DIGEST | ISSUE 26In 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; andOther 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 whichthere 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 inaccordance with the contract – what is the purpose of attempting to value and agree compensation events in advanceof them actually occurring?From an employer’s perspective, the argument would be that an early forecast of cost is necessary for the employerto make an informed decision as to whether or not it should proceed with a change or to take measures to reduce theimpact of a change.However, a contractor may prefer the certainty of cost reimbursement and this may have an impact on anycontingency it may otherwise build into the contract. The principal reasons for using an Option E is the absence ofwork scope definition and the requirement for an early start to construction. As a consequence, the contractor’s riskis – deservedly - minimised through cost reimbursement and a lower Fee. On that basis, it appears somewhat unfairto 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 Zclauses....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 compensationevents in advance of them actually occurring?29
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