Pharmaceutical Company Recovers $90,000 from Initial Audit of Construction Project
A pharmaceutical company was preparing to build a $55 million lab and office space. Its contractor was to perform the work under a cost-reimbursable contract, whereby the pharmaceutical company would be billed for the cost of the work performed in addition to a fee that would cover the contractor’s profit and overhead up to a guaranteed maximum price.
CBIZ Risk & Advisory specialists helped the pharmaceutical company review the draft contract before it was signed to limit the company’s financial exposure and protect it from various overstated costs. This allowed our team to recommend changes that would better guard against hidden profit centers and expenses that should have otherwise been covered by the contractor’s fee.
During our initial audit, CBIZ identified overstated costs that related to sub-contractor labor rates. There were also markup issues. When cumulated, the totaled subcontractor markups exceeded the aggregated markup that was included in the contract. Our findings presented an opportunity for the company to recover upwards of $90,000 in project fees.
The factual cost data we provided helped the company make informed business decisions, on a timely basis, regarding the construction project. To date, the company has recovered $90,000 with future project savings anticipated.
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