TARGET + COST CONTRACT

TARGET & COST

Target
Specific amount of estimated project cost agree
d between client and contractor.
Including fee, estimated profit, risk, emergency,
etc
Cost
Actual amount of project cost which would be cl
aimed from client.
Actual amount may be vary