NEC3: Option B - Schedule of rates

We are working on an NEC3 (Option B). The contract has a pre-agreed schedule of rates, the rates are on the high side for the industry. If these rates are used in assessing a Compensation Event (by agreement) can the Contractor apply their people percentage overheads to this? (agreed schedule of rate + people percentage overhead +direct fee). Could there be a justification to say the rates are not Defined Cost as it’s unlikely the Contractor is actually paying the employees this amount (the cost incurred), and therefore the PP is only applicable to Defined Cost, and in this instance cannot be applied? The contract does not specify what is included in the pre-agreed day rates.

It is not possible to give you a conclusive answer without understanding what amendments have been made to the standard form to introduce the “pre-agreed schedule of rates”. If they have been introduced to be (deemed) Define Cost then that is how they should be regarded irrespective of their cost.

1 Like