construction contract help please…

The contractor is in the intermediate stage of completion of a construction contract for the building of a new privately owned road bridge over a river estuary.
Approx duration of contract 3 years
Date of commencement 1 October 1998
Total contract price $40 million
Estimated total cost $28 million
An independent surveyor certified the value of the work in progress as follows:
on 31st March 1999 $12 million
on 31st March 2000 $ 30 million (including the $12m in 1999)
Total costs incurred at:
31 March 1999 $ 9m
31 March 2000 $28.5m (including $9m in 1999)
Progress billings at 31 March 2000 were $25m
On 1 April 1999 the contractor agreed to a contract variation that would involve an additional fee of $5m with associated additional estimated costs of $2m

The costs incurred during the year to 31 March 2000 include $2.5m relating to replacement of some bolts which had been made from material that had been incorrectly specified by the firm of civil engineers who were contracted by the the contractor to design the bridge. These costs were not included in the oiginal estimates but the contractor is hopeful that he can recover this amount from the firm of civil engineers. Advice to the contractor from lawyers is that there is a 60% chance of success.
Percentage of completion of the contract is based on value of the work certified to date compared to the total contract price.

I’m sorry for a such a long question. I wanted to know why is $2.5m rectification costs included in ”costs incurred to date” shouldn’t it be excluded? Also how should we treat the extra $2m costs???