Waleed Tariq Academy homeNEC4 Payment and Defined Cost Masterclass · From cost to cash
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NEC4 Payment and Defined Cost Masterclass · Lesson 2 of 3

From cost to cash

8 screensAbout 6 minutes

Why it matters

Merrow Vale has paid GBP 1,905,000, and the 1 June payment is GBP 646,020

Merrow Vale is the Contractor, Aldermere Water the Client and Dana Whitfield the Project Manager. How do the figures join?

1,905,000GBP of paid by 1 June 2026
646,020GBP Aldermere Water pays for 1 June

Source: ECC 51.1. ECC Option C 11.2(31).

The rule

Defined Cost is the listed cost, less Disallowed Cost

One box each.

Defined Cost

Listed in the .

Listed, but a ground such as missing records removes it.

Not Defined Cost

Not listed. covers it.

“the cost of the components in the Schedule of Cost Components less Disallowed Cost” (11.2(24))

Source: ECC 52.1. ECC Option C 11.2(24), 11.2(26).

The rule

Under Option C, payment starts from forecast Defined Cost

Five steps, in this order.

  1. Defined CostPaid, plus the Project Manager's forecast.
    C 11.2(31)
  2. Plus the FeeAt the .
    Clause 11.2(10)
  3. Less retention3% over GBP 400,000.
    Clause X16.1
  4. The running total.
    Clause 50.3
  5. PaymentThe change since last time.
    Clause 51.1

Source: ECC 11.2(10), 50.3, 51.1, X16.1. ECC Option C 11.2(31).

See it on the project

On 1 June 2026 the cost builds up, then the earlier amount due comes off

Watch the total climb, then fall back to the payment.

The 1 June 2026 assessment, GBP

Defined Cost paid by 1 June
1,905,000
Project Manager's forecast to 29 June
+595,000
2,500,000
Fee at 11%
+275,000
2,775,000
Retention, 3% over 400,000
−71,250
Amount due
2,703,750
Less the 4 May amount due
−2,057,730
Payment, due by 22 June
646,020

“the total Defined Cost which the Project Manager forecasts will have been paid” (11.2(31))

Source: ECC 11.2(10), 50.3, 51.1, 51.2, X16.1. ECC Option C 11.2(31).

See it on the project

The target stays beside the payment path until the share is worked out

Work out the share before you look.

Target and Price for Work Done to Date, GBP

Target1 June 2026
8,518,385
Price for Work Done to Date1 June 2026
2,775,000
TargetAt the end
8,912,000
Price for Work Done to DateAt the end
8,640,000
02.5m5m7.5m10m

At the end Merrow Vale beats the target by GBP 272,000. What is its share?

GBP 136,000, its 50% share in the 90% to 110% range (C 54.1).

Is the GBP 136,000 paid through the monthly payments?

No. A preliminary share goes in at Completion and the final share in the final assessment (C 54.3, 54.4).

Source: ECC Option C 54.1, 54.3, 54.4. Aldermere Contract Data.

Try it

Sort the costs Dana checks on 8 July 2026 for the four weeks to 29 June

Does a component cover it? Then, does a ground take it out? Each answer names the ground.

Cost 1 of 7

…

Source: ECC 52.1. ECC Option C 11.2(24), 11.2(26).

Quick check · Try it

Two questions on what you have just covered

Work each one out before you pick. The figures are on the money map.

Quick checkPick an answer to see if you are right and why
1Suppose Dana had forecast GBP 495,000, not GBP 595,000. What would the 1 June payment be?
GBP 538,350
GBP 546,020
GBP 535,020
2Suppose Merrow Vale's commercial manager, Leila Moss, puts the 1 June amount due at GBP 2,820,000. What does Dana certify?
Her own figure of GBP 2,703,750
Leila's figure, as it came in on time
Leila's figure, less what Dana can disprove

2 questions to answer

Source: ECC 11.2(10), 50.1, 50.2, X16.1. ECC Option C 11.2(31).

Recap

Follow every payment from Defined Cost to cash

Four checks for any certificate. Next: who does what, and when.

On Monday at work

  • Start from Defined Cost paid, then add the forecast.
  • Add the Fee before you take off retention.
  • Pay the change in the amount due, not the total.
  • Keep the target out of the payment.

In the Toolkit: NEC4 Application for Payment (ECC and ECS, Options A to F) (Excel) Members

Next lesson: Who pays whom, and when

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Independent course material. It is not published or endorsed by NEC. Clause references are to the NEC4 Engineering and Construction Contract, June 2017 with amendments January 2023. The project and the people are invented. Short quotes from NEC4 (© NEC 2017) and the FIDIC Red Book (© FIDIC 2017) are used for review and comment. Read the full clauses in your own copy of the contract.

Source: ECC 11.2(10), 50.3, 51.1, X16.1. ECC Option C 11.2(31), 54.1.

Go deeper (optional)

Three edges of the money map

Three common questions. The first is a what-if.

Sent Friday 26 June, received Monday 29 June. Paid when?

NEC4 does not say. One view takes the day it left the account, the other the day it arrived. Write the test into the .

ECC Option C 11.2(31), 52.2

Whose forecast sets the payment?

Dana's forecast of Defined Cost paid sets it. Merrow Vale's forecast of total Defined Cost only informs.

ECC Option C 11.2(31), 20.4

Does payment stop at the target?

No. Payment carries on above the target. The target only sets the .

ECC Option C 54.1

Source: ECC 52.2. ECC Option C 11.2(31), 20.4, 54.1.