NEC3 ECC: Option E - Working & Design Area Overheads

NEC3 and NEC4 Contracts Contract Data
1

What is the correct way to apply Working Area Overhead and Design Area Overhead to your defined costs? For example, if Contract Data Part 2 reads the following:-

WAO Percentage- 15%
DAO Percentage- 30%
Direct Fee Percentage- 10%

…And both the Working Are and Design Area are on the same site/office, should the Working Area Overhead be applied to certain disciplines and Design Area Overhead to design people? For example:-

Project Manager - £40/hour
Add WAO @ 15%
Add Fee @ 10%

Design Engineer- £35/hour
Add DAO @ 3-%
Add Fee @ 10%

(Note: fee is added onto WAO/DAO).

Any clarity on this matter would be greatly appreciated.

1 Like
2

The Working Area overhead is applied to Contractor employed people (as defined in People 1) who are working in the Working Areas. The percentage for Design overheads is applied to designers directly employed by the Contractor who aren’t working in the WAs. Either way, on top of whichever percentage is applied, the direct fee percentage is applied

If the designers are not employed by the Contractor, then the Contractor is reimbursed in accordance with the subcontract. On top of this, you would apply the subcontracted fee percentage.

3

Thank you. What if both Design and Other personnel are working in the ‘Working Area’ would the two applicable OH rates be applied, dependant upon if the personnel were Design Resource or not?

4

No, because in the SCC part 6 for design, it specifically states that the percentage for design overheads only applies to those working outside the WAs.

5

Hello, If the above scenario was under a NEC Option E contract, wouldn’t any designers that are not working in the working area be disallowed? so it would be a DAO % uplift on zero? Whats the mechanism for making the designs not working in the working area allowable?