Construction Law/Profit on Profit (Main Contractor OHP on Subcontractor OHP)
I am working in a consultancy firm in UAE.
Our Main Contractor submitted a VO proposal, in his cost submission,
they include the Main Contractor Profit plus Subcontractor Profit.
Based on the new items they used a rate from supplier quote and coming up with a total cost. After that MEP Subcontractor added 10% OHP on top of the Main Contractor added 15% OH & Profit. Now my question is, this Profit on Profit allowed or applicable in to FIDIC 1987 reprinted 1992, 4th Edition contract?
Please note that MEP Subcontractor is not a nominated Subcontractor.
Hope to hear from you the soonest
FIDIC GCOC does not advise on the way OHP need to be reimbursed. However in most of the cases, the Engineer or Contract Admin insert amendments as part of PCOC wherein they stipulate such percentages.
In your case I understand that such information is missing. In such case you need to negotiate best OHP percentage with the SC and MC.
However while calculating OHP for MC, you may choose to deduct SC OHP and then calculate MC OHP.
VO Amount = AED A
SC OHP = OHP% x A = say B
Amount Payable to SC = A+B = say C
OHP for MC = OHP% x A = Say C ( not OHP% x C)
Total VO Amount = A+B+C
Hope this clarifies.