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+NEC3 Option A – Compensation Event ,Direct Fee and Subcontractors Fee

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The client has raised a Compensation Event requesting the replacement of a specialist pump to an existing AC unit.  The Sub Contractor has to sublet this out as it is a specific manufacturers pump.  The SC has added his Subcontractor fee to the Sub SC Quotation.
The main Contractor has added his Direct Fee to the combined so in effect layering of fees
SSC (Pump Supplier) £15,000
Subcontracted Fee @ 12% 1,800
Combined Pump and SCFee £16,800
Direct Fee @10% £1,680
Total £18,480
The Sub Contactor is insisting that he gets his SCF as he is responsible for managing the specific works and it will be his responsibility to ensure it is complete when handing over. The works is also being carried out in close proximity to his own works.
The main Contractor insists he is due his Direct Fee on every Compensation Event as the client contract is with him and he is ultimately responsible.
Is this classed as layering of Fees
If the Subcontractor had simply submitted his figure of £16,800 as the cost and then the Direct fee added would this not be an issue
asked Aug 15 in Compensation Events by Glen40 (160 points)  

1 Answer

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Under NEC3 ECC Options A and B the definition of Defined Cost precludes any 'fee on fee' situation as you take the various costs and allocate them to the relevant component in the Shorter Schedule of Cost Components.  You then apply the appropriate fee percentage depending on whether the work is subcontracted or not.

If the Subcontractor is on an NEC3 ECS form with main option A or B then the same principle would apply in terms of any work that is subsubcontracted.  Hopefully that would allow you to extrapolate the appropriate cost components from a quotation and allocate them accordingly under the ECC contract.

The contracts are administered separately so the Subcontractor's CE would be assessed by applying their subsubcontracted fee appropriately.  The commercial risk to a Contractor is that their subcontracted fee percentage is less than the Subcontractor's subsubcontracted fee percentage.

By agreement rates and lump sums may be used to assess a CE, but otherwise the process above should be applied.
answered Aug 15 by Andrew W-I Panel Members (21,670 points)