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I <br />3.11 General Issue: Indirect Costs <br />CMC and Henderson have decades of experience with engineering design, bid <br />preparation, and contracting and contract management. Consequently, <br />Henderson does not understand the rationale behind DMG's standard two <br />percent surcharge for engineering work and/or contract/bid preparation. Likewise, <br />Henderson questions the statutory authority to attach this additional fee when <br />Section 4.2.1(5) of the Mineral Rules and Regulations of the Colorado Mined Land <br />Reclamation Board for hard Rock, Metal and Designated Mining Operations <br />(Rules) states only that "The Financial Warranty amount shall include an amount <br />equal to five (5%) percent of the amount of the cost of reclamation to defray the <br />administrative costs incurred by the Office in conducting reclamation". Henderson <br />is not questioning this five percent attachment. <br />Normally, these indirect costs are considered part of project management and <br />administration. The five percent line item for management and administration <br />should easily cover the engineering/contract/bid components. While it is <br />Henderson's experience that five percent is somewhat high, Henderson has no <br />objection to it. However, Henderson strongly believes that the two percent <br />surcharge should be eliminated from the total FW for the Henderson site. <br />4.0 FINANCIAL WARRANTY REVISION SUMMARY <br />Approval of this clarifications report will refine the FW cost calculations in a number <br />of areas and will result in a total FW reduction for clarification changes of <br />$12,524,215. As previously stated, Henderson submitted TR-12 to closely <br />precede these additional non-TR clarifications. A Henderson spreadsheet, <br />incorporating the changes proposed in both TR-12 and this clarifications report, <br />including indirect cost percentages of direct totals, is presented in Exhibit K. The <br />total FW based on Henderson's calculations is $22,989,782. The total reduction <br />from DMG's initial estimate of $54,695,000 is $31,705,218. This total represents <br />an increase in Henderson's current FW of $12, 856, 782. <br />14 <br />