University of the Cumberlands BADM Cost Reimbursable Contract Calculation Essay – Assignment Help

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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?
3. Under option 2, 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.

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