Question

If the Contractor demands an increase in price, what justification would you provide your boss for offering or agreeing to increase the compensation, and b) what argument would you present to the Contractor for reducing the existing price.

Answer 1

a) I will provide following justification to my boss for offering or agreeing to increse the compensation.

i) Due to increse in prices of raw materials and other items i.e due to escalation clause which means increse in the contract price with the escalation rate I.e percentage increase in prices of raw material.

ii) If the quality of work and performance of contractor is better than expected and it's competitors.

iii) If contaractor completes the project earlier than the expected time and which results in benefit to the company.

b) I will provide following argument to the contractor for reducing the price of contract :-

i) Experience of the contractors in comparison to its competitors and other players in the industry to make him realise and to secure a lower price.

ii) Having multiple options for contractor can lead to reduction in price of the contract as the contractor which will bid lower cost will be selected.

iii) By purchasing and supplying raw materials directly to the contractor which will reduce the price of the contract.