This query is in relation to pricing of a compensation event under ECC option A by a Contractor.
The work has been done by a subcontractor who is also on ECS option A. Subcontract quotation is priced using defined cost plus his direct fee for overhead and profit from his subcontract data part two. Let’s say it’s a £1,000 plus 10% equals £1,100.
The Contractor used subcontract quotation as a substantiation of the build up. Defined cost is the amounts payable to the subcontractors plus fee for the subcontracted works. So in this case, defined cost is £1,100 (amount paid by the Contractor) plus fee of 15% on subcontracted works. The resulting cost is £1,265.
The client does not want to pay the 10% contained within the subcontractor’s quotation stating that this is a duplication of fee. and that the fee for subcontracted works already includes for subcontractors overhead and profit. The client is happy to pay £1,000 plus 15% fee, or £1,150. So the Contractor is worse off because the difference does not cover the direct fee percentages for the costs of his overhead and profit.
There seems to be conflicting information about this. Whilst the intent of separating direct fee from fee for subcontracted works in NEC3 was to make it easier, it is not clear how the conditions prevent the contractor from recovering the cost of subcontractors fee in addition to his Fee for the subcontract works.