This query relates to an Option B Contract.
The Contractor has submitted a quotation for a Compensation Event where the work was wholly carried out by his sub-contractor.
The Contractor has included his sub-contractor’s quotation along with his own in the submission.
In the sub-contractor’s quotation, there are no people overheads, no percentage adjustment for equipment but there is a direct fee.
The Contractors quotation is merely his sub-contractor’s quotation (including the direct fee) plus the sub-contract fee.
My understanding is that the people overheads and the percentage adjustment for equipment should be included and the direct fee on the sub-contractor’s quotation excluded.
Is my understanding correct?
As per the link. The Contractor applies the Direct Fee percentage to only the components of the Short Schedule of Cost Components that apply to their costs and the Subcontract Fee on only the Subcontracted works. Applying the Direct Fee to the overall quote would be wrong and would constitute a “fee on fee” scenario. Essentially it’s Direct Fee on items 1,2,3,4,5,6 & 7 that only apply to the Contractors costs. If the works are subcontracted they may fall under some of the 1 to 7 titles, then ONLY the Subcontract Fee can be applied to those components. This is why the “Subcontract Fee” percentage can be higher than the Direct Fee percentage.
The people percentage overhead and deign overhead applied would be the contractors percentage put in Contract Data Part 2. This is why they can’t just submit a Subcontractor quote with their fee applied, this would encourage companies just to farm work out all the time. As per the item linked above, the Contractor is taking a risk when they set their Fee Percentages.