Expenses and the fee

We are a contractor on an NEC3 ECC Option C project. Should our expenses be subject to the direct fee percentage, or subcontracted fee percentage, or neither?

You are paid defined cost plus fee in NEC3 ECC Option C, see clause 11.2(29). Fee is defined in clause 11.2(8), which is self-explanatory. Defined cost is defined in clause 11.2(23). For the cost of your subcontractors, you are paid what you have paid your subcontractors plus the subcontracted fee percentage, as set out in the contract data part two. For all other costs you have to look at the rules in the schedule of cost components, and you then add the direct fee percentage for those costs. For any one cost, you only pay one or other of the fee percentages.

So the question is, are the items you are claiming contained in the schedule of cost components? If they are, they are paid at what you have paid for them. In addition, if the cost falls within items 11, 12, 13 or 14 of the schedule of cost components, the working areas overheads percentage set out in contract data part two is added to that cost, see item 44 of the schedule of cost components. Then the direct fee percentage is added to the total of this. If a cost is not listed in the schedule of cost components, you are assumed to have allowed for it in the fee, see clause 52.1.

Looking at some examples of travel and subsistence, the actual cost you pay a person as an allowance, or pay others such as taxis, train fares or hotels, are included in the schedule of cost components, see items 13(a) and (b). To this you add the working areas overheads percentage and then the direct fee percentage. Remember in all of this the project manager can verify, at least on an audit basis, the actual amounts of defined cost you say you have paid, see clauses 52.2 and 52.3.

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