Peoples Rate for Sub-Sub Contractors

We have a Short Schedule of Cost Components included within an agreed Option A Sub-Contract.
We do not have a rate to cover sub-sub contractors.
The Sub-Contractor is trying to apply for there own Operatives peoples rate to cover sub-sub contractors. Is this allowed or should we be agreeing a new rate?

1 Like

I presume that your use of the word ‘Short’ rather than ‘Shorter’ (Schedule of Cost Components) means that you have an NEC4 ECS form.

NEC4 introduced People Rates under main options A and B which are used to assess a compensation event but for the Subcontractor’s People only.

Where a compensation event includes the cost of a Subsubcontractor then that is treated as a separate cost component, based upon payments for work which is subsubcontracted. Consequently the Subcontractor should not be using their People Rates to assess the cost of a subsubcontractor.

You could, however, use rates or lump sums to assess the change to the Prices, although only by agreement between the Contractor and Subcontractor. As it does not say how the rates and lump sums are derived you are free to agree any appropriate mechanism, which could make use of People Rates, but again only by agreement.

Thanks Andrew.
The sub-contractor has referred to bullet point 3 under the definition of People on the Short Schedule of Cost Components for the justification for the use of Peoples rate which reads ‘people who are not directly employed by the Subcontractor but are paid for by it according to the tie worked while they are within the Working Areas’

We believe this is only applicable for agency staff and not Subsubcontractors which is covered under Section 4 of the Short Schedule of Cost Components.

Can you advise your thoughts on this. thanks

The definition of Subsubcontractor at 11.2 (19) should clarify who would be a Subsubcontractor.

If the people in question are engaged under a ‘labour only’ agreement then they would be classed as People under the Short Schedule of Cost Components, which would include agency staff as you have said.

Whether a person is a People cost or a Subsubcontractor can be determined by a combination of factors, including; how they get paid, treatment for taxation purposes and insurance requirements.