NEC3 ECS: Labour Agency Employed by S/C & Subsubcontract Fee under Option B

In the context of Option B and NEC Subcontract, the Subcontractor has employed a labour agency to undertake works. The Subsubcontracted Fee percentage is 15%. A Direct Fee applies to Materials but no % on Working Area Overhead is stated in the Subcontract. As far as I am aware the Subcontractor has not issued details on the sub-sub it wishes to Employ to the Contractor under Clause 26 and it is not clear whether or not he based his original price on carrying out works directly or by sub-subbing it out.

Can the subcontractor claim the labour agency costs as a subsubcontractor and therefore with the additional 15% sub-sub fee?


Under options A & B, the Shorter Schedule of Cost Components applies whether the work is (sub)subcontracted or not. (see clause 11.2 (22)).

Labour only people fall under the third bullet of ‘People 1’ in the Shorter Schedule of Cost Components.

However, there is an argument for saying that before you get to this clause, you have to decide whether they are a Subsubcontractor or not.
To do this we have to look at the definition of a Subsubcontractor in clause 11.2 (17) with the second bullet point being the culprit. It causes confusion as you have to decide whether the labour only people are providing “a service necessary to Provide the Subcontract Work.”

“Necessary” is a strong word. So if the person was a security guard and the Subcontract Works Information said nothing about having to supply security, then the Contractor in this case could argue that he or she was not “necessary” and hence not a Subsubcontractor. On the other hand, if the people are doing physical work as defined in the Subcontract Works Information, the Subcontractor would have a pretty good case for arguing that they were and hence should get the 15% subsubcontracted fee percentage.