What percentage of overhead and profit is acceptable?

Question

Accepted Answer

QUESTION

If a deleted item is a lump sum unit is the lost overhead and profit still applied to only 85% or does it need to be applied to 100% on lump sum items?

COMMENT

The CA is the interpreter of the contract in the first instance. (GC3.6.1)

The User Guide (Volume 1) Section 4 page 22 of 43 article 5.4.3 discusses contractor costs, saying GC10.1.1 gives general guidance, but that each contractor may have different “payroll burdens”. This User Guide discussion is worth looking at in detail, as well as GC10.1.1. (The User Guide is available as an electronic document from MMCD)

GC1.76 defines the Variance Threshold Percentage and references ‘unit price items”. This suggests that lump sum items are exempt from calculations using a variance threshold. Again, the CA should provide a ruling on this aspect of the contract. GC7.0 Changes contains the procedure for a Change Order. Valuation of the Change is set out in GC9.2.1.

Failing agreement, Force Account is a default calculation.

What percentage of overhead and profit is acceptable?

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