NEC3 Direct fee percentage and subcontracted fee percentage

Can you tell me what is meant by “direct fee percentage” and “subcontracted fee percentage” in Contract Data Part Two for a project being procured under the NEC3 Option B: Priced contract with bill of quantities?

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Under options A and B, the fee percentages are only used when there are compensation events.

Under clause 63.1, the Contractor is entitled to the change in their actual or forecast Defined Cost, due to the compensation event, plus the relevant fee percentage.

The change in Defined Cost is worked up (from first principles) using the Shorter Schedule of Cost Components, regardless of whether the work is subcontracted or not.

If Defined Costs are incurred by the Contractor directly, then the ‘direct fee percentage’ is applied to these elements of Defined Cost. If Defined Costs are incurred by a Subcontractor (as defined in clause 11.2(17)), then the ‘subcontracted fee percentage’ is applied to these elements of Defined Cost.

Most options allow the Project Manager and Contractor to agree to use rates and lump sums as a basis for assessing compensation if appropriate as a short cut. See the last paragraph of clause 63.13 under option B as an example.


If the contractor has subcontracted a compensation events. is the main contractor entitled to direct fee (he is not doing any work)? He has allowed for people and people overhead.

Thank you for your assistance.

For the elements that the Contractor is doing directly, which may only be additional management cost supervising the Subcontractor, the direct fee percentage is applied.