Answered: NEC ECC: X22 Incentive payment

The Budget is the summation of the amounts stated for the items in the Contract Data. This is generally the forecast cost to be paid to the Contractor together with the forecast of other costs to be incurred by the Employer.  

The X22 incentive is a measure of any saving between the final outturn paid to the Contractor plus the final other costs in comparison to the Budget (as may be adjusted). The saving being factored by the % stated in the Contract Data. This is determined initially at Completion and again at “final account” (in the same manner as the Contractor’s share).

At commencement of stage 2 on an Option C contract the difference between the Target Price (total of the Prices) and the Budget will be the other costs. However during stage 2 the Prices can potentially change for more circumstances than will alter the Budget and therefore the difference may not remain constant.

On an Option C, there is potential for an incentive (based on the saving between the Employer’s outturn cost and that forecast) and a Contractor’s share (based on the difference between the Prices and PWDD).  Both assessed at Completion and then again at “final account”.