The works are within a research and development environment whereby there is continual development, testing and rework ahead of completion of elements of the work.
For both target cost contracts(C/D) and cost reimbursable type contracts(E) the cost of correcting defects after Completion is a disallowed cost. However, this means that the cost of correcting defects before Completion is NOT disallowable, i.e. the Contractor should be paid.
Glenn is correct in what he says with the exception of the following 5th main bullet in clause 11.2 (25) : “Disallowed Cost is … … the cost of - corecting Defects caused by the Contractor not complying with a constraint for how his is to Provide the Works stated in the Works Information”.
I.e. they have not follwed an explicitly stated method and this has resulted in a Defect.
Both Glenn’s and Jon’s responses are correct, however lawyers would argue that if a Contractor continually failed to correct a Defect despite repeated efforts to do so that in such situations it would be unreasonable for the Employer to pay for this conituned correction of Defects
If a contractor did continually fail to correct a defect after repeated efforts on what basis would it be unreasonable (either within or outwith the contract) for the employer to pay defined cost under a either of the target contracts?
Picking up on the comment Barry made about it being unreasonable for the Employer to pay for this continued correction of Defects. I think the test here really is whether the cost incurred in attempting to correct a defect but failing has been incurred properly or has it been incurred improperly in the sense that resource and material used to ineffectively rectify a defect has not been used to Provide the Works. On that basis you would get paid once for, in fact, fixing the defect but all costs incurred in unsuccessful attempts would be disallowable.
In looking at this you need to consider what the defect actually is and whether you are getting multiple attempts to fix a single defect or there are in fact multiple defects giving similar symptoms or there is one defect but only symptoms rather than the underlying problem are being addressed. This needs careful examination on the facts before any disallowance is made.
A very comprehensive response by Rob which highlights the involved nature of the management of Defects.