We have instructed the Contractor to carry out additional works. The works are being carried out by a specialist sub-contractor who have been procured by another operating division of the main Contractor. The Contractor has submitted a quotation based on the specialist sub-contractor’s quotation, which has attracted an 11% fee from the other operating division, which the Contractor has then applied its own fee percentage of 8.4% to. Is there anything in the contract which says that fee on fee cannot be applied in this instance when both the Contractor and one of the sub-contractors are both part of the same parent company?
Can you identify which main Option you are on? For main Options A & B the additional works will be assessed using the Shorter Schedule of Cost Components whether the works are Subcontracted or not. So no fee on fee.
However with main Options C, D and E the Schedule of Cost Components SCC is used only for the Contractors direct work. In these main options payments to Subcontractors are included in the Defined Cost and it therefore follows that the Employer pays both the Contractor’s fee (subcontract fee percentage) and the Subcontractor’s Fee.
it is worth checking that the SCC has not been amended as some Employers amend the SCC to specifically exclude Fee on FEE situations.