If a Contractor hires an Engineer from a labour agency to work within the Working Areas and pays the Engineer via the labour agency on an hourly basis for the work the Engineer does within the Working Areas are they classed as sub-contractors under clause 17.2 (17) or as people on the SoCC?
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This is an area which has caused confusion in the past and the clauses in question have been updated since the 2nd edition. I have assumed that you are using options C, D and E of the Engineering and Construction Contract (ECC) 3rd edition using the (full) schedule of cost components. The answer is different for NEC 2nd Edition and also if using the shorter schedule of cost components from the 3rd edition.
Definition of a sub-contractor is set out at clause 11.2(17): A Subcontractor is a person or organisation who has a contract with the Contractor to construct or install part of the works, provide a service necessary to Provide the Works or supply Plant and Materials which the person or organisation has wholly or partly designed specifically for the works.
Define cost is defined under clause 11.2(23): Defined Cost is the amount of payments due to Subcontractors for work which is subcontracted without taking account of amounts deducted for retention, payment to the Employer as a result of the Subcontractor failing to meet a Key Date, the correction of Defects after Completion, payments to Others and the supply of equipment, supplies and services included in the charge for overhead cost within the Working Areas in this contract And the cost of components in the Schedule of Cost Components for other work less Disallowed Cost.
An Engineer does not fit the criteria of clause 11.2(17) as constituting Subcontractors as they are not “a person or organisation with a contract with the Contractor to construct or install part of the works” and are also unlikely to fall under the second part of the definition for “supply Plant and Materials which the person or organisation has wholly or partly designed specifically for the works”.
I’d suggest that they must therefore be treated as defined costs under item 14 of the people section of the SOCC, their status aligns with “The following components of the cost of people who are not directly employed by the Contractor but are paid for by him according to the time worked while they are within the Working Areas.” If so these costs should attract the addition of the Working Areas overhead percentage.
Contrary to the intent of the document some treat labour-only sub-contractors and agency staff as sub-contractors applying only the fee percentage and no working areas overheads percentage.
Good question! There are several variants to this question that fall under this same theme.
If the Agency Supplied Engineer is working in a supervisory capacity/service within the Working Areas then are they not “providing a Service to Provide the Works” as included for in clause 11.2(17) and therefore a Sub Contractor?