Frequently Asked Questions

We have priced a tender under NEC3 Engineering and Construction Subcontract (ECS) main option B (priced contract with bill of quantities). The main contractor is asking us as the subcontractor to reduce our direct fee percentage. Looking at the contract, we cannot see where the fee percentage comes into play, so
is the contractor’s request relevant?
The direct fee percentage and the subsubcontracted fee percentage are used to calculate the fee – see clause 11.2(8) in the ECS. In option B the fee is used to calculate the value of compensation events – see clause 63.1.

Note it is important to understand that compensation events are valued based upon defined cost plus fee (see clause 63.1). Defined cost is a defined term (see clause 11.2(22)). Compensation events are not valued using the rates and prices in the bill of quantities unless both parties agree to do so (and agree the rates to use) – see the last sentence of clause 63.13.

The levels you set for your fee percentages at tender stage are therefore important. They have to be set to recover any additional costs and profit that are not covered by defined cost, that is not included in the shorter schedule of cost components – see clause 52.1. It is therefore your decision as to what these should be, not the contractor’s.

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