I would be grateful if you could explain the outcome if the Contractor does not price the Direct Fee Percentage and leaves it blank? I have a Contractor who left it blank and is now attempting to claim over 20% which they claim is based on their annual profit and loss accounts. The contract is under Option B.
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Ross, I had a client with a similar situation recently. In principle the Contractor “chose” to leave it blank and therefore the tender was evaluated on this structure.
So in essence the Contractor will not be able to add anything in the form of “The Fee” to the Defined Cost for compensation events, etc. On an Option A contract this would possibly have grave consequences. Hopefully the impact will be less severe on Option B since much of the additional work can hopefully be covered under cl 63.13 using existing rates in the BOQ. Where cl 60.4 comes into play, it can be more problematic and the contractor will be disadvantaged.
Read cl 52.1. It effectively states that whatever is not recoverable under Defined Cost is deemed to be included in the Fee per cl 11.2(8). By leaving the direct fee % blank, it is assumed all your costs are covered in the Defined Cost and the SSCC dictates how this is derived. Essentially at cost.
The only remedy to this situation is to sit with the Employer and hopefully reach an agreement under cl 12.3 to amend and add a direct fee %.
Ross, I consulted with Rob Horne on this one.
His view was that there were so many legal arguments from “assume its in the rates and therefore nothing, up to actual OHP being the basic comparison.” In other words, you could get completely bogged down in legal arguments about what to apply.
So we agreed that probably the best middle ground / “appropriate answer” is apply market norms for size, scale and location of the project."
You can then have a commercial argument about what that is ! (which you would have had after the legal argument).