Frequently Asked Questions
You therefore need to assess the compensation event based upon defined cost plus fee, but you then need to deduct that from the prices in the activity schedule for the omitted work to come up with the net effect. You then add that as an item in the activity schedule (usually under the heading of the compensation event number) and, at the same time, also remove the original activities and their prices from the activity schedule, because that work will not be done.
If the assessment of the compensation event is lower than the prices, that will produce a positive figure in the activity schedule. If it is higher, it will produce a negative figure. That means that the effect of the compensation event is neutral as far as the contractor is concerned. If the contractor was forecasting to make a profit from the work (over and above the fee), it still would, and if it was forecasting to lose money on the work, it still would too.