Webinar - Disallowed Cost in Practice: Why Issues Persist Despite Open-Book Principles
Thank you for everyone who atteneded our Disallowed Cost in Practice: Why Issues Persist Despite Open-Book Principles webinar in collaboration with CICES on 21/07/2026, hope you’ve enjoyed session.
Please feel free to connect with our presenter, Cecelia Fadipe, Commercial & Finance Director at CFBL Consulting on LinkedIn.
As promised, please find below the answers to the questions we didn’t have time to answer live on the session.
Governance & Assurance
Q: When should independent assurance be introduced?
Independent assurance should be introduced at contract mobilisation and maintained throughout delivery. Early assurance helps identify weaknesses in controls, records and cost allocation before issues become embedded.
Key Principle: Treat assurance as a preventative activity, not a retrospective investigation.
Q: Can expenditure be audited proactively rather than retrospectively?
Yes. Continuous Verification and Assurance (CVA) provides an ongoing review of cost records, which improves accuracy, reduces disputes and supports timely corrective action.
Key Principle: Review costs while they are being incurred, not after they have crystallised.
Records & Evidence
Q: Should evidence requirements be agreed upfront?
Yes. Parties should agree at mobilisation what evidence will be required to support labour, plant, material and subcontractor costs.
Key Principle: Unclear evidence requirements are one of the most common causes of disallowed cost disputes.
Q: Should evidence requirements be agreed upfront?
Yes. Parties should agree at mobilisation what evidence will be required to support labour, plant, material and subcontractor costs.
Key Principle: Unclear evidence requirements are one of the most common causes of disallowed cost disputes.
Q: Timesheets do not show hour-by-hour activities. What is acceptable?
NEC requires costs to be justified by accounts and records. Timesheets do not need to record every hour, but they should demonstrate a clear link between resources, activities and the works provided.
Key Principle: Agree minimum evidence standards at contract outset
Q: Are contract management systems such as FastDrafttm essential?
No, but they are highly beneficial. They provide structured records, approvals and audit trails that improve transparency and consistency.
Key Principle: Technology supports assurance but does not replace good governance.
Commercial Controls
Q: How should Defined Cost and Disallowed Cost be managed under Option E?
Implement robust records, regular audits, agreed evidence standards and early challenges of questionable costs. Option E places greater emphasis on disciplined cost management because costs are reimbursed as incurred.
Key Principle: Costs that cannot be justified through records may become Disallowed Cost.
Q: Why does Disallowed Cost remain a persistent issue?
The challenge is often interpretation rather than contract wording. Resource allocation, support costs, affiliates and productivity losses frequently create disagreement.
Key Principle: Document agreed methodologies before costs arise.
Q: Can an employer recover due diligence or audit costs when records are inaccurate?
Not automatically under NEC. However, costs may be disallowed, and additional contractual provisions can be included to recover audit costs arising from materially inaccurate submissions.
Key Principle: Accurate records reduce commercial exposure for all parties.
Labour, Plant & Materials
Q: How can plant utilisation be demonstrated?
Use site diaries, plant logs, GPS information, photographs, delivery records and productivity reports. Evidence should demonstrate that the plant was used to Provide the Works.
Key Principle: Availability alone does not necessarily justify recovery of cost.
Q: What are the boundaries for inefficiency costs?
Contractor-caused inefficiencies such as poor planning or avoidable rework are generally Disallowed Cost. Client-caused disruption may be recoverable where properly evidenced.
Key Principle: Cause and effect must be clearly demonstrated.
Q: How should excessive material wastage be assessed?
Establish expected wastage levels using industry benchmarks, manufacturer guidance or historic performance, then investigate material variances.
Key Principle: Reasonable wastage may be recoverable; avoidable wastage may not be.
Contract Administration & Information Sharing
Q: How should subcontractor delay costs be treated?
Costs should not automatically be disallowed simply because delay occurred. The underlying cause, contractual obligations and mitigation actions should be assessed before reaching a conclusion.
Key Principle: Focus on evidence and causation rather than assumption.
Q: Does NEC4 require overtime approval?
No. However, organisations should establish approval thresholds and governance arrangements to ensure overtime is necessary, reasonable and adequately supported.
Key Principle: Pre-agreed approval processes reduce disputes.
Q: How can open-book transparency be balanced with GDPR?
Use agreed data-sharing protocols, anonymise personal information where appropriate and restrict access to authorised personnel.
Key Principle: Transparency should be sufficient to validate costs while protecting personal data.
CFBL Key Takeaways
- Disallowed Cost issues are usually caused by weak evidence, inconsistent interpretation or poor governance.
- Good records are the foundation of successful NEC cost recovery.
- Early agreement of methodologies prevents later disputes.
- Independent assurance strengthens confidence in cost submissions.
- Prevention is significantly more effective than retrospective recovery.