$1.$Cost reimbursable contract calculation.

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?

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?

Under option $1.$b$,$ at what dollar amount of total costs would the contractor be assuming all of the excess costs beyond that point?

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