Final Accounts: Getting Closure Under JCT and NEC

5 October 2025 · 9 min read · Contract Administration

The final account is the moment of truth in any construction contract — the point at which every variation, every loss and expense claim, and every provisional sum is reconciled into a single agreed figure. Yet across the UK construction industry, final accounts routinely take months or years to settle, consuming management time and legal budgets that far exceed the sums in dispute. Understanding the process under JCT and NEC4 — and the pitfalls that derail it — is essential for closing out projects cleanly.

The Final Account Process Under JCT

Under JCT 2024, the final account process is triggered by practical completion and the issuance of the statement of final account. The process involves several defined stages:

• Final statement preparation: the contractor submits final account particulars within a specified period after practical completion, typically two to three months
• Architect/contract administrator review: the CA reviews and either accepts, amends, or disputes the figures, issuing a pay less notice if required
• Adjustment of loss and expense: any extended loss and expense claims are incorporated into the final account
• Agreed final sum: the final adjustment to the contract sum is confirmed and paid, subject to retention release

The JCT framework is structured but depends heavily on the quality of documentation maintained throughout the project. A final account that has not been progressively compiled is inherently vulnerable to dispute.

The NEC4 Approach

NEC4 takes a fundamentally different approach. Rather than a single end-of-project reconciliation, NEC4 promotes continuous assessment through the compensation event mechanism. Each compensation event is priced and agreed as it arises — at least in theory — meaning the final account should be a confirmation rather than a negotiation.

In practice, however, NEC4 projects often accumulate unquoted or disputed compensation events that coalesce into a disputed final account. The contract's tight timescales — a contractor must submit a quotation within three weeks of notification, and the project manager must respond within two weeks — are frequently missed, leading to deemed acceptance or disputation.

"The NEC philosophy is that the final account is built throughout the contract, not negotiated at the end. But when discipline breaks down, the mechanism collapses and parties find themselves in a worse position than under JCT — because the audit trail is fragmented." — RICS Contract Administration Guidance, 2024

Time Bars and Their Enforcement

Time bars are contractual provisions that extinguish a party's right to claim if they fail to submit within a defined window. JCT 2024 retains relatively generous notice periods for loss and expense claims. NEC4 is tighter — the three-week quotation period for compensation events operates as a quasi time bar, and failure to submit can leave the contractor with no entitlement.

The English courts have shown willingness to enforce time bars strictly. In Walter Lilly v Mackay [2012] EWHC 1773 (TCC), Akenhead J confirmed that contractual notice requirements must be complied with. However, the courts have also recognised that time bars can be waived by conduct, and that prevention principles may apply where the employer's own actions impede the contractor's ability to submit on time.

Documentation: The Foundation of Closure

The single most common reason for final account disputes is inadequate documentation. A robust final account package should include:

• Complete variation schedule with architect's instructions, quotes, and valuation sheets
• Loss and expense particulars with detailed worksheets, disruption analysis, and supporting correspondence
• Provisional sum reconciliations showing actual expenditure against allowances
• Daywork records signed by the employer's representative
• Plant and material cost records for any fluctuation adjustments
• Extension of time certificates and associated delay analysis

Dispute Triggers

From our experience advising on final account disputes, the most common triggers are:

1. Unagreed variations: particularly where instructions were issued verbally or via meeting minutes rather than formal AI/CA instructions
2. Loss and expense quantum: global claims unsupported by discrete cause-effect analysis
3. Delay-related entitlements: disagreement over concurrent delay, extension of time entitlement, and prolongation cost recovery
4. Defect rectification costs: disputes over whether remedial work was the contractor's liability or attributable to design changes
5. Retention and release: disagreements over the timing and quantum of final retention release

Practical Steps Now

1. Compile progressively: maintain a live final account workbook from project inception, updated each month with agreed and disputed items separately flagged
2. Formalise instructions: ensure every variation is backed by a written instruction — never rely on verbal directions or meeting minutes alone
3. Meet NEC4 deadlines: if managing an NEC4 contract, treat the compensation event timetable as non-negotiable and resource the assessment accordingly
4. Quantify loss and expense contemporaneously: submit loss and expense particulars with each interim application, not as a single end-of-project claim
5. Agree a final account protocol: at practical completion, agree a timetable and procedure for final account resolution — including a deadline and escalation route
6. Use adjudication early: if agreement cannot be reached within six months of practical completion, consider adjudication for discrete disputed items rather than allowing the dispute to compound

Sources: JCT Design and Build Contract 2024; NEC4 Engineering and Construction Contract; Walter Lilly v Mackay [2012] EWHC 1773 (TCC); RICS Guidance Note on Contract Administration (2023); Construction Industry Council, Final Account Management (2024); adjudication cost data from RICS Dispute Resolution Survey 2024.