Which fee percentage applies?

A Contractor working under an Option E contract has procured plant, labour and materials from the same supplier for the installation of a sheetpile wall.

The Contractor is stating that since he has procured them separately then the direct costs fee percentage (13% in this case) should apply.

The PM is arguing that, although no written “sub-contract” document has been prepared between the Contractor and the supplier, the supplier is clearly installing part of the works and should be defined as a sub-contractor under 11.2 (17) and thus the sub-contract fee percentage (2% in this case) applies.

Who is correct?


I think there may be a different answer for each component i.e. the Plant (construction Equipment in ECC terminology), the People and the materials (Plant and Materials in ECC speak).

To decide whether each component counts as a Subcontractor, you have to look at clause 11.2 (17) which defines what a Subcontractor is and the specific of each contract.

For example, if the it is a fixed price contract for the People to install the sheet pile wall, then it satisfies the first and arguably second bullet point of clause 11.2 (17). Ditto for the Equipment. On the other hand, if hired on a time charge basis, then both of these could fall into a People 14 and Equipment 21 of the Schedule of Cost Components.

If the Plant and Materials have been “wholly or partly designed specifically for the works”, then the supplier is a Subcontractor under that contract, but they are off the shelf purchases, then they are paid in accordance with Plant and Materials 31 of the SCC.