Direct Staff Hourly Rates

In the design phase of an Option A Design & Build contract a compensation event has been notified to carry out some additional design work. This work will be undertaken by the Contractor’s sub-contractor.

Included in the subsequent quotation justifiable time has been allocated against the Contractor’s staff.

I read in an article that the hourly rates to be used for the direct staff costs in CE quotations are those contained in Contract Data Part 2.

However, in the model CD Part 2 under Data for the Shorter Schedule of Cost Components there is no requirement to include hourly rates for direct staff and the contract in question likewise has none.

This is confusing and any guidance on the direct staff hourly rates to be used in CE quotations would be welcomed.

People rates were introduced to the Short Schedule of Cost Components for NEC4 so maybe your contract is NEC3 or maybe it has been amended?


Normally in the template for CD Part 2, you have the category of “Data for the Shorter Schedule of Cost Components”, and the last couple of bullet points refer to hourly rates for Defined Cost of design outside the Working Areas, percentage for design overheads, and categories of design employees whose travelling expenses to and from the Working Areas are included in the Defined Cost.

Mind you that the above refer to “employees” of the Contractor, therefore I don’t think that the subcontractor’s design would fall under those - you would probably have to follow the “People” cost component or agree rates with the Contractor (if you are the Project Manager) in relation to the CE.

Does the above make things clearer?

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The Contract is NEC3 and my question was specifically in relation to the people rates to be used for the Contractor’s staff in the CE quotation.

Your response in relation to the Defined Cost of design outside the Working Areas is nevertheless useful. In the submitted quotation there is merely a lump sum against the Contractor’s design sub-contractor to which the sub-contractor fee has been applied.

Yes, you are correct - I misread that part.

I’m afraid that my response in relation to the Defined Cost will only cause you trouble - in my experience it never works with subcontractors’ quotations; you will have to persuade the Contractor to persuade his subcontractor to break down their cost into the SSCC items and then apply the subcontracted fee on those. Not an easy task and in my personal view, not really practical.

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Again, useful to know your take on this.

So, in the absence of Contractor’s staff hourly rates in CD Pt 2, how should these be presented in the quotation under NEC 3? At present the quotation merely contains an arbitrary rate against each of the staff grades.

See clause 52.1, amounts of Defined Cost not included in the CD2 are at “open market or competitively tendered prices with deductions for discounts, etc…”, so this refers to the cost of the components in the Shorter Schedule. Presumably the Contractor/Subcontractor are paying their people open market rates so they should base the quotation on what they are paying with an additional allowance for cost risks which have a significant chance of occurring and are the Contractor’s risk under the contract, all as per clause 63.6.

Contractor’s staff costs, should be in reference to the SSCC - 1 People - first two bullet points (people who are directly employed etc.). The costs would have to reflect the actual cost the Contractor incurs, i.e. the cost to employ (see People item 11).

Because the above exercise is rather laborious and impractical for every time you wish to assess a CE, you can agree rates under clause 63.14. Usually contractors present a built-up of their rates, which include all components such as salary, NI, pension, CITB etc. in order to agree those with the PM.

I hope I covered your question now.

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