What does the Fee mean under NEC4?

The Fee is the Contractor's margin, and under clause 11.2(10) it is the amount calculated by applying the fee percentage to the amount of Defined Cost. The fee percentage is a single figure the Contractor enters in the Contract Data at tender, and it is applied to Defined Cost wherever Defined Cost is used. Under Options A and B that is only the assessment of compensation events, so the Fee appears on every quotation and every Project Manager's assessment. Under Options C, D and E the Price for Work Done to Date is Defined Cost plus the Fee, so the Fee is paid at every assessment date as well as forming part of every compensation event that moves the target. The Fee covers everything the Schedule of Cost Components and the Short Schedule of Cost Components do not list: head office overheads, profit, and any cost that is not a component, because the schedules state that such costs are treated as included in the Fee. It is applied to Defined Cost after Disallowed Cost has been taken out, so a cost the Project Manager disallows loses its Fee too. It also works in both directions: an omission assessed as a compensation event reduces the Prices by the Defined Cost saved plus the Fee on it. What goes wrong most often is double counting and wrong bases. Contractors add a percentage for overheads on top of the Fee, or price the quotation preparation as a cost, or apply the fee percentage to the Prices or to a Subcontractor's quotation rather than to Defined Cost. Project Managers apply the Fee to the net of a compensation event after a deduction that was never Defined Cost. And both sides sometimes assume the Fee is where risk lives; it is not, because clause 63 puts cost and time risk allowances into the forecast Defined Cost and the Fee is then applied on top.