Designing the works is part of the works (if the WI says it is), in the same way as building the works is. It is not a separate service as such. And in any event clause 25.2 does not deal with costs between the Parties, that is set out elsewhere in the contract, by the definitions of Defined and Disallowed Costs. Clause 25.2 is about costs that the Employer incurs either internally or by paying 3rd parties. In any event I am struggling a bit to understand how there would be any additional cost to the Contractor caused by these designs. In most cases the design will be carried out by a consultant, employed as a Subcontractor by the Contractor. Normally such consultants are employed on lump sum Fees, i.e. PSC Option A or similar, and that means that the Contractor should not be paying them to correct their mistakes, i.e. designing not in accordance with the WI.
If the Contractor spends more on designing the works that is a shared risk under Option C in exactly the same way as it is if he spends more money on building the works. Both Parties share in that additional cost
However it is important to realise that the Contractor’s design has to be judged by what the WI requires, not what the PM thinks it should require, or the contractor should have assumed it required. The Contractor is not required to have a crystal ball in that respect. As long as the design complies with the actual WI and law then if the PM rejects it that will be a CE..
If, as you suggest, this is a significant issue for the future then it needs to be managed. It is in neither party’s interests to expend additional design costs unnecessarily, as both will shoulder their part of that burden. The PM should issue an early warning and insist the Contractor attends a Risk Reduction meeting with their designers to try to prevent designs that do not comply with the WI from being issued in the future. Remember at the end of it to re-issue the Risk Register, recording how this is going to be managed.