The Government of Thailand has signed a contract with SNC-Lavalin for the construction of an elevated express
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Question:
- The Government of Thailand has signed a contract with SNC-Lavalin for the construction of an elevated express highway that will run from one end of Bangkok to the other, so as to ease the pressure of traffic. The contract has been fixed at USD 100 million to be completed within 5 years. The scope of work has been fixed and agreed to. However, due to the timeframe of the project, the ceiling price for this contract has been fixed at USD 150 million. If the contractor exceeds the key performance indicators mentioned in the contract and can complete the project below the cost of USD 100 million, then an incentive of 40% would be paid. However, should the contractor exceed the cost of USD 100 million but below USD 150 million, then an incentive of 20% would be paid. But on the contrary, if the contractor exceeds the cost of USD 150 million, then the additional costs will be borne by the contractor with no incentive, in which case the Government of Thailand is only liable to pay the USD 150 million.
- What type of a contract was signed between both parties?.
- What was the reason for your choice?
- State one (01) major difference between Fixed Price Category of Contracts and Cost Reimbursable Category of Contracts. NOTE: The question has asked for a difference between the category, not the types. Therefore, any difference mentioned, between the types of contracts, will result in a deduction of 2 marks.
Related Book For
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
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