The defects liability period (DLP) is the fixed window after practical completion during which the contractor is obligated to return and fix defects at their own cost. On most UK construction contracts, this runs for 12 months. Under NEC4, the equivalent concept is the "defect correction period" (clause 43), and the terminology matters because NEC4 treats defects with more procedural rigour than most QSs expect.
Why does this matter for earned value management? Because if your contractor carries risk for defects rectification, those costs need to be inside your BAC. Miss that, and your EAC is lying to you from day one.
This page is part of the earned value definitions glossary. For the full formula reference, see the earned value formulas page.
What Happens During the Defects Liability Period
Don't dismiss the DLP as a contractual formality. It's the window where the client inspects the finished works, identifies snags and defects, and the contractor comes back to put things right. Only after the DLP expires and all notified defects are corrected does the final certificate get issued and retention released.
On NEC4, the process is tighter than on JCT. The Supervisor (not the Project Manager) searches for and notifies defects under clauses 43 and 44. The contractor then has the defect correction period stated in Contract Data Part 1 to fix each one. Miss that deadline? The PM assesses the cost of having someone else fix it and deducts that amount from the Prices.
That catches people out. Under NEC4, the PM doesn't just withhold money and hope for the best. They actively assess and deduct.
The Timeline
Here's how the DLP fits into the project lifecycle:
CONTRACT WORKS PRACTICAL DEFECTS FINAL START PERIOD COMPLETION LIABILITY CERTIFICATE | | | PERIOD | | Design & | Construct | 12 months | Fix defects | | mobilise | & install | (typical) | + snagging | | | | | | v v v v v ──────────────────────────────────|===========|───────────────────> ^ ^ ^ Completion DLP Expiry Retention certificate (or defect released issued correction (final period ends) account settled) KEY: ─── = Works period === = Defects liability period
Two things to note. First, the DLP clock starts at practical completion (or, on NEC4, at Completion as defined in clause 11.2(2)). Second, retention isn't released until the DLP ends AND defects are rectified. On a £10M contract with 3% retention, that's £300,000 sitting in the client's account for 12 months after you've finished the work.
NEC4 vs JCT: Key Differences
| Aspect | NEC4 (Defect Correction Period) | JCT (Rectification Period) |
|---|---|---|
| Who notifies defects? | Supervisor (clause 43.1) | Architect/CA or Employer |
| Correction period | As stated in Contract Data Part 1 (e.g., 4 weeks per defect) | "Reasonable time" (typically negotiated) |
| Remedy if contractor fails | PM assesses cost, deducts from Prices (clause 45.1) | Employer engages others, deducts from retention |
| Typical duration | 52 weeks (1 year) from Completion | 12 months from Practical Completion |
| Defects date | Defined in Contract Data Part 1 (clause 11.2(13)) | Tied to Rectification Period expiry |
| Retention release | Half at Completion, half at defects date | Half at Practical Completion, half at end of Rectification Period |
The critical NEC4 distinction: there's a defects date AND a defect correction period. The defects date is the end of the window for notifying defects. The defect correction period is how long the contractor has to fix each one once notified. A defect notified one day before the defects date still gets the full correction period.
Worked Example: £10M Office Fit-Out
Worked ExampleScenario: Murphy Group is delivering a £10M office fit-out under NEC4 Option A in Manchester. The Contract Data states:
- Defects date: 52 weeks after Completion
- Defect correction period: 4 weeks
- Retention: 3%
Completion is certified on 14 March 2025. The defects date is therefore 13 March 2026.
Month 3 (June 2025): The Supervisor notifies 14 defects during a systematic inspection. These include cracked floor tiles in the atrium (est. £8,500 to fix), HVAC balancing issues on floors 3 and 4 (est. £22,000), and fire door closer faults on 6 doors (est. £3,600). Murphy has until 12 July 2025 (4 weeks) to correct all 14.
Month 3 outcome: Murphy corrects 12 of 14 defects within the 4-week period. The remaining 2 (HVAC balancing) take an additional 3 weeks. The PM considers assessing the cost but Murphy completes before the PM makes the assessment.
