Under ECC option D:
1. What if the contractor did not follow procurement procedure;
Clause 11.2 (25) "was incurred only because the contractor did not follow procurement procedure".
Procurement procedure includes bidding, and the purpose of bidding is to get the most competitive price. Selecting the highest bidders should be justified.
The Contractor purchased 1,000 bags of cement 40kg per bag for usd15 per bag Total Usd15, 000.
The Employer's cost verification team discovered that the Contractor conducted bidding for the purchase of the cement, the bidding documents shows that the lowest bid for the cement was Usd5 per bag (40kg per bag). No justification why the Contractor selected the highest bidder.
Had the Contractor selected the lowest bidder, the cost should have been Usd5, 000 only. Now the question is how do you treat the difference amounting to Usd10, 000?
2. How about clause 52.1 "Defined cost includes only amount at open market or competitively tendered prices" (with emphasize on the word INCLUDES ONLY AMOUNT) can we use this?