Does the PM pay the Main Contractor for the repair of a defect when the work was carried out by a sub-contractor? i.e. am I correct in my view that the cost of correcting the defect would be deemed to be included in the Fee of the sub-contracted work - and would be clear profit for the Main Contractor.
I assume that you are operating an option C, D or E in that you are paying the Contractor based on Defined Cost.
That being the case you need to understand the terms of the subcontract the Contractor has with the Subcontractor since Defined Cost is the amount of payments due to Subcontractors (due in accordance with their subcontract).
If the subcontract is a C, D, or E then the Contractor is required to pay the Subcontractor, unless the Defect was corrected after Completion, and under C or D it would effect the gainshare. The amount would therefore be due to the Subcontractor and should be included in the Price for Work Done to Date.
To add to Dave’s answer if the subcontractor is under option A (but Contractor under option C with Employer) then they should not be paid to correct a defect, so the Contractor should not be paying out any extra money for this and would not then be claiming under their option C with the Employer. So this money not being paid out by the Contractor would increase gainshare which both Parties benefit from.