The NOPs' Corporate Overhead represents a multitude of costs. There is considerable variation between individual NOPs on what costs they will include within this component of the NOPs' fee and what they expect should be Reimbursable Costs. During the selection process, the NOPs and Owner will need to discuss and agree the classification of all likely project costs as either Corporate Overhead or Reimbursable Costs. Examples of the type of costs that may be included in Corporate Overhead are:
corporate office costs, including administration and management staff;
corporate IT management fees;
corporate software licensing;
financing costs (interest) on normal project cash flow;
corporate management expenses (airfares, hotels) incurred in relation to the alliance;
corporate managers' costs (generally including ALT attendance);
staff bonuses;
overtime payments;
recruitment and redundancy;
relocations;
plant and equipment for the project office;
corporate OH&S auditing and system development costs;
staff development;
entertainment of staff and workforce; and
payroll and administration.
An Owner may need to seek specialist advice from an experienced alliance financial auditor to establish an appropriate definition of Reimbursable Costs. Ultimately, however, the Owner will remain accountable for the decisions about this and should therefore develop a thorough understanding of how the NOPs will develop and seek to negotiate both the Corporate Overhead amount and Reimbursable Costs definitions in the PAA.
| The complexities of Corporate Overhead and Reimbursable Costs The decision regarding what reasonably constitutes a Reimbursable Cost and what should comprise part of the NOPs' Corporate Overhead requires industry knowledge and expertise. Some items are clear; however, others are less so. One example is the costs associated with preparing the Proponent's Project Proposal (such as estimating costs). Another example is the business-as-usual project audit(s) undertaken by the NOPs' corporate office in areas such as Safety, Environment and Quality. Many (but not all) of the above costs are part of the Proponent's 'business-as-usual' costs and are covered by their Corporate Overhead. This means reimbursing those costs may result in the NOP/Proponent being paid twice. |