which shares the risk and costs between the client and contractor in the event of unexpected ground conditions.

How JCT and NEC Handle War, Conflict and Geopolitical Disruption

Global conflicts and geopolitical instability have brought contract resilience into sharp focus for construction teams across the UK. Material shortages, sanctions, energy price shocks and supply chain failures are no longer theoretical risks — they are live project challenges. Understanding how your contract responds to these events could make a significant difference to your financial exposure.

Force Majeure Under JCT

Under JCT, force majeure is treated as a ‘relevant event’, which means a contractor can claim an extension of time where such an event causes delay — but crucially, not additional money. The contractor bears the financial consequences even where the delay is entirely beyond their control. Compounding this, force majeure is not a defined term within JCT contracts, which leaves meaningful scope for disputes about what qualifies in the first place. Unless the parties have specifically amended the standard form to address geopolitical events, sanctions or conflict-related disruption, the default position offers contractors limited protection.

Prevention Events Under NEC

NEC takes a notably different approach. Under clause 60.1(19), where an event stops the contractor from completing the works, and neither party could have prevented it, the contractor may be entitled to both additional time and money — a significant distinction from JCT. 

Accessing this entitlement comes with strict procedural requirements. Both parties are obliged to issue an early warning as soon as they become aware of anything that could affect time, cost or quality. 

The contractor must then formally notify the compensation event within eight weeks or risk losing the entitlement entirely. Where disruption is severe, the Project Manager can instruct the contractor to stop work under clause 34.1, itself a compensation event, with termination rights available if a restart instruction is not issued within 13 weeks. 

Throughout, compensation events must follow a strict cycle of notification, quotation, assessment and implementation, with no steps skipped.

NEC offers better protection than JCT meaningfully in times of conflict or geopolitical disruption, but only for those who understand the contract and manage it proactively from the outset.

Choosing JCT or NEC for Construction Projects

The Government recommends that all public sector construction contracts should be procured via NEC contracts. Its comprehensive suite of end-to-end contracts, focused on project management, helps to deliver efficiencies across the public sector by delivering projects on time, on budget and in line with the Crown Commercial Service’s principles of Achieving Excellence in Construction. 

However, the publication of the JCT 2024 edition suite, with its new mandatory collaborative working provisions and the introduction of the Target Cost Contract, means the choice between JCT and NEC is less clear-cut than it once was, particularly for larger private sector schemes where risk sharing and cost transparency are increasingly important. Important considerations when deciding between JCT or NEC contracts remain time, cost, quality, and risk.

One important caveat for any client considering NEC contracts is that whilst the contract was written by engineers rather than lawyers and is deliberately designed to be more accessible and industry-friendly, this should not be mistaken for simplicity. It is imperative that clients develop a sound understanding of the contract themselves and do not rely solely on the Project Manager to administer it on their behalf. 

A client who is not across the key obligations, notice requirements and compensation event procedures risks undermining the very cooperation and good faith that NEC is designed to foster.

At Procure Partnerships, we have a wealth of experience in frameworks, and we use our sector-specific expertise to help both public and private sector organisations choose the most suitable procurement methods and contract types for each individual project. As a leading and dedicated UK procurement framework specialist, we can provide valuable support and advice to help deliver strategic value and objectives specific to your project. Get in touch with our team today to find out how we can help.

Comments from Ben King, Associate Director at EDGE:

“Whilst NEC is over 30 years old and has grown into a 4th generation, its adoption outside of the public sector works remains limited, most notably within the building sector, where it is rarely used. Within the infrastructure sector, NEC leads the way with widespread adoption by organisations such as National Highways, Network Rail, and the Environment Agency, i.e. government-funded organisations.”

“Often referred to as a burden, NEC administration is simply a demonstration of good project management with clear timescales, roles, and processes. That said, JCT is still an important reference point for clients across the country, offering familiarity and comfort compared to an unknown world of NEC. The important point is to consider who will be responsible for managing the selected contract and their experience in doing so. With several key differences between the two, a Project Manager/ Contract Administrator familiar with the requirements of the role is critical.”