Terminal Float NEC

Terminal Float under NEC4 ECC (Clause 63.5) | SCCSI

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Terminal Float

NEC4 Engineering and Construction Contract, Clause 63.5. This visual explains what terminal float is, why it sits with the Contractor under the NEC4 ECC, and how the wording of Clause 63.5 (and its NEC3 predecessor Clause 63.3) produces that result when a compensation event is assessed. It compares the NEC position with the more common position under JCT and bespoke forms where float is treated as belonging to the project rather than to a party.

Clause 63.5: Assessment of Delay to the Completion Date

0 of 8 sections explored

01 Three kinds of float on a construction programme +

Float is the spare time on a programme. Three categories are normally distinguished, and they behave very differently when a delay event arrives.

a Free float is the time a single activity can be delayed before it affects the start of any following activity.

b Total float is the time an activity can be delayed without delaying planned Completion (or eating into the terminal float, where one is shown).

c Terminal float is the gap between planned Completion as shown on the programme and the contractual Completion Date. It sits at the end of the programme rather than inside an activity chain.

Industry practice treats free and total float as a project resource available to absorb delays, but treats terminal float as something different in kind: an entitlement attached to the programme as a whole and to sectional Completion, owned by the Contractor under the NEC4 ECC wording.

Total float and free float are usually shared. Whoever uses the float first benefits, regardless of fault, unless the contract says otherwise. Terminal float, under NEC4 ECC, is the exception.

Distinguishing the three kinds of float is the first step in any delay analysis under NEC

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02 The wording of NEC4 ECC Clause 63.5 +

Clause 63.5 of the NEC4 Engineering and Construction Contract sets out how a delay caused by a compensation event is measured. In paraphrase: any movement of planned Completion attributable to the event, as judged against the Accepted Programme current at the dividing date, becomes the corresponding movement of the Completion Date.

The same approach appeared in NEC3 ECC at Clause 63.3, without the dividing-date anchor. NEC4 added the dividing date concept in Clause 63.1 so that the measurement is locked to the programme version live when the event was notified, not to a programme submitted afterwards.

Two features of the wording carry the entire mechanism. First, the reference point is the Contractor's own forecast date on the Accepted Programme, not the contractual Completion Date. Second, the comparison runs between two forecast dates only: the planned Completion before the event and the planned Completion after it. The Completion Date plays no part in the calculation; it simply moves by the same amount.

Reference: Clause 63.5, NEC4 Engineering and Construction Contract (paraphrased; consult the published contract for the exact wording)

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03 Why Clause 63.5 gives terminal float to the Contractor +

Imagine a contract with a Completion Date of 31 December and an Accepted Programme that shows planned Completion on 30 November. The terminal float is the month in between.

If a compensation event causes a critical-path delay of three weeks, Clause 63.5 looks only at planned Completion. Planned Completion moves from 30 November to 21 December. That movement, three weeks, is the assessed delay. The Completion Date is moved by the same three weeks, to 21 January. The terminal float is preserved.

If the assessment had been made by reference to the Completion Date, the three-week delay would have been absorbed by the existing month of terminal float and the Completion Date would not move at all. The Contractor would have lost the contingency it had built into its programme.

Because Clause 63.5 measures from planned Completion, the terminal float is reinstated after every compensation event. In substance, the Contractor's contingency is preserved for the Contractor's benefit, not absorbed by Employer risk events.

The consequence of the Clause 63.5 wording, accepted across leading commentary on NEC4, is that terminal float is owned by the Contractor.

The result is contractual, not equitable: it follows from the words of Clause 63.5

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04 NEC4 ECC compared with other standard forms +

Most standard forms do not address terminal float expressly. The NEC4 position is unusual because the assessment formula in Clause 63.5 produces ownership as a by-product of the wording rather than by direct allocation.

NEC4 ECC

Clause 63.5 measures delay against planned Completion. Terminal float between planned Completion and the Completion Date is preserved across compensation events and so sits with the Contractor.

JCT (DB / SBC)

The standard JCT forms do not deal with float ownership expressly. The orthodox English position is that float belongs to the project and is available to whoever needs it first, unless the contract provides otherwise. [Inferred from the wording of Clauses 2.27 and 2.28 of the JCT SBC, which gate extensions on actual delay past the Completion Date.]

FIDIC 2017 (Red / Yellow)

The FIDIC 2017 forms do not contain an equivalent to NEC Clause 63.5. Extension of time under Sub-Clause 8.5 is granted only "if and to the extent that completion is or will be delayed". Float is therefore typically treated as a project resource. [Inferred from the wording of Sub-Clause 8.5; FIDIC does not expressly address terminal float.]

The contrast matters for tendering. A Contractor pricing terminal float as its own contingency under NEC4 ECC has a basis in the contract wording. The same Contractor under JCT or FIDIC must rely on the general law on float and may find the contingency consumed by an Employer-risk delay.

Comparative positions are general; bespoke amendments routinely change them. Always read the executed contract.

