Cost shifting is the unauthorized transfer of costs from non-reimbursable cost centers to reimbursable cost centers. Reallocated costs are the authorized repurposing of budget dollars resulting from advantageous purchasing practices or efficient delivery of construction services. Knowing the difference between these strategies and testing for compliance can mitigate potential conflicts by preventing confusion and enhancing communication between the owner and contractor. The ability to recognize cost shifting can also helpful in identifying systemic noncompliance that can lead to owner billing credits.
Key learning objectives
This presentation will use a case study to illustrate how to:
- Test for cost shifting
- Differentiate between cost reallocation and cost shifting
- Recognize high risk scenarios
- Identify enabling contract terms
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