NEC ECC: Option A - Design in Compensation Events

When assessing a compensation event under the NEC3 Option A Contract how do you correctly apply the relevant fees to design costs?

The contractor directly employs a designer (off-site) and has reasonably forecast defined cost for design within their CE quotation.

Within the Contract Data Part 2 there is a prescribed design overhead percentage.

In assessing the design costs in this instance do you:

  1. Apply only the design overhead percentage.
  2. The design overhead percentage then the direct fee percentage.
  3. The design overhead percentage then the subcontract fee percentage.

In the instance of 2 and 3 is the direct/sc percentage applied to the defined cost element only to avoid fee-on-fee?

The answer would depend on whether the designer is a Subcontractor or not.

If ‘No’, then 2. above applies.

If ‘Yes’, then 3. above applies.

Can I clarify something? Item 61 of the SSCC refers to “The total of the hours worked by employees…” Am I to take employees as a person directly employed by the Contractor as opposed to a subcontractor? If design is in-house by an employee then the design overhead would be applied and then the Direct Fee percentage. If design is subcontracted, does the design overhead apply or just the subcontract Fee?

If design is subcontracted, the design overhead apply and then the subcontract fee percentage on top.