Contractor wants to extend Working Area to include factory so can assess manufactured items using SSCC method to calculate people & equipment, but it is difficult to use this method to assess actual cost of manufacturing when the people overhead and equipment overhead are already set based upon onsite installation activities, not factory activities.
Before any decision is made on whether to extend the Working Areas have a look at NEC3 ECC clause 15.1 which gives two reasons for not accepting a proposed addition to the Working Areas.
From a purely contractual angle, if these two reasons are not fulfilled, then you have no reason not to accept them i.e. the proposed areas are added to the Working Areas. Note though that the first “reason for not accepting the proposed area is … not necessary for Providing the Works or …”. ‘Necessary’ is quite a strong word e.g. it does not say ‘desirable’ for instance.
Again, from a purely contractual / legal angle, if the Contractor is entitled to add this area to the Working Areas, then it does not matter what the percentages for People and Equipment were : that is the bargain you struck and signed up to, so if you don’t like it commercially then (legally) tough !