Conclusions and questions:
•To
minimise the budget, the ‘cost plus’ strategy should cascade as far as
possible down the chain to avoid incurrence of risk-related
contingencies at multiple levels with multiple mark-ups.
A Client's budget will still contain the usual contingencies for the overall project
(the contractor remaining incentivised by an allocation system of costs
against relevant targets in target-based
contracts).
•Effectively
by the Client investing in the loss of the ability to sue the Contractor they
gain immediate assistance in problem solving, a
quicker return to production and an enduring relationship
with the Contractor.
•The
Contractor loses the potential no cost profit from an unused contingency or
the use of cheaper/lower
specification materials and equipment and in return gains the advantage of a
contract on which they cannot actually lose money and which forges a long term
relationship with their Client.
•Obviously
other cost saving can be introduced to such a contracting strategy but what is
most important is that some major Client
(preferably a JV) is brave enough to give this concept
a serious try on a major project.