NEC3 ECC: Treatment of Sucontractor Cost by Main Contractor in preparing Tender Lump Sums

NEC3 and NEC4 Contracts
1

I am having some difficulties in understanding how exactly a Main contractor should be preparing and pricing their quotations, specifically in regards to Subcontracted activities.

Where a main contractor is requested to submit a proposal for ECC option A – how should he build up his price of subcontracted works.

Option A Contract Data still requests Subcontractor fee percentage to be applied, therefore, should the main contractor request his quote from the subcontractor in the form of Defined Cost+subcontractor direct fee. On receipt of this, the main contractor will develop a subcontractor fee which accounts for the subcontractor direct fee and his own profit (therefore making the subcontractor fee marginally more than the direct)

Essentially my query is whether under ECC Option A we , as the Employer have the right to interrogate a the Main Contractors Subcontractors costs that they tender

The reason I ask is that during a Tender for ECC Option A- the Main contractor submitted, as part of his proposal, the lump sum quote from subcontractor and then proceeded to add subcontractor fee on top? Surely this is excessive and effectively equates to fee on fee as the subcontractor will already have included his OHP.

Your clarification would be hugely appreciated!

2

The tendering process is generally one of offer and acceptance.

The Employer’s rights to interrogate the Contractor’s offer will depend upon any specifics stated by the Employer in the invitation to tender otherwise the Employer can ask for clarification if required.

3

I think this question is a little confused as there are two separate aspects here. Firstly, whatever the Contractors price is and how it is made up is up to you to review and interrogate before you appoint the Contractor. You would be considering their price, and also their direct fee percentage/subcontractor fee percentage in contract data part 1. They may be marginally the cheapest bidder but then if higher percentages in CD1 means that their compensation events will be higher and in the long run more expensive.

The subcontract fee comes into play after contract award with individual compensation events. If there is a compensation event - the Contractor uses Defined Cost - whether these works are subcontracted or not (i.e. not use subcontractor lump sum quotes). Therefore they have to break subcontractor costs down into the 7 categories of the SSCC, and then they can apply the subcontract fee percentage (which is fixed in contract data part 2) to the subcontracted people cost in section 1.