Cost of Cost-Checking

How much should I spend on cost checking in open-book contracts?

NEC clients on open-book contracts often do not know what they are paying for cost checking, especially when using generalist auditors. Frequently the amount of money spent on cost checking can be hidden among a basket of activities. So, as a client, the first step is to isolate the cost of cost-checking so you can understand whether you are receiving value for money.

Once you have isolated the cost, in our experience overall you should not be paying more than 0.1% of the value of costs checked. However, in practice this may fluctuate from project to project because assurance costs should vary in response to an agreed level of risk. Riskier projects and areas should attract more cost checking and therefore the effort will cost more.

If overall you are paying fees and internal costs of less than 0.1% of costs checked, and amounts are variable dependent upon an agreed level of risk, you are likely to be spending an appropriate amount.

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