The project assume more of the risk of cost overrun

Assignment Help Operation Management

Reference no: EM132292919

Cost reimbursable contract calculation.

1. A contract calls for a total payment of $800,000 with a guarantee. Essentially the contractor is guaranteed to make at least $200,000 above his costs. If the contractor can demonstrate his costs exceed $600,000, the project will pay the difference, with a $50,000 ceiling on the overage. The contractor demonstrates he spent $623,000. How much (gross) must the project remit to the contractor?

2. Another option for the same contract has the contractor guaranteed to be paid his costs plus 20%, for costs that exceed $600,000. With the same initial assumption—guarantee of $800,000 gross payment (no requirement to itemize costs), but if the contractor can show that costs exceed $600,000, the project will pay $800,000 plus the costs that exceed $600,000, plus 20% of those excess costs, with a ceiling of $900,000 gross. The contractor demonstrates he spent $623,000. How much (gross) must the project remit to the contractor?

QUESTIONS:

3. Under this second option (in 3.2. immediately above), at what dollar amount of total costs would the contractor be assuming all of the excess costs beyond that point?

4. In which option did the project assume more of the risk of a cost overrun? Explain.

Reference no: EM132292919

Questions Cloud

Does this practice use valid reward distribution system : Is it ethical for CEOs to be paid so much more than other employees? Does this practice use a valid reward distribution system?

Fill in the surface-track and sector : We need to get to block 29137. Fill in the surface, track and sector that holds that block.

Brief discussion of what the issue or threat : A brief discussion of what the issue or threat is and how it could affect the company

Start-up steps to form the business : Type of ownership and rationale; start-up steps to form the business; personnel (or functional) needs; proposed staffing to handle managerial.

The project assume more of the risk of cost overrun : In which option did the project assume more of the risk of a cost overrun? Explain.

Purpose of the mmc : What's the purpose of the MMC? What is the added feature in Windows VIsta/7?

Give a domain of discourse : If P(x)=T, P(y)=F and Q(x)=F, Q(y)=T ; give a domain of discourse so that the two propositions are not equivalent.

How much must the project remit to the contractor : How much (gross) must the project remit to the contractor?

Evaluate the market segments and make decisions : Evaluate the market segments and make decisions about which among them is most worthy of investment for development.

User Account

All Pages