Direct fee and Subcontract fee


I am still stuck on the fees issue. I have a main contractor who has subcontracted a compensation event to a subcontractor for designs and also installation. He is then claiming for subcontract fee against the subcontractors work and design fee against the design compenent and people overheads for the people in the job. Now this contractor after getting the overall total of this has then added his direct fee on the whole works total including the added adjustments for the other fees. Is this applicable? Please assist me as the contract is vague.

This is NEC3 option A activity schedule contract

Given it is NEC3 Option A then:

The subcontract fee should be applied to the element of work which is subcontracted. This appears to be the design and installation.

The Defined Cost should be assessed in accordance with the Shorter Schedule of Cost Components. Under the SSCC it is irrelevant if the work is subcontracted or not, so the assessment is based on the components People etc.

The assessment of Defined Cost would therefore include for design at the rates in the Contract Data + design overhead %, People + people overhead %, Equipment etc.

The subcontract fee being applied to the aggregate of the Defined Cost.

The Defined Cost of any work which is not subcontracted would have the direct fee applied. The Direct Fee is not applied to the subcontracted element,

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This contractor has added for example
Comp event cost

  1. R12+15% subcontract fee
    2.R5 + 15% design fee
  2. R2+ 15% people fee
    He then got his total of R20M for example.

On top of this R20M he has added 15% direct fee to get R26. Now this is the part I don’t understand. He argues this his profit and he is entitled to it.

I’m still confused?

Sorry but I’m not clear on your example

  1. For the subcontracted works:

Defined Cost of People + percentage for people oveheads
Defined Cost of design outside Working Areas = rates x hours + percentage for design overheads
Defined Cost of Equipment
Defined Cost of Materials

= total x Subcontract fee = A

  1. For the non-subcontracted works

As above but, total x Direct fee = B

Assessment = A+B

the Direct Fee is not applied to the Subcontracted works

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