In our NEC3 Engineering and Construction Contract (ECC) using option C (target contract with activity schedule), the contractor has a plant hire agreement for the provision of certain mechanical plant (which is of course ‘Equipment’) and different fees arise for direct costs and subcontracted costs. We are trying to determine the correct fee percentage to apply in this case. We consider the plant hire agreement is a subcontract under ECC clause 11.2(17) second bullet, which talks about a ‘service’. This is not a defined term in the ECC so would you consider that the hire of equipment to provide the works could be argued to fall under this category?
Answer
It is not what the mechanical plant is doing that decides whether the plant hire is a subcontract or not; it is the nature of the contract between the plant owner and the contractor for the supply of the mechanical plant.
Providing mechanical plant for hire on an hourly or daily rate to carry out work under the direction of a contractor is not a contract to provide a service, it is a simple hire contract. On the other hand, if the contract was to carry out the work directly – that is be responsible for the work, supervise it, decide how it is carried out and be paid for either as a lump sum or on a pro rata basis – the plant supplier would be a subcontractor. The mechanical plant should therefore be paid for under item 21 of the schedule of cost components, added to which should be the direct fee percentage.
