Driver Trett Digest Issue 26 - Flipbook - Page 29
DIGEST | ISSUE 26
In addition, the contractor is specifically required to keep the following records:
Accounts of payments of Defined Cost.
Proof that payments have been made.
Communications about, and assessments of, compensation events for subcontractors; and
Other records as stated in the Scope.
Ordinarily, this would not be an unreasonable requirement for a cost reimbursable contract.
However, this approach would appear to be at odds with the ‘forecast’ element of a compensation event and for which
there can be no accounts of payments or proof that payments have been made.
Furthermore, if the contract is premised on the reimbursement of all costs – providing they have been incurred in
accordance with the contract – what is the purpose of attempting to value and agree compensation events in advance
of them actually occurring?
From an employer’s perspective, the argument would be that an early forecast of cost is necessary for the employer
to make an informed decision as to whether or not it should proceed with a change or to take measures to reduce the
impact of a change.
However, a contractor may prefer the certainty of cost reimbursement and this may have an impact on any
contingency it may otherwise build into the contract. The principal reasons for using an Option E is the absence of
work scope definition and the requirement for an early start to construction. As a consequence, the contractor’s risk
is – deservedly - minimised through cost reimbursement and a lower Fee. On that basis, it appears somewhat unfair
to require a contractor to forecast cost without having an adequate provision for risk.
Therefore, when Option E is selected, it may be in both parties’ interests to consider amendments through the Z
clauses.
...if the contract is premised on the reimbursement of all costs –
providing they have been incurred in accordance with the contract
– what is the purpose of attempting to value and agree compensation
events in advance of them actually occurring?
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