When assessing a CE on Defined Cost, is it correct to apply the percentage of people overheads, as defined in the contract data, to the cost of the subcontractor’s people?
For example, if a subcontractor claims say £30/hr for a person (exc the subcontractors fee percentage) and we incorporate this rate into our quotation under subcontract people, can we legitimately add the percentage of people overheads to this rate prior to applying our subcontracted fee percentage?
The percentage for people overheads applies to the Shorter Schedule of Cost Components.
Under the SSCC the People cost is assessed as if the people were employed by the Contractor to determine the Defined Cost. Therefore there are “subcontract people”.
The perecentage for people overheads should be applied to the People Cost and if the work was subcontracted work then the subcontracted fee percentage would apply.
Assuming you are under option A and B, the answer is ‘Yes’ as under these options, the contract does not distinguish between whether Defined Costs are in accordance with the subcontract or costs incurred by the Contractor (as per options C, D & E).
Instead, under options A & B, all Defined Costs are assessed using the Shorter Schedule of Cost Components unless agreed otherwise.