When you are assessing a CE under Option C and you have hourly rates for Defined Cost for people (please note these rates are not only for design but also include labour) - please can you advise if you use these rates and then apply the WAO% to this total?
Under Option C a CE would usually be assed using the Schedule of Cost Components unless the PM and Contractor agree otherwise. Using the standard contract and the SCC the WAO% would be applied to the People component to assess the Defined Cost.
It not clear from your question if the use of hourly rates is an agreement between the PM and Contractor or an amendment to the standard contract. Whichever it is you need to refer to the specific wording