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05 The dividing date and the role of the Accepted Programme +

Clause 63.5 is anchored to the Accepted Programme "at the dividing date". The dividing date is defined in Clause 63.1: it is the date the Project Manager instructed or should have instructed the Contractor to submit a quotation, or, for compensation events arising from a Project Manager or Supervisor decision, the date of that decision.

The consequence is that the programme used to assess the compensation event is the version current when the event was notified, not a later one. NEC's own published guidance is that programmes submitted after the dividing date drop out of the assessment for that event.

This protects the Contractor's terminal float in two directions. A subsequent Contractor-driven re-plan that reduces planned Completion does not retrospectively shrink the float available for an earlier compensation event. Conversely, an Employer cannot rely on a later programme version showing more efficient working to argue that the compensation event would not have caused the delay it did.

Practical effect: keeping the Accepted Programme genuinely up to date matters under NEC4. A stale Accepted Programme produces a stale baseline against which delay is measured.

If the Project Manager has not accepted any revised programme, the original Accepted Programme governs every compensation event assessment

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06 Practical points for parties under NEC4 ECC +

The Clause 63.5 mechanism can only operate on what the Accepted Programme actually shows. The practical points below follow from that.

1 The Contractor should show planned Completion separately from the Completion Date on every programme submitted for acceptance, so that the terminal float is visible. Clause 31.2 requires the programme to identify the planned Completion date.

2 The Project Manager should not refuse acceptance simply because terminal float is shown. Clause 31.3 sets out the only permitted reasons for non-acceptance, and the existence of terminal float is not one of them. [Inferred from Clause 31.3 listing exhaustive grounds for non-acceptance.]

3 Both parties should keep the Accepted Programme current. Revisions are submitted under Clause 32. A stale programme produces a stale dividing-date baseline.

4 Bespoke amendments sometimes redistribute float ownership. Z-clauses commonly delete or rewrite Clause 63.5 to align with the Employer's risk position. Read the contract before assuming the standard outcome.

For Employers, the answer to terminal float retention by the Contractor is not to argue with Clause 63.5; it is to negotiate the position before signature, either by amending Clause 63.5 or by contracting on a different form.

Z-clause amendments to Clause 63.5 are common on UK infrastructure projects; check the Contract Data and Z-clauses in every case

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07 In plain terms: who owns terminal float, and what should Contractors do +

The short answer under the unamended NEC4 ECC is that terminal float belongs to the Contractor. It is not a shared project resource and it is not available to the Project Manager to absorb the time effect of compensation events. The reason is procedural rather than philosophical: Clause 63.5 measures delay against planned Completion, so the gap between planned Completion and the Completion Date is moved bodily forward whenever an Employer-risk event lands on the critical path.

For Contractors, the practical consequences run in three directions.

1 Show the float on the programme. Terminal float exists as a benefit only when planned Completion is plotted clearly on the Accepted Programme, ahead of the Completion Date. A programme that lands planned Completion exactly on the Completion Date forfeits the contingency before the contract has even started.

2 Keep the Accepted Programme current. The dividing-date rule freezes whichever Accepted Programme is live when an event is notified. A stale programme produces a stale baseline, which usually understates the actual position. Submit revisions under Clause 32 promptly and chase acceptance.

3 Read the Z-clauses before pricing. Many UK Employers amend or delete Clause 63.5 to redistribute terminal float. If Clause 63.5 has been changed, the contingency disappears and the tender allowance for risk needs to reflect that. The standard outcome should never be assumed without checking.

4 Watch for indirect erosion. Bespoke wording sometimes leaves Clause 63.5 alone but adds an obligation to reduce planned Completion to the Completion Date when float is created, or makes acceptance of the programme conditional on removing terminal float. The effect is the same as deletion. Read the Contract Data and any pre-conditions to acceptance carefully.

5 Document the basis of any quotation. Quotations submitted under Clause 62 should set out the planned Completion movement clearly and link it to the Accepted Programme version at the dividing date. This makes the assessment auditable and difficult to displace later.

Bottom line: under the unamended NEC4 ECC, terminal float is the Contractor's. Under JCT and FIDIC, the position is much less clear and float will usually go to whoever needs it first. The wording of the contract decides; the label "float" does not.

For Employers seeking a different outcome, amendment at the negotiating table is the only reliable route

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08 Does the Contractor receive payment for loss of terminal float? +

The honest answer is that, under the unamended NEC4 ECC, the question rarely arises on its face: terminal float is not lost through a compensation event. The position is structural rather than discretionary.

1 Time and money are assessed separately. Clause 63.1 governs the cost effect of a compensation event (assessed by reference to Defined Cost plus the Fee). Clause 63.5 governs the time effect (movement of planned Completion is matched by the same movement of the Completion Date). The two assessments are independent limbs of the same quotation and run in parallel.

2 The float itself is not consumed. Because Clause 63.5 moves the Completion Date by the same number of days as planned Completion, the gap between the two is preserved by the assessment formula. There is no scenario under the standard wording in which a compensation event eats into the Contractor's terminal float and leaves it eroded for the next event.

