I am applying BoQ rates to certain items for quotes. PM is not allowing my Direct Fee to these Items.
My main concern is that he is applying this principle to large reductions in scope by reducing the breakwater height.
You are at slight cross purposes here. The contract intends that EITHER you use B of Q rates (which you would assume has fee etc in it as there is not normally a single B of Q item for “overhead/profit”), or you use Defined Cost which is using the elements within the schedule of cost components - to which you then apply Direct Fee.
Default position is that a change to Works Information is assessed using Defined Cost, unless you BOTH agree that B of Q rates can be used to assess the negative deduction