I would like to clarify what items are included / allowed for when calculating the percentage for peoples overheads within the Shorter Schedule of Cost Components (SSCC).
Our Contract is Option A and under the SSCC has a people overhead fee percentage of 15%. I am trying to find what is included for or allowed within “people overhead fee” and do a sense check. I would also like to know what is included so that i can assess our own proposed people overhead fee in the future
Strictly speaking by the contract, it is what is listed in Charges 41.
The issues come when interpreting that. As a real life example - and there are others - when it says in the 3rd bullet “payments for … services for … security” does this mean for the hire costs of security infrastructure e.g. movement detectors, security lights etc or does it also include the cost of security person (or are they paid for directly as a Subcontractor or under People).
Even if you arrive at a definitive view on this, there is then the question of where you pitch it. At one extreme, do you assume all compensation events have a time-related aspect and therefore the people percentage needs to take account of this (but that might make you un-competitive at tender) or, at the other extreme, no time-related effects, which means you might well lose money on compensation events which have an affect.
Although not the official reason given, this is probably the main driver for removing it from the fourth edition with things just being paid for at cost.
Hi Jon, could you please elaborate more on what is included in people overheads?
Also I have read that you would add this percentage as well as the define fee percentage to come to a cost, isn’t this doubling up on percentages?
Many thanks
Apart from referring to the contract and specifics about where the ambiguities in it are, I am not sure what else I can add. So if you have specific, then ask.
In terms of doubling up on fees, then it could be viewed that. However, in an NEC purist perspective, the percentage for people overheads is to cover the things in Charges 41. The direct fee percentage is to cover anything not counted as Defined Cost which, under option A, means is not in the SSCC. In simple terms that’s an allowance for profit and off Working Areas costs (but not for design or manufacture/fabrication) when a compensation event occurs whether the work is subcontracted or not. The subcontract fee percentage needs to cover any fee percentages tendered by the Subcontractors.
Hi Jon, hope you can please clarify something for me. With reference to a NEC3 - Option C Target Cost Contract, that I am working on there is no people’s overheads % included in the executed contract agreement. Therefore is my understanding correct that a subcontractor can recover items like surveying, computing, hand tools not powered by compressed air, under Charges 4 ( 44)? Thanks & regards.
@aadcarlos, Are we talking about the Schedule of Cost Components or Shorter Schedule of Cost Components? You seem to be mixing them.
The People OH% only applies in the Shorter Schedule. It covers the items at clause 41, and will only be used in CE assessment where PM and C agree, as per 63.15.
The charges you mention as being at 44 are in the ‘full’ Schedule and are covered by Working Area Overhead Percentage. This is not the same thing.
In terms of your statement that ‘there is no people’s overheads % included’ - what do you mean? That its 0%, that its blank, or that it’s entirely missing from Contract Data Pt2? But bear in mind that there may be no circumstances where you need it.