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How much should the contractor account for the award fee

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Reference no: EM133073099

Question - A contractor enters into a contract for the expansion of an existing two-lane highway to a three-lane highway. The contract price is P65 million plus a P5 million award fee if the expansion is complete before the holiday travel season. The contract is expected to take one year to complete. The contractor has a long history of performing this   type of highway work. The award fee is binary; that is, if the job is finished before the holiday travel season, the contractor receives the full award fee. The contractor does not receive any award fee if the highway is not finished before the holiday season. The contractor believes, based on its significant past experience, that it is 95 percent likely that the contract will be completed in advance of the holiday travel season. How much should the contractor account for the award fee?

Reference no: EM133073099

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