3 Cost recovery is tied to the actual effect on the work, not to whether the Completion Date is breached. Defined Cost includes the cost of resources affected by the event during the actual period of delay to the Contractor's activities. So if a compensation event causes a one-week prolongation to the Contractor's site team, that one-week prolongation cost is recoverable through the Clause 63.1 assessment regardless of whether the Completion Date moved or whether float "would have absorbed" it. This is a material difference from many other forms where prolongation cost tracks completion impact.

4 Risk allowances form part of the assessment. Clause 63.8 requires the assessment to include cost and time risk allowances for matters that have a significant chance of occurring and that are not themselves compensation events. So an element of contingency for second-order disruption can be priced into the quotation alongside the direct effect.

5 Acceleration is the only paid route to a shorter Completion Date. Where a Contractor agrees to bring planned Completion forward, that is dealt with under Clause 36 [Acceleration] and requires the Project Manager to instruct a quotation. Acceleration is voluntary on both sides; the Project Manager cannot impose it. There is no separate "loss of float" payment outside this mechanism. [Inferred from Clause 36 framework; confirm against the executed contract.]

The position changes if the contract has been amended. Where Z-clauses delete or rewrite Clause 63.5 so that delay is measured against the Completion Date (the JCT or FIDIC pattern), terminal float can be consumed. In that case the Contractor is back to general principles: Clause 63.1 still gives full Defined Cost recovery for the actual effect on the work, but the time entitlement under Clause 63.5 disappears once float is exhausted, and there is no separate sum payable for "loss of float" itself.

Practical takeaway for Contractors: under unamended NEC4 ECC, you keep the float and you keep your cost recovery. Under amended forms, check whether Clause 63.5 has been preserved before pricing the float as a contingency.

Delayed demobilisation: can the Contractor recover the cost of staying on site longer?

Yes. Where a compensation event delays planned Completion, the Contractor remains on site longer than it would otherwise have done. The cost of People, Equipment, Charges and other on-site overheads kept on site during that extended period is recoverable as Defined Cost under Clause 63.1. Three planks support this.

A The intent of compensation under NEC. NEC's own published commentary states that the purpose of a compensation event is to put the Contractor in the cost position it would have been in if the event had not occurred. Where the event keeps People and Equipment on site for an additional period, restoring that cost position requires payment for the extended period.

B The Schedule of Cost Components is time-based. Defined Cost is built up from the (Short) Schedule of Cost Components: People, Equipment, Plant and Materials, Subcontractors, Charges, Manufacture and Fabrication, Design, Insurance. The People and Equipment categories are calculated by reference to the time the resource is required (Equipment cost components 21, 22 and 23 are explicitly time-related). Extending the period the resource is required therefore feeds directly into Defined Cost.

C General prolongation principle. The orthodox UK construction-law position is that, where an Employer-risk delay event keeps the Contractor's labour and resources on site for longer than originally anticipated, the Contractor is entitled to recover the costs incurred for that extended period, subject to proof of actual cost and of the causal link. NEC4 implements this principle through Defined Cost rather than through a separate "preliminaries" head of claim.

Two qualifications. First, Clause 63.7 requires the Contractor to take steps to mitigate the cost effect, so the recoverable amount is the cost that could not reasonably have been avoided. Second, the Contractor must keep records sufficient to evidence the additional resource time on site. Forecast assessments before the dividing date should price the prolongation prospectively; retrospective assessments use actual Defined Cost.

The label "prolongation" or "extended preliminaries" is not used in NEC, but the underlying cost is recovered by routing the extended-period People, Equipment and Charges through the Schedule of Cost Components

Off-site head office overheads are recovered separately through the Fee, not through Defined Cost; they are not assessed by extension of the on-site period

Live Programme Simulation

How Clause 63.5 preserves the Contractor's terminal float

An eight-week construction sequence runs to a planned Completion two weeks ahead of the Completion Date. Inject a compensation event and watch the wording of Clause 63.5 do its work in real time.

Activities

Earthworks

Substructure

Frame

Fit-out

CE delay

Terminal float

Contractor's contingency

Planned Completion

Completion Date

Planned Completion

Wk 8

Completion Date

Wk 10

Terminal float

2 wks

CE delay

0 wks

Baseline. Planned Completion sits at week 8. The Completion Date is week 10. The two-week gap is the Contractor's terminal float. Click Inject Compensation Event to see how Clause 63.5 treats an Employer-risk event.

Critical-path activity

Compensation event

Terminal float

Planned Completion

Completion Date

Legal Disclaimer

This interactive process flow is provided for educational and professional development purposes only and does not constitute legal advice. The content reflects interpretations and analyses that may not apply to specific circumstances. Contract interpretation depends on specific wording, jurisdiction, and factual context. Always consult qualified legal professionals before making decisions based on this content. SCCSI and its contributors accept no liability for reliance on this material.

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