Risk allocation in target cost contracts
Target Cost Contracting Strategy in Construction
The problems inherent in the traditional design-bid-build procurement method often lead to adversarial working relationships within the construction industry. Target cost contracts, accompanied by a gain-share/pain-share arrangement serving as a cost incentive mechanism, have emerged in the United States, the United Kingdom, Australia and Hong Kong with the aim of achieving better value for money and more satisfactory overall project performance under a collaborative working relationship. This
... ook presents the underlying principles and practicalities of applying the target cost contracting strategy, along with a series of short case studies. Principles begin with the fundamentals, then cover the development of target cost contracting in major countries/cities, definitions of target cost contracting, perceived benefits, potential difficulties and critical success factors for implementation. Practices include the target cost contracting approach and process in general, and the key risk factors, risk assessment model, risk allocation and risk mitigation measures for target cost contracts in particular, together with a conceptual framework for the performance measurement of target cost contracts. Several short real-life case studies from the United Kingdom, Hong Kong, Australia and New Zealand are provided for further illustration. The book will appeal to a wide spectrum of readers, from industrial practitioners to undergraduate students, researchers and academics interested in construction contracts and procurement methods. Daniel W.M. Chan is Associate Professor in Construction Project Management and the Associate Head (Teaching and Learning) at the Department of Building and Real Estate at The Hong Kong Polytechnic University. He has published over 200 research papers on the broad theme of project management in leading construction management journals and international conference proceedings. Joseph H.L. Chan is Lecturer in Housing Management at the School of Professional Education and Executive Development (SPEED) at The Hong Kong Polytechnic University. To date, he has produced over twenty publications, including journal papers, international conference papers, consultancy reports and other written outputs related to construction procurement management.