Every commercial manager has lived this moment. A compensation event is legitimate, the entitlement is clear, and the NEC4 contract supports the claim. But when the Project Manager asks for substantiation, the records are incomplete, contradictory, or missing entirely. The entitlement evaporates.
NEC4 records compliance is what separates contractors who recover their full entitlement from those who settle for less. The contract does not prescribe a specific record-keeping system, but it creates obligations and consequences that make robust contemporaneous records a commercial necessity.
Why Records Matter Under NEC4
NEC4 operates on a principle that distinguishes it from traditional contracts: prospective assessment. When a compensation event occurs, the Contractor must demonstrate its effect on the Defined Cost and the programme from the dividing date forward. That forecast needs a credible baseline, and that baseline comes from records.
Records serve three distinct purposes under NEC4:
- Substantiation of quotations. Under clause 62.2, the Contractor's quotation must show the changes to the Prices and any delay to the Completion Date. The Project Manager needs enough detail to assess the quotation. Without records of labour, plant, and materials deployed before and during the event, quotations become guesswork.
- Defence against disallowed cost. Under the Disallowed Cost definition in clause 11.2(26), cost is disallowed if the Contractor cannot demonstrate it is justified. Records are the evidence that prevents legitimate Defined Cost from being stripped out at assessment.
- Programme integrity. The Accepted Programme under clauses 31 and 32 is the objective baseline for delay and disruption analysis. Maintaining records that track actual progress against the programme is essential for demonstrating impact.
The Commercial Reality
On a typical £50 million NEC4 project, 3% of the Prices arise from compensation events. That is £1.5 million in entitlement. Contractors with poor records routinely leave a significant portion of that figure on the table. The entitlement existed. The records to prove it did not.
What Records the Contractor Must Keep
NEC4 does not contain a clause titled "Records to Maintain." Instead, the record-keeping obligations are embedded across multiple clauses, each creating a specific need. Understanding those needs prevents the common mistake of keeping records for their own sake rather than for a contractual purpose.
Under Options C, D, and E (target and cost-reimbursable contracts), the obligations are stronger still. The Contractor must keep accounts and records of Defined Cost that are open to the Project Manager's inspection at any time. This makes contemporaneous, auditable records a contractual requirement rather than a best practice recommendation.
| Record Type | NEC4 Clause | Purpose | Minimum Frequency |
|---|---|---|---|
| Daily site diary | Implied (Cl. 61.3, 62.2) | Contemporaneous narrative establishing awareness dates and supporting quotations | Daily |
| Labour allocation | 63.1 (Defined Cost) | Substantiate people cost in CE quotations | Daily |
| Plant records | 63.1 (Defined Cost) | Substantiate equipment cost and utilisation | Daily |
| Material deliveries | 63.1 (Defined Cost) | Link material cost to specific activities | Per delivery |
| Photographic evidence | 60.1(12) physical conditions | Visual proof of conditions encountered | Daily + event-triggered |
| Weather records | 60.1(13) weather | Compare actual weather against 1-in-10-year threshold | Daily |
| Progress records | 32.1 (programme) | Track actual vs planned progress for Accepted Programme updates | Weekly |
| Correspondence log | 13.1 (communications) | Audit trail of notifications, instructions, and replies | Continuous |
| Subcontractor records | 26 (subcontracting) | Substantiate subcontract Defined Cost | Per application |
How daily records feed NEC4 commercial processes and protect entitlement
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How Records Support Compensation Events
The relationship between records and compensation events is direct. Consider the lifecycle of a typical compensation event and where records are required at each stage.
Awareness and notification. The Contractor must notify the Project Manager within eight weeks of becoming aware that an event has happened or is expected to happen. Site diary entries establish the date of awareness. Without a diary entry, the Contractor cannot prove when awareness arose, and the Project Manager can argue the notification is time barred under clause 61.3.
Quotation preparation. The Contractor submits a quotation showing the effect on Defined Cost and any delay to the Completion Date. Labour allocation sheets, plant returns, and material records from the period before the event establish the baseline. Records from during and after the event show the impact. The difference is the entitlement.
Project Manager assessment. If the Project Manager makes their own assessment under clause 64, the Contractor's records provide the counterargument. Well-structured records make it difficult for the Project Manager to assess at a lower figure without justification.
Adjudication or dispute resolution. If agreement cannot be reached, the adjudicator relies on contemporaneous records above all other evidence. Retrospective witness statements carry far less weight than a diary entry written on the day the event occurred.
A Project Manager instructs a change to the Scope on 15 March. The Contractor's site diary records the instruction, the affected work area, and the labour and plant on site that day. The allocation sheet shows 12 operatives and a 20-tonne excavator deployed to the affected area. The Contractor notifies the compensation event on 17 March, within the eight-week time bar.
When preparing the quotation, the Contractor compares labour and plant records from the week before the instruction (baseline) against the four weeks after. The records show an additional 4 operatives and 1 telehandler deployed for 18 working days. The Defined Cost impact is calculated at £47,200. Without those daily records, the Contractor would be estimating, and the Project Manager would have grounds to reduce the assessment.
Poor Records and Disallowed Cost
The consequences of inadequate records under NEC4 are not theoretical. Disallowed cost under clause 11.2(26) applies to any cost that the Contractor cannot demonstrate is justified. In practice, this means the Project Manager can strip out cost items from payment applications and compensation event assessments if the Contractor cannot produce supporting records.
| Record Gap | Consequence | Typical Financial Impact |
|---|---|---|
| No daily diary entries | Cannot prove awareness date for CE notification | Entire CE time barred |
| Missing labour allocation | Cannot substantiate people cost in quotation | Significant reduction in assessed Defined Cost |
| No photographic evidence | Cannot prove physical conditions for Clause 60.1(12) | Physical conditions CE rejected |
| Inconsistent programme updates | Cannot demonstrate delay impact | Extension of time refused |
| No weather records | Cannot compare against 1-in-10-year threshold | Weather CE unsupported |
Adjudicator Perspective
In adjudication, the party with the better records almost always wins. Adjudicators have 28 days to reach a decision. They rely on contemporaneous evidence because it is objective. A well-maintained site diary written on 15 March carries more weight than a witness statement written six months later recalling what happened on 15 March.
A Practical Record-Keeping Framework
Knowing what to keep is one thing. Building a system that actually works on a busy site is another. The following framework organises NEC4 record-keeping into three tiers based on frequency and purpose.
Tier 1: Daily (Non-Negotiable)
These records must be completed every working day without exception. They form the foundation of every commercial process under the contract.
- Site diary. Narrative account of work completed, conditions encountered, instructions received, visitors, and any events that could have commercial implications. Three to five sentences per section is sufficient. Brevity with specificity beats length without substance. See the site diary guide for detailed guidance on what to include.
- Labour allocation. Names, trades, hours worked, and the activity each person was allocated to. This is the single most important record for substantiating Defined Cost.
- Plant and equipment. Machines on site, hours operated, and activity allocation. Include standing time if plant is idle due to a compensation event.
- Photographs. Date-stamped and location-tagged photographs of work faces, conditions, and anything unusual. Aim for enough coverage that a commercial manager who was not on site can reconstruct what happened.
Tier 2: Weekly
- Progress against programme. Update actual progress against the Accepted Programme. Note any activities behind programme and the reason for the delay.
- Early warning review. Review the risk register and assess whether any new early warnings are required.
- Commercial review. Reconcile records against open compensation events. Identify any gaps before they become irrecoverable.
Tier 3: Monthly and Event-Triggered
- Programme submission. Revised programme showing actual progress and forecast to Completion per clause 32.
- Payment application. Collate Defined Cost records for the assessment period.
- Compensation event substantiation. Package records for any CE quotation in preparation, linking daily records to the specific event.
Three-tier NEC4 record-keeping framework: daily foundations feed weekly reviews and monthly submissions
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Digital vs Paper Records
Paper-based records served construction for decades, but they carry inherent risks that digital systems eliminate. The question is no longer whether to go digital but how to do it without creating a different set of problems.
| Criterion | Paper Records | Digital Records |
|---|---|---|
| Accessibility | Filing cabinets, site offices, vehicles | Searchable, cloud-based, accessible from any device |
| Completeness | Gaps often undetected until needed | Automated prompts flag missing entries |
| Contemporaneity | Often completed retrospectively at week end | Timestamped on creation, GPS tagged |
| Linkage | Manual cross-referencing across files | Automatic linking between diary, allocation, and photos |
| Commercial extraction | Hours of manual review to identify CEs | AI can flag potential compensation events in real time |
| Adjudication readiness | Days to compile a bundle | Export filtered records in minutes |
Gather's QS AI Agent reviews site diary entries daily and flags potential compensation events that might otherwise go unnoticed. On average, Gather identifies 40% more compensation events than manual review alone, because it reads every diary entry against every clause in the contract. The result is that nothing falls through the cracks and nothing gets time barred because awareness was missed.
The shift from paper to digital does not change what records you need to keep. It changes how quickly you can assemble those records when the commercial moment arrives. The Contractor who can produce a structured CE substantiation package within 24 hours of notification has a material advantage over one who needs two weeks to find the right diary entries.
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