My client has a bespoke clause to cover the Fee in an option E contract, they have requested that the overhead & profit are separated as they want the ability to audit the overhead %, it can down but not up.
My question therefore is can you claim profit on the overhead?
The Direct Fee percentage is to include all costs that are not recoverable as Defined Cost. The Fee would normally cover things like staff working outside the Working Areas (company HR staff, training staff, admin/support staff etc), head office overheads (rent, heating, business tax, maintenance etc), debts the company may owe, bonds, certain insurances, plant & equipment storage offsite etc, Profit is built into the fee. There are no rules given in NEC for what makes up the fee, only that if it is not classed as Defined Cost (SCC) then it’s deemed to be included in the fee percentage. Get the fee percentage wrong and you may be marked down in a tender review. In civil engineering the direct fee percentage for the big Tier 1 contractors typically range from around 7%, to 16-18%. I recently reviewed a contract that had a direct fee percentage of 23%!
In short I would say yes, you can make profit on the overhead. There is nothing in NEC to say otherwise (there is no guidance on the components of fee build up).