NEC3 ECC: How is the People Overhead Fee Applied

In assessing a quotation for a compensation event, is it correct to multiply the People cost by both the % for people overheads and direct fee?

If you do a search within Reachback using “people overhead” or “direct fee percentage” you will find several answers to this questions or similar ones that will give you more detailed answers. However, to answer this briefly here, you assess a compensation event using Defined Cost. Under option A which I assume this is (as you talk about people overheads rather than working area overheads) , one element of Defined Cost is “People” which allows you to claim the cost of what ever it says you can for people with regards to that compensation event. Another element is “Charges” which allows you to multiple the people overhead stated in contract data part 2 to the cost that was calculated from the People cost in section 1 of the Shorter Schedule of Cost Components. The direct fee percentage is then applied to the overall total of sections 1-7 of the cost components.

Put even simpler, if people overhead was 15% and direct fee percentage 10%, you apply 15% to the cost worked out as a result of section 1 people, and then once you have added everything up you then apply the 10% fee on top of everything to get the final quotation value. (so yes this is an intentional “fee on fee”.)