NEC TSC Application of direct fee percentage and subcontracted fee percentage to supply of materials

In an agreement using a NEC3 TSC, there is quoted the direct fee % of 20% and a subcontracted fee % of 10%. On materials purchased for a project they have quoted the 20%, I on the other hand have advised that materials should attract the 10% as materials comes under the Subcontractor definition of cl. 11.2 (16) page 4 in the TSC grey book. Who is correct?

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Application to the two different fee percentages is set out under 11.2(8) as follows: subcontracted fee percentage is apply to the subcontracted work and the direct fee percentage is applied to the Defined Cost of other work.

Cl. 11.2(16) defines what a Subcontractor is - the definition includes “supply of Plant and Materials”, but under this clause the supply must be “wholly or partly designed specifically for the service.” So in other words, suppliers of “off the shelf Plant and Materials fall within the definition of Plant and Materials under cl. 11.2(11) (outside the definition of Subcontractor); and suppliers of P&M “designed specifically for the service” are treated as Subcontractors. The latter attracts the subcontracted fee percentage and the former attracts the direct fee percentage. Once you have established whether the suppliers is designing the materials, you can then apply the logic above.