Month 11 (February 2026): Final snagging inspection reveals 4 minor defects. All notified before the defects date. Murphy corrects them by 20 March 2026.
Retention release:
- At Completion (14 March 2025): first half of retention released = £150,000
- At defects date + correction (20 March 2026): second half released = £150,000
EVM implication: Murphy's BAC of £10M should include an allowance for defects correction costs. On this project, the total cost of rectifying defects was approximately £42,000 in labour and materials. If BAC didn't include a defects contingency, that £42,000 would show as a cost overrun in the CPI calculation, making performance look worse than it actually was.
The EVM Connection: Should BAC Include Defects Period Costs?
Short answer: yes.
On most contracts, the contractor carries the cost risk for correcting their own defective work. That means your BAC should include an allowance for defects rectification, typically 0.5% to 1.5% of contract value depending on complexity and the contractor's track record.
Skip this, and your EVM system will flag a cost overrun the moment you mobilise to fix defects after completion. The project looks like it's gone wrong when actually everything is working exactly as expected. I've seen commercial managers waste hours investigating a CPI drop that was entirely explained by post-completion snagging they hadn't budgeted for. Hours they'll never get back.
The same principle applies to EAC and ETC. If defects costs aren't in the baseline, your forecasts will overstate the problem every time. Here's how to model it:
| Contract Value | Defects Contingency (%) | Budget Allowance | Typical Actual |
|---|---|---|---|
| £5M | 1.0% - 1.5% | £50K - £75K | £30K - £60K |
| £10M | 0.8% - 1.2% | £80K - £120K | £40K - £90K |
| £25M | 0.5% - 1.0% | £125K - £250K | £80K - £180K |
| £50M+ | 0.3% - 0.8% | £150K - £400K | Varies significantly |
These figures are indicative, the actual percentage decreases with scale because defects don't scale linearly with contract value. Complex M&E-heavy projects will sit at the higher end; straightforward civils at the lower.
Common Mistakes
- Confusing the defects date with the defect correction period. The defects date is when the notification window closes. The correction period is how long the contractor has to fix each notified defect. On NEC4, a defect notified on the last day before the defects date still gets the full correction period. The project isn't "done" at the defects date if corrections are still outstanding.
- Not budgeting for defects rectification in BAC. If you're running EVM, your baseline needs a defects contingency. Otherwise every post-completion fix looks like a cost overrun. Most experienced QSs allow 0.5% to 1.5% of contract value.
- Assuming retention release is automatic. Retention isn't released just because the defects date has arrived. It's released when all notified defects are corrected (or the PM has assessed the cost of uncorrected defects). On one highways project I worked on, the contractor waited 7 months past the defects date for retention release because two defects were in dispute.
- Ignoring latent defects. The DLP covers patent defects (those discoverable by reasonable inspection). Latent defects (hidden problems that emerge later) are covered by the Limitation Act, not the DLP. The contractor's liability for latent defects extends 6 years under hand (12 under deed) regardless of the DLP.
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Frequently Asked Questions
What's the typical defects liability period on UK construction contracts?
12 months from practical completion (or Completion under NEC4). Some contracts specify longer periods for specific elements, 24 months for waterproofing or 36 months for planted areas, for example. The Contract Data or contract particulars should specify the exact period.
Can defects be notified after the DLP expires?
Not under the DLP mechanism, no. Once the defects date passes, the contractual notification window closes. However, the contractor still has liability for latent defects under the Limitation Act (6 years simple contract, 12 years under deed). The DLP is a contractual remedy period, not the extent of total liability.
How does the DLP affect retention release?
Most contracts split retention release into two halves. The first half is released at practical completion (or Completion). The second half is held until the defects date passes AND all notified defects are corrected. On NEC4, clause 50.1 specifically ties the second retention payment to the defects date. If defects remain uncorrected, the PM assesses the cost and deducts it before releasing the balance.
Should I track defects rectification costs in my EVM system?
Yes, if the contractor bears the risk. Include a defects contingency in your BAC and track actual costs of rectification against it. This prevents post-completion defects work from distorting your CPI and EAC. Treat it as a discrete work package within your WBS.
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