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Is it reasonable to state that only profit is included in the Fee if the schedule of cost components has been mapped to clarify which components are deemed overhead and charges

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asked Feb 3, 2014 in SOCC SSOCC by anonymous   10 59 88

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The purpose of the Fee is to cover all costs and risk allowances that cannot be recovered directly as detailed by the schedule of cost components.  

There are many costs that are not recoverable directly, including in particular central overhead costs, such as a Head Office.  It must be remembered that the SCC relates generally to site incurred costs whereas the Fee deals with costs external the actual costs of construction.  

The contractual reasoning lies in clause 52 and the definition of Defined Cost.  This states that "All the Contractor's costs which are not included in the Defined Cost are treated as included in the Fee" .  Defined Cost points either to the Shorter or full Schedule of Cost Components, dependent on the main option you are using.

Any amendments to the SCC (inferred as mapping as per your question) would therefore have to cover such matters as head office costs, insurance, risk etc.  Since these are generally charged for as a percentage of turnover (as is the Fee) I can't see how these are different from the Fee (I note many clients ask for a Fee breakdown).

Whether it is reasonable to require only profit to be included in the Fee depends on whether the mechanisms have been properly amended to ensure you recover all your costs and risks equitably where a Defined Cost evaluation is being used.  To determine that I would need more information and a copy of the amendments you are being asked to use.
answered Feb 3, 2014 by John Rayner (2,720 points)  
I would echo John's points, but slightly re-word the question to "is it realistic to state that only profit is included in the Fee ?". As the Contractor has to cover these costs somewhere, if they are not in the contractually defined  Defined Costs, then they will be covered somewhere else regardless of what the contract says. In a Priced Contract, that will be the fee percentage(s) for compensation events. If a target cost contract, it will either be in the fee percentage(s) or a higher target. Take your pick - or more precisely, let the Contractor pick -  or lust leave the contract as it is.