They cover different things - see clause 41 of the Shorter Schedule of Cost Components for what the percentage for People O/Hs is. While it can vary hugely, it is "typically" in the low teens.
Whereas direct fee percentage is more typically in the high noughts e.g. 5.5% to 12%'is range, so you would probably get a good deal by accepting it.
However, I would ask whether the Contractor actually understands what this percentage covers and then work through it with them to get a figure which works for both Parties. Signing up to a contract where the commercials are not understood usually leads to problems down the line.
Whereas direct fee percentage is more typically in the high noughts e.g. 5.5% to 12%'is range, so you would probably get a good deal by accepting it.
However, I would ask whether the Contractor actually understands what this percentage covers and then work through it with them to get a figure which works for both Parties. Signing up to a contract where the commercials are not understood usually leads to problems down the line.