Answer: Because the contract demands (clause 52.2) that the Contractor keeps records of accounts of payments of Defined Cost, also proof that the payments have been made.
But in any case, doesn’t the Contractor have a corporate obligation in the eyes of any jurisdiction I’m aware of to capture cost (not quite Defined Cost, but not too far off!)? So how difficult is it to tag cost – tag for accountancy/legal purposes, tag for ECC Defined Cost, Disallowed Cost, Working Areas overheads, and Fee %’s and so on. Each cost can only go in one place so surely any Contractor needs an outstandingly simple but effective cost recording system, all neatly offered up in one system and available to view from the perspective of an accountant or the ECC Project Manager (PM). Simples!
Any cost into the Contractor’s company (real cost) can then be tagged according to the pre-determined set of rules in ECC that determine what is, and what is not, recoverable as Defined Cost, Fee and so on. Auditing by the PM becomes far easier, the Contractor in turn has a good basis to provide the required forecasts of total Defined Cost under 20.4, maybe has the basis for producing earned value analysis (EVA) (if required), trending, and so on.
So, in the interests of sharing good practice, who has such a great system?
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