In NEC3 ECC Option A, can the Tendered Fee value (as contained in the Activity Schedule) be different to the Fee percentage entered into the Contract Data Part 2 from the tenderer?
Scenario
Defined cost of Direct and Sub-contract works is £1,000,000
the value of the Fee stated in Activity Schedule is £100,000 which equates to 10%
Total Value for the Works is therefore £1,100,000
Within Contract Data Part 2 there is the requirement for the tenderer to enter the Direct and Sub Contract Fee Percentages. Do these need to correlate with the value of the Fee contained within the Activity Schedule i.e. 10% or can these be different?
If they do need to be the same then where does the contract stipulate this?
Under NEC3 ECC main option A, the activity schedule is used to assess the Prices and also the Price for Work Done to Date. There is no ‘method of measurement’ so the Contractor generally uses their discretion as to how the activities are presented and what value is applied to each one.
Usually the ‘tender fee’ is not presented separately within the activity schedule and forms part of the total for each activity. The percentage of the ‘tender fee’ in the activity schedule can be whatever the Contractor wants (ensuring commercial competitiveness of course) and may be different to the Fee percentages in Contract Data part 2.
The contract does not stipulate what the ‘tender fee’ should be, only what the Fee percentages should be in Contract Data part 2.
Hi Andrew,
Thanks for your response.
It is my experience, that Activity Schedules on Option A contracts do identify the Fee separately to the Activities I am yet to see anything different in my experience on the employer’s and also contractor’s side, which may be incorrect and likely a common misinterpretation.
Accepting your comment on face value, where the tender fee is included in the total for each activity, and purely testing your advice; where does the contract tell us that the tendered Fee is included in the Prices? as the definition of the Prices does not specifically refer to Fee (as tendered) and it is not mentioned elsewhere in the contract?
If the way you set out is correct, then why is it not made absolutely clear in the written word and just left to deduction and interpretation, which is always dangerous territory?
Welcome your further considered thoughts.
Thanks and appreciated.
The pricing of an activity schedule is not required to correlate with a particular format, such as Defined Cost plus Fee. Any included ‘tender fee’ could simply be the Contractor’s overhead and profit (OH&P), which may well be different to the Fee (percentages) as defined at 11.2 (8), that are primarily used for the assessment of compensation events under main option A.
If the Contractor does not include a ‘tendered fee’ within their activity schedule prices then they would not recover any OH&P, as the definition of PWDD does not expressly mention ‘fee’, as you have said.
This does highlight the differences in how the main options operate in practice. For example under main option A;
- you could be paid the cost of insurance premiums (where included in the activity schedule),
and
- there are no restrictions with regard to working inside or outside the Working Areas.
This contrasts with the payment mechanism under a main option C which is based upon Defined Cost and the express requirements within the Schedule of Cost Components.