According to the Clause 22 of Schedule of Cost Components, payment for equipment (say backhoe) owned by the Contractor should be at the open market rates.
Assuming the open market rate for a backhoe is X (which includes mark up for overheads and profit of the equipment company). When we assess the interim payments, should we delete the mark up of the equipment company? This is because there is FEE for the contractor. It may be double paid to the Contractor if we do not delete the mark up of the equipment company.
Suppliers of the Contractor have a right to recover their overheads and profit too - they are businesses. If you deducted that, how could the equipment supplier make money?
The concept of open market rates is to allow the supplier to make margin, but not excessively.
Assuming that the item of Equipment in question is not listed (with a stated rate) within Contract Data Part 2 then you should be paying the open market rate for the Contractor owned Equipment as Defined Cost. That open market rate would likely include the “overheads and profit” amounts as otherwise you wouldn’t be paying the Contractor open market rate. Fee would be paid on top of this as you should be reimbursing Defined Cost + Fee. This is fair as you have to appreciate that as “overheads” the Contractor may have a plant workshop to pay for, fleet insurance and people running that workshop with tooling / machinery etc to maintain their fleet. All of these things and on costs would have to be recovered by the “open market rate” as they can’t be recovered under any other cost component. That all said if there is a rate in Contract Data Pt2 for that item of Equipment, clause 52.1 states you should be using that in the first instance.
@MylesScrancher thanks for the information and guidance above, really useful. I’m particularly interested in the insurance element here. in particular, under item 22 of the SCC (which i’m currently working with), there is no mention of insurance and I’ve been struggling to see how/why the Project Manager would assess that element of equipment.
Item 8 suggests that insurance which the contract requires the Contractor to insure is deducted from cost, however it starts of by saying "the cost of events . . . "
I’m currently working in the situation where the Contractor is claiming for site vehicles via item 22 and the cost of the vehicle is accompanied by the insurance element.