When using a schedule of rates in an NEC 3/4 contract, would the Contractor be entitled to apply the Direct Fee percentage on top of these rates ? Pricing Compensation events should be a forecast of defined cost + fee (CL63.1), but Cl.63.14 allows for “rates and lump sums to be used by agreement”. We view this as not defined cost, and therefore the Contractor is not entitled to apply the direct fee percentage. The schedule of rates are not a forecast, we deem them to be “all inclusive” rates that do not attract the fee on top. Would the answer be dependent upon how the “rates” were built up, if they only include items in the SCC then they can add the fee, if not in accordance with the SCC then they don’t?
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The clause about rates and lump sums is a ‘may agree’. Its there to allow you to do something different to Defined Cost if you both agree. That agreement can be whatever you wish, so it can be existing rates or new ones.
I’ve tended to use it in situations where we kinda know what something costs, but proving it to a Defined Cost standard is not proportionate. An example might be installing an additional field gate. We know the rough cost, but because the Defined Cost would be a lot of small costs (a little bit of time for an excavator, dumper, roller, supply of posts, supply of gate, installation time, concrete, excavator back to tidy up, so on…) its often easier to just say - shall we call it £xxxx? and come to an agreement.
As for fee; if we do as described above, we are not assessing Defined Cost. We are assessing the change to the Prices, as per the clause. There is therefore no ‘rule’ about whether you include fee; you can agree on an all inclusive basis if that is appropriate. That can be confusing if you use a price / rate for a part of the cost, which is a reason to not do it. Either way, you should be clear about that in the agreement to use rates and prices.
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Thanks Andy. In my example the contract schedule of rates is not clearly defined, in terms of what is covered in the people day rates. As it’s not clear how the Contractor arrived at the quoted rates we don’t feel the fee applies. How would it work with plant costs in the contract schedule, for example if the contract stated “day rate for 20T Excavator = £350”, would the fee be applicable ?
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We need to be careful here. You say plant, but the example you give is an excavator. In NEC terminology and in the Schedule of Cost Components an excavator is almost certainly Equipment. Plant is something else.
Either way, they would get fee on the £350, as per 63.1.
I’m also intrigued by the use of ‘schedule of rates’. NEC doesn’t have a schedule of rates. You might have a Bill of Quantities, and you might have Data for the Schedule of Cost Components in Contract Data Part 2 (which are effectively rates), and you might have a published list, all depending on your main Option.
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