Clause 11.2 (26) states “Disallowed Cost is cost which should not have been paid to a Subcontractor or supplier in accordance with its contract.”
Clause 53.4 states “The assessment of the final amount due is changed to include any agreement the Parties reach” and “A changed assessment becomes conclusive evidence of the final amount due under or in connection with the contract”.
Operating clause 53.4 with a subcontractor the term ‘any agreement the Parties reach’ would suggest an agreement which is not necessarily made upon the terms of the subcontract. I interpret the intention of this clause as being able to capture the agreement of costs where they are of a ‘negotiated settlement’. As under this clause this would be the final amount due, the amount then agreed would be paid in accordance with the subcontract satisfying 11.2(26).
So under the main contract, subcontract cost could be disallowed if it is believed that the cost was not derived by following the terms governing the parties to the subcontract. However, if the parties to the subcontract are free to conclude the account by negotiation, the cost of which becomes due and payable, does this not mean that the disallowable cost eventually becomes allowable at final account?
There seems to me to be a conflict between these clauses so I am interested in understanding what peoples thoughts are on the relationship between these and what experience others may have had operating them on their contracts.