NEC3 - Option B - People Percentage Overheads

We have employed a Contractor on an NEC3 Option B contract (ECC). The Contractor has subcontracted a section of work to another company, with our approval. The Contractor has “0 %” for their subcontract fee and "o %) for ther direct fee percentage. They have applied people percentage overheads (10% in the contract data part 2) to their staff and the subcontractors staff hours on a Compensation Event. Are they entitled to do this ? or should it just the the PP% on their staff costs and cost on the subcontractors staff (as the Fee was set at 0%). Thanks

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The definition of Defined Cost under main option B requires that cost is not differentiated between Contractor and Subcontractor when applied to the cost components under the Shorter Schedule of Cost Components. The percentage for people overheads stated in the Contract Data is applied to people item 11 so does not differentiate between Contractor or Subcontractor.

The subcontracted fee percentage is then applied to the Defined Cost of subcontracted work (hopefully readily identified as such in the quotation assessment) and the direct fee percentage to the Defined Cost of other work. As these are both 0% then the only adjustment to the People rates would be the percentage for people overheads at 10%.