Contracts and subcontracts which are let under NEC Option C,D or E (or other similar cost reimbursable arrangements) will usually seek to obtain some form of assurance over the accuracy of the costs applied for. Over the last 18 years, we have seen many different approaches to cost checking. The most effective, however, respect the collaborative nature of these contracts.
In our experience, to achieve a collaborative approach to cost checking there are five essential components:
1. Professional independence
Cost checkers should be independent and be free and be seen to be free to draw their own conclusions. Any hint of bias will undermine confidence.
2. Qualified and experienced
Cost checkers should understand the contract, be qualified, and experienced in cost audit and take a pragmatic and commercial view. Untrained or inexperienced people can quickly reach the wrong conclusions when analysing and testing complex accounting data sets. Issues may get raised as a result, which cause unnecessary tensions between the parties.
3. Transparent process
The cost checking process should be open and transparent so that both the client, contractor and subcontractor understand what is being checked and why – this will ensure the results of the checking process avoid nasty surprises for the parties involved.
4. Open discussions
Difficult issues should be tackled head on in an agile manner, with a view to overcoming them to allow all parties to move forward quickly.
5. Balanced and driven by the contract
Fundamentally cost checking should not attempt to create an advantage for one party but should allow both parties to pay or be paid what they are entitled to under the contract.
To find out more about our approach or for a confidential chat about a potential issue please get in touch.
Darren Ward FCA, AQ – Managing Director
darrenward@theorangepartnership.co.uk
