NEC4 Delivery Notes and Disallowed Cost

What you need to know

For NEC4 Options C, D and E, Defined Cost excludes Disallowed Cost under the applicable definition.
A missing delivery note is not automatic Disallowed Cost: assess the accounts and records as a whole.
Keep order, delivery, payment, use and stock records connected; check the selected Option and amendments.

Imagine Type 1 deliveries appearing in a project’s cost ledger on Saturdays, when that site does not work Saturdays.

One possible explanation is a booking error: a shared receiving team processes tickets for two projects, but finance allocates them to one. This is an illustrative scenario, not a verified quotation from the NEC webinar. The lesson is to compare accounting entries with the delivery and site records.

Buying materials, receiving them and using them on the right project are different facts. Your records need to show which one each entry supports.

Everything below assumes the unamended NEC4 Engineering and Construction Contract (ECC). Check your Z clauses and Scope for changes.

How Plant and Materials fit into Defined Cost

For ECC Options C, D and E, Defined Cost is calculated using the Schedule of Cost Components, excluding Disallowed Cost, with the Fee applied under the contract. Check the relevant component before treating an invoice amount as recoverable cost. Contract Data rates and percentages are treated differently from actual-cost amounts under clause 52.1. Source: NEC Defined Cost guidance; NEC cost assurance Q&A.

The Plant and Materials component covers payments for:

purchasing Plant and Materials
delivery to and removal from the Working Areas
providing and removing packaging
samples and tests

The cost is credited with payments received for disposal of Plant and Materials, unless the cost is disallowed.

Each item has a document behind it. The quantity is on the delivery note or batch ticket, and the price is on the invoice. The delivery charge is on the ticket or invoice. Returned pallets show up on collection notes or credit notes, and disposal credits come from whoever bought the scrap.

NEC's webinar Q&A is clear on the order of proof. Verification should start with the invoice and proof of payment. Proof of delivery, a purchase order (PO) or a requisition may be worth requesting where the invoice description is vague or the Project Manager is remote from the works.

Equipment charging is usually supported by on-hire and off-hire records. Utilisation records help test the charge too. Idle time is not automatically Disallowed Cost: the definition allows for reasonable availability and utilisation. Source: NEC cost assurance Q&A.

A delivery note helps answer questions an invoice may leave open: what arrived, when and at which project. It supports the cost evidence; it is neither a universal prerequisite for recovery nor proof of use on its own.

The Disallowed Cost categories that bite on delivery records

For ECC Options C, D and E, three parts of the Disallowed Cost definition are particularly relevant to delivery records. Check clause 11.2(26) in your contract. The summaries below are paraphrases.

Cost not justified by the accounts and records. A missing ticket creates a gap, but the decision concerns the evidence as a whole, not a mandatory six-document checklist.
Plant and Materials not used to Provide the Works, with allowances for reasonable wastage and the exception for a change to the Scope. Keep evidence of receipt, use, stock, transfers and the reason any material became surplus.
Resources not used to Provide the Works, allowing for reasonable availability and utilisation, or not removed when the Project Manager requested. Keep hire periods and actual use distinct; a resource can be available without working continuously.

NEC4’s definition differs from NEC3, including removal of wording referring to what the Project Manager decides. That does not remove contractual assessment or the need to judge matters such as reasonable wastage. Use the definition in the executed contract. Source: NEC Defined Cost guidance.

Disallowed Cost is excluded from Defined Cost. On a target contract, the eventual financial outcome also depends on the contractual share calculation. Do not present an amount excluded from reimbursement as an identical final loss under every Option. Keep the payment assessment and the final share calculation separate.

What an audit actually tests

Cost assurance can use a risk-based sample rather than checking every ticket. That is an assurance approach, not a contractual cap on what the Project Manager may inspect or request. Check your Scope and agreed process. Source: NEC equipment assurance guidance.

An accounting entry can be compared with diary entries, delivery records, quantities and stock movements. An apparent mismatch is a reason to investigate, not proof that the cost is wrong.

Data checks can help identify unusual dates, repeated prices or incorrect project codes. A digit-distribution test such as Benford’s law is only a screening tool on suitable datasets; a flag is not proof of fraud or Disallowed Cost. Check the underlying records before drawing a conclusion.

Keep PO, delivery and invoice references against ledger entries where your system allows it. That gives a reviewer a route from the cost to the evidence without another round of chasing.

The six-link evidence chain

These six records form our suggested evidence file, not an NEC-mandated pack. Clause 52.2 addresses records, including additional requirements in the Scope. NEC’s webinar Q&A recommends starting material-cost verification with the invoice and payment evidence, then seeking delivery/order evidence where needed. Source: NEC cost assurance Q&A.

Purchase order. What you agreed to buy, from whom, at what price.
Delivery note or ticket. What the supplier says it delivered, and when.
Goods received note. What you confirm you received.
Invoice. What the supplier charged.
Proof of payment. That the money actually left your account.
Evidence of use. That the materials went into this job: a diary entry, an allocation, a measured quantity or an as-built record.

Finance usually holds the order, invoice and payment records. The site team holds the receiving and use records. Agree references that connect them. Recording an intended activity is useful, but actual use still needs to be supported by progress, allocation or stock records.

Where materials evidence usually breaks

Reading the chain, these seven places are where it tends to break:

The ticket never reaches the office, so no GRN is raised against it, or one is raised from the invoice instead.
The GRN is booked to the wrong job or cost code, as in the Saturday deliveries example.
Bulk material tickets have no weight or volume, so the quantity comes from the invoice.
The diary says "concrete pour ongoing" with no quantity, location or ticket reference.
Materials are moved between jobs or back to the yard with no record, so the cost stays on the wrong project.
Wastage isn't recorded, so there's nothing to show it was reasonable.
Returns and credits aren't tracked, so the disposal credit never reaches Defined Cost.

Capturing the ticket promptly and identifying its project, location and intended use helps reduce the gaps. Transfers, wastage, returns and credits still need their own stores and finance routine.

What a defensible materials record looks like

Use this as a checklist for Option C, D and E jobs:

Every delivery is recorded on the day it arrives, with a photo of the ticket.
Bulk materials have the quantity checked on site and written down.
Each delivery is linked to a PO and a cost code before it leaves site.
The site diary records the activity and location the materials were delivered for.
Materials used are recorded against activities, so you can reconcile delivered against used. Our allocation sheet template shows one way.
Wastage is recorded with a reason.
Transfers between jobs and returns to the yard are recorded.
Credits for returned pallets, packaging and disposals are tracked.
Any materials made redundant by an instruction are recorded with the date and the instruction reference.
Your cost ledger keeps the GRN and PO reference against each line.

This checklist makes an audit easier to support; it cannot guarantee acceptance of a cost. Check any gap before it becomes a month-end query.

Gather records delivery notes within the shift record, alongside the day’s work and resources. Its Record product page also describes photos with timestamps and GPS metadata. These records support a delivery history; they do not, by themselves, confirm the quantity received or prove that materials were used. See the Gather Record product page or book a demo.

What the Scope says

Read the Scope alongside the selected Option. Confirm which records are required, who keeps them, how they can be inspected and what must be submitted. Additional record requirements should be clear and priced into the process. Confirm the applicable inspection clause against the executed contract rather than importing a clause number from another Option.

FAQ

Is a missing delivery note automatically Disallowed Cost?

No. The records must justify the cost as a whole. A supplier duplicate, invoice, payment evidence, diary entry or stock record may help fill a missing-ticket gap. None guarantees recovery: the contract and facts still decide. Source: NEC cost assurance Q&A.

Does this apply to Options A and B?

Options A and B use the Short Schedule of Cost Components for Defined Cost assessments, including compensation events; routine payment follows the relevant priced mechanism. Option F has a separate Defined Cost regime. Do not copy the C/D/E Disallowed Cost explanation across all Options. Source: NEC Defined Cost guidance.

Do auditors check every ticket?

Not necessarily. Sampling is common in cost assurance, but it does not mean a particular record cannot be requested or checked. Agree the assurance process and keep the full underlying records. Source: NEC equipment assurance guidance.