Which Party carries the risk of inflation?
For Options A and B the contract is firm price and the Contractor carries all of the risk of inflationary increases in the costs of labour, plant materials etc.
For Options C and D, the risk of inflation is initially borne by the Employer as he pays recorded Defined Costs, which are effectively ‘current costs’. The risk is subsequently shared with the Contractor through the application of the calculation for Contractor’s share For Options E and F, the Employer already carries all of the risk of inflation since payments are of recorded Defined Cost. These are ‘current costs’ and automatically include for price increases occurring since the contract was signed. Option X1 is therefore irrelevant to Options E and F.