NEC ECC: Direct Fee or Subcontract Fee Option A/B

In an option A or B contract, is it correct to apply the direct fee to all works that have been valued using the SSofCC? i.e. if we are pricing based on defined cost/the SSofCC but anticipate using one of our subcontractors should we apply the Subcontract Fee?. Or is the Subcontract Fee applied to lump sum subcontract quotes only.

This question has previously been answered by Barry Trebes and can be found via the following link;

I had reviewed that answer, but still slightly unclear. My query relates solely to whether the subcontract fee % or direct fee % is added to subcontractor costs included within a CE quotation. I.e. Subcontractor people costs (not including subcontractors fee) + people overhead + subcontract fee or direct fee. I understand that fee on fee cannot be charged. If we have an agreed SSofCC and we are pricing CE work that we anticipate will be subcontracted do we allocate people overhead and SC fee?

The Contractor’s costs (actual and forecast) are allocated against the appropriate cost component with the applicable percentage (people overhead for people) and the direct fee is then applied to give total A.

The Sub-contractor’s costs (actual and forecast) are also allocated against the appropriate cost component with the applicable percentage (as above) and the subcontracted fee is applied to give total B.

Totals A and B are then added together to give the overall quotation assessment cost.

Clearly the Contractor takes the risk of a variance between their subcontracted fee percentage and the actual subcontractor’s fee percentage. It has been known for different subcontracted fee percentages to be included in Contract Data Part 2 for separate categories of subcontracted work.

In NEC4 there is no subcontracted fee percentage and the Short Schedule of Cost Components has a category for subcontractors, where this cost is included with the Fee percentage applied.

Consequently, under NEC4 you do get a ‘fee on fee’ situation but not under NEC3.