Common use of WHAT Clause in Contracts

WHAT. The Deal ensures that project partners establish a shared pool of money (i.e., a Profit Pool or Incentive Compensation Layer). The owner/operator typically guarantees that all true costs will be paid, regardless of outcome, thus removing the fear of catastrophic failure and encouraging innovation. With an IPD-contract (Integrated Form of Agreement), this pool of money can be structured to directly or proportionately increase or decrease depending on the cost of the work. Note: Tying the pool solely to the budget essentially ties it to the schedule because the longer a project goes the more overhead costs increase and the more exposed the project becomes to escalation increases. It also ties to the scope because scope typically will be a key element of the Project CoS. Where other contract forms are in place, this pool will likely need to be created with some form of proxy. Project compensation can be more specifically tied to the CoS through contract performance bonuses or contract penalty for missing targets. This has shown to be helpful in more stringent procurement environments. Aligning the bonus to the outcome encourages teamwork and rewards the team accordingly. It also discourages silos.