Construction Contract Compliance Unlocks $100M+ in Data Center Cost Saving

Challenge: Cost-Based Complexity at Scale 

Cost-based contracts are designed to provide transparency — the client reimburses actual costs plus an agreed management fee. In practice, the structure creates multiple points where charges can drift from what was contractually agreed, especially when projects are running simultaneously at shared locations under separate agreements. 

For this client, the risks were compounded by the sheer scale and pace of investment. Contractor and subcontractor arrangements created a web of billing categories, each with its own complexity and potential for leakage. Pass-throughs, overhead, and markup treatment required careful validation against fee structures. Contingency and allowance provisions demanded strict authorization and documentation. Labor billing in construction is inherently nuanced, carrying daily rate caps, shift differentials, and role-based pricing. Each of these required granular review to ensure charges stayed within contractual boundaries.  

And with separate contracts governing different buildings at shared locations, costs could shift between project budgets without clear visibility. 

With more than $1.5 billion invested, even minor deviations translated into significant cost leakage. 

Approach: Contract Compliance Audit Across 10+ Data Center Builds 

PRGX brings deep expertise in construction contract compliance having audited $56B in construction project spend. We understand the cost-based structures, contractor billing practices, and project-level complexities create risk in high-value capital programs. The team conducted a comprehensive audit across all 10+ builds, reviewing contractor and subcontractor invoices, cost allocations, change orders, and supporting documentation against the underlying contractual terms. 

The PRGX audit plan included a focus on areas where compliance deviations are most likely to develop in complex construction portfolios. The team traced costs across projects, validated billing against contractual rate structures and fee provisions, and tested authorization and documentation requirements at every level.  

What distinguished the PRGX approach on this engagement was the depth of review. Rather than examining general contractor billings at face value, our team audited spend down through the individual subcontractor level—the firms that actually executed the work. Each line of spend was verified for accuracy against supporting documentation.  

Beyond invoice validation, PRGX also confirmed that subcontractor payments had been made and that the amounts paid matched what was billed upstream, ensuring the general contractor was only invoicing for costs it had actually incurred. 

Root cause analysis was applied throughout, identifying not just where deviations occurred but the process gaps that allowed them to develop.  As part of the deliverable, PRGX quantified the financial impact of each finding, giving the client a clear picture of recoverable value and future savings opportunities.  

The Results: $17M+ Identified, $100M+ in Future Savings 

Financial Impact 

The audit identified over $17 million in recoverable findings across the $1.5 billion+ portfolio. Beyond the immediate findings, PRGX identified over $100 million in future cost savings through ongoing monitoring of cross-project cost transfers, unallowed cost and markup compliance — giving the client a framework for sustained cost governance as its data center portfolio continues to grow.  

Recovery & Negotiation Leverage 

Clients can use the findings to negotiate directly with contractors or engage PRGX to advise in the negotiation process and manage recovery end to end. Some clients prioritize recoveries on active projects, while others focus on using the results to drive process improvement and tighten controls for future building activity.   

Key Findings 

The audit revealed a consistent pattern of contractor billing deviations across the portfolio: 

• Markup and overhead duplication: contractors used markups to charge miscellaneous costs outside contractual terms, while overhead was billed separately despite being covered under the General Conditions fee, resulting in duplicate charges 

• Unapproved contingency and allowance usage: contingency funds allocated without required owner approval, including for cost overruns and trade damage without documented recovery efforts; allowances billed based on estimates rather than actual incurred costs 

• Cross-project cost shifting: transferring expenses between captive budgets at shared locations under separate project agreements 

• Labor billing above contractual caps: hourly billing that exceeded established daily rate caps without authorization 

• Inconsistent tax and bond treatment: corporate-level business taxes charged as direct project costs contrary to applicable rules, and subcontractor bond costs were billed without consistently crediting related offsets 

• Unsupported General Conditions and General Requirements billing: GCs/GRs billed as lump sums based on estimates without adequate cost tracking or supporting documentation 

Operational & Process Impact 

The review provided the client visibility into both where contractor billing practices deviated from contractual terms and why those deviations occurred. By linking each finding to its root cause, control gap, and financial impact, PRGX helped the client move beyond recovery to prevention and strengthen governance across future builds as the firm continues to invest in data center capacity. 

Looking Ahead: A Roadmap for Stronger Construction Cost Governance 

PRGX translated the audit findings into actionable recommendations organized around five priorities: 

• Billing compliance controls: strengthened validation, documentation, and reconciliation requirements across all cost categories 

• Authorization and fund governance — stricter approval, scope, and recovery requirements before contingency or allowance usage 

• Cross-project visibility: embedded monitoring to prevent unauthorized cost transfers between captive budgets 

• Continuous audit program: a scalable framework to apply learnings and monitoring across future builds 

• Lifecycle contract management: embedding contract review and compliance from pre-construction through active build monitoring to final invoice closeout 

Together, these recommendations position the client to shift from project-by-project recovery to scalable cost governance, helping prevent future leakage, improve contractor accountability, and protect capital spend as its data center portfolio continues to grow. 

Strengthen Your Construction Cost Assurance with PRGX Contract Management 

Whether you’re at the pre-construction stage, managing an active build, approaching closeout, or reviewing completed projects, PRGX Contract Management can help. Our team brings deep construction expertise to every phase of the project lifecycle, ensuring contractual compliance and cost assurance from first dollar to final invoice. 

Just in the past year, PRGX has analyzed $2.3T in client spend with $2B client revenue across industries and services. Chat with our team of experts about your unique construction project challenges and goals to learn more.