ProQS NEC4 Pain and Gain Share Calculator

Under Option C the tendered total of the Prices sets a target. The Contractor is reimbursed what the work actually costs, measured as the Price for Work Done to Date. That is the Defined Cost plus the Fee.

If the final Price for Work Done to Date comes in below the target, there is a saving. The Contractor receives a share of it. This is the gain share.

If it comes in above the target, there is an overrun. The Contractor pays a share of it back. This is the pain share.

The arrangement gives both Parties a reason to control cost. Neither carries the full consequence of an overrun, and neither keeps the whole of a saving.

The total of the Prices is the target. It starts as the total of the Activity Schedule at tender. It then moves as compensation events are implemented. A large project can see the target change many times before Completion.

The Defined Cost is the cost the Contractor has actually incurred, assessed under the Schedule of Cost Components. Disallowed Cost is excluded. Disallowed Cost includes cost not justified by the accounts and records, and cost of correcting Defects after Completion, among other items listed in the contract.

In an unamended NEC4 contract the share compares the target with the Price for Work Done to Date, which adds the Fee to the Defined Cost. The Fee is the fee percentage applied to the Defined Cost. Because the tendered Prices already include the Fee, this keeps the comparison like for like.

Some amended contracts compare a cost-only target with Defined Cost alone. The calculator offers both bases. Choose the one your contract actually uses.

Contract Data part one lists the share ranges and the Contractor's share percentage for each. The ranges are expressed as the Price for Work Done to Date divided by the total of the Prices, as a percentage.

A typical entry might read like this.

These figures are an illustration only. NEC4 does not set default ranges or percentages. Every contract states its own.

The difference between the target and the outturn is split into slices. Each slice is the part of the difference that falls inside one range. Each slice is multiplied by that range's percentage. The Contractor's share is the sum of the results. This is a progressive calculation, much like income tax bands. It is not a single percentage applied to the whole difference.

1. Establish the final total of the Prices. Include every implemented compensation event and any agreed adjustment.
2. Establish the final Defined Cost. Remove any Disallowed Cost.
3. Add the Fee to get the final Price for Work Done to Date, unless the contract is amended to compare Defined Cost alone.
4. Convert each share range limit into money by applying it to the total of the Prices.
5. Find the part of the difference that falls inside each range.
6. Multiply each part by the Contractor's share percentage for that range. Add the results together. This is the Contractor's share.
7. The Client's share is the rest of the difference.

A saving means the Contractor is paid its share. An overrun means the Contractor pays its share. The Project Manager makes a preliminary assessment at Completion and a final assessment once the final figures are known. Check the timing clauses in your own contract.

The final total of the Prices is £10,000,000. The final Defined Cost is £11,500,000. For simplicity this contract compares Defined Cost alone, so no Fee is added. The share ranges are those in the table above.

The Contractor's share is £875,000, payable by the Contractor. The Client's final cost is £11,500,000 less £875,000, which is £10,625,000.

A single 50% applied to the whole overrun would give £750,000. That understates the Contractor's share by £125,000. Getting the banding right matters.

The tendered total of the Prices was £8,000,000. Implemented compensation events raised it to £8,400,000. A further £100,000 compensation event has been agreed and is entered as an adjustment. The final target is therefore £8,500,000.

The Contractor's accounts show £7,950,000 of cost. The Project Manager has disallowed £50,000. The Defined Cost is £7,900,000. The fee percentage is 10%, so the Fee is £790,000. The Price for Work Done to Date is £8,690,000.

That is £190,000 over target, or 102.24% of it. The share ranges are less than 95% at 50%, 95% to 105% at 50%, 105% to 115% at 80% and greater than 115% at 100%. The whole overrun sits inside the 95% to 105% range, whose upper limit is £8,925,000.

The Contractor pays £95,000 and the Client bears £95,000. The Client's final cost is £8,595,000. The Contractor's Fee of £790,000 is reduced to an effective £695,000.

Share ranges vary widely between contracts. Some put a 0% band just above target, so pain only starts later. Some cap the Contractor's exposure. Some state ranges in pounds rather than percentages. Public sector frameworks often add Z clauses that change how the share works or when it is paid.

Always read Contract Data part one and every Z clause before relying on a figure. The calculator lets you enter the ranges exactly as written and choose the basis of comparison. It cannot read your contract for you.

An overrun reduces the Contractor's margin. Where the Contractor's share is high, a large overrun can wipe out the whole Fee. The calculator shows the effective Fee after the share so this is easy to see.

A saving lowers the Client's outturn cost and increases the Contractor's return. Both Parties benefit, which is the point of the mechanism.

Use the scenario analysis to test a range of outturns early. It shows where pain or gain first starts to bite and how quickly exposure grows. That is useful when preparing cost reports and early warnings.