NEC ECC: Same Subcontract fee percentage applied to subcontracts under option A and C?

NEC3 and NEC4 Contracts SOCC SSOCC
1

A Contractor has been engaged under option C target cost contract. They have stated a direct fee percentage and a subcontract fee percentage in their ECC contract data part 2.

Let’s say there are two subcontracts (subby X and subby Y), one the Contractor has chosen to let under option A, one under option C.

Change to the Prices for options A and C are Defined Cost plus fee.

For subby X engaged under an ECS option A contract, for their CE they build up their Defined Cost in line with their Shorter Schedule of Cost Components and then apply their subcontractor direct fee percentage to create a lump sum price. Price for Work Done to Date (PWDD) is then completed items on the activity schedule, and once the CE is agreed i.e. implemented it gets added to the activity schedule.

For subby Y engaged under an ECS option C contract, for their CE they build up their costs in line with the (full) Schedule of Cost Components, and would then apply their fee to create the change to the Prices. They are then paid on an actual cost basis.

Does this work fine? I have confused myself as to whether it works that one single subcontract fee percentage in the Contractors ECC contract data works in both situations if they have different forms of contract down the line under ECS?

2

In principle you’re right, in the ECS there is a direct fee percentage and a subsubcontract fee percentage and each is applied to the relevant part of Defined Cost. If the Subcontractor is doing the work themselves it is the direct fee percentage that is applied to that element of Defined Cost and if the work is being subsubcontracted it is the subsubcontract fee percentage that is applied to that element of Defined Cost.

Under Option C the Subcontractor is not paid actual cost, they are paid Defined Cost plus Fee.

3

Thanks - so does one single Contractors subcontract fee percentage “work” under their ECC contract if it is applied to an option A subcontract and an option C subcontract? i.e. will both the option A and option C subcontracts allow for subcontract fee percentage to be applied, so that the Contractors subcontract fee percentage in their ECC contract only need to cover their extra over management costs (OHP) they need to claim as the subcontractors fee percentage will already be included within their costs that the Contractor has to pay them?