Tools — Glossary Construction jargon buster
Plain-English definitions of common construction, contract and cost management terms, from compensation events and retention to pay less notices and practical completion.
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- Activity schedule
- Under NEC Options A and C, a list of activities priced by the contractor. Payment is made as each activity is completed.
- Bill of quantities
- A document listing the measured quantities of work and materials, used by contractors to price a tender on the same basis.
- Collateral warranty
- A contract giving a third party, such as a funder, purchaser or tenant, a direct right of action against a contractor or consultant.
- Compensation event
- Under NEC, an event that entitles the contractor to more time, money or both, such as a change instructed by the Project Manager. Learn more →
- Contingency
- A sum held in the budget to cover risks and unforeseen costs.
- Contract administrator
- The person who administers a JCT contract, issuing instructions, certificates and notices.
- Contract sum analysis
- A breakdown of the contractor’s price on a design and build contract, used to value changes and payments.
- Cost plan
- A breakdown of the estimated cost of a project by element, updated as the design develops.
- Defects period
- A period after completion, often 12 months, during which the contractor must put right any defects.
- Design and build
- A procurement route where the contractor is responsible for both the design and construction of the works.
- Drawdown
- The release of funds by a lender in stages as the project progresses, usually monthly.
- Early warning
- Under NEC, a notice given by either party as soon as it becomes aware of a matter that could affect cost, time or quality.
- Employer’s Agent
- The client’s representative who administers a design and build contract on its behalf. Learn more →
- Employer’s Requirements
- The client’s description of what the contractor must design and build under a design and build contract.
- Extension of time
- An adjustment to the completion date where the contractor has been delayed by a relevant event it is not responsible for.
- Final account
- The agreed final cost of the works, including all variations and adjustments.
- Liquidated damages
- A pre-agreed sum the contractor pays for each week the works are late. Called delay damages under NEC.
- Monitoring surveyor
- An independent surveyor who reports to a funder on a project’s cost, programme, quality and risk before each drawdown. Learn more →
- NEC4
- A family of contracts based on collaboration and proactive management, widely used on public sector and infrastructure projects. Learn more →
- Pay less notice
- A notice saying the payer intends to pay less than the sum stated as due, issued within the period set by the contract.
- Payment notice
- A notice setting out the sum the payer considers due at the payment due date.
- Practical completion
- The point when the works are complete for practical purposes and can be handed over. Called Completion under NEC.
- Preliminaries
- The contractor’s site-wide costs, such as management, welfare, scaffolding and site set-up.
- Principal Designer
- The designer appointed under the CDM Regulations 2015 to plan, manage and coordinate health and safety during pre-construction.
- Project Manager (NEC)
- The person who manages an NEC contract on behalf of the client, with defined duties and time limits. Learn more →
- Provisional sum
- An allowance in the contract for work that cannot be fully defined at tender.
- Quantity surveyor
- A construction professional who manages the cost of a project, from early estimates to the final account. Learn more →
- Retention
- A percentage of each payment held back until completion and the end of the defects period, to make sure defects are put right.
- RIBA Plan of Work
- A framework that divides a building project into eight stages, from Strategic Definition (0) to Use (7). Learn more →
- Target cost
- A price agreed in advance, with any savings or overruns shared between the client and the contractor, as under NEC Option C. Learn more →
- Tender
- The process of inviting contractors to price a project, and the price they submit.
- Time bar
- A deadline after which a party loses a right, such as the eight-week limit to notify a compensation event under NEC4. Learn more →
- Two-stage tender
- A procurement approach where a contractor is appointed early to help develop the design before agreeing the final price.
- Valuation
- An assessment of the value of work completed, used to work out interim payments.
- Variation
- A change to the works instructed under a JCT contract. Called a change under NEC.
Why construction terminology matters
Construction contracts and reports are full of technical terms, and misunderstanding them can be costly. Knowing the difference between a payment notice and a pay less notice, or between practical completion and the end of the defects period, can affect when you pay, what you are owed and who carries the risk.
This construction glossary explains common JCT, NEC, quantity surveying and project management terms in plain English. If you need help applying any of them to your project, our RICS-regulated team in Birmingham is happy to help.
Frequently asked questions
What is retention in construction?
Retention is a percentage of each payment, often 3% to 5%, held back by the client. Usually half is released at practical completion and the rest at the end of the defects period, once any defects have been put right.
What is the difference between a variation and a compensation event?
A variation is a change to the works under a JCT contract. Under NEC, a change instructed by the Project Manager is one type of compensation event, which also covers other events that entitle the contractor to more time or money.
What does practical completion mean?
Practical completion is the point at which the works are complete for practical purposes and can be handed over. It usually triggers the release of half the retention, the start of the defects period and the end of the contractor’s liability for delay damages.
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