Effect on cost of contract time extension for output-based contracts

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ID: 285112
2025
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Abstract
This practicum project explores the financial and procedural implications of contract time extensions under output-based contracts within the Department, particularly focusing on consulting services during the Project Preparation Stage, which includes Feasibility Studies and Detailed Engineering Design. As the Department adopts output-based contracts to better match the complexity of large infrastructure projects, it becomes essential to analyze the challenges and benefits associated with this contractual shift. Output-based contracts are paid by the outputs delivered, not through the time rendered by the consultant. Thus, the Department does not usually allow additional costs during contract time extension for this type of contract. The study aims to estimate the cost impact of time extensions across selected projects, compare these costs with those incurred from project delays, and propose a structured plan for implementing contract amendments, in consideration with the possible cost implications. Through the contractual data gathered from three ongoing and completed projects, the study found that the cost of extending a contract is significantly lower than the financial and operational consequences of project delays. This supports the inclusion of output-based reimbursable expenses without the need for formal contract amendments to continuously support the consultant’s operations and activities during the extended period. The study further proposes the addition of a formal process to account for cost increases due to contract time extensions—an aspect currently lacking in the Department’s system. By implementing this process, both Consultants and Implementing Offices will benefit from a more consistent, flexible, and efficient approach to contract management, ultimately enhancing project delivery and performance under output-based contracting.
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Authors Diaz, Krizelle P.
Journal Malay Journal
Year 2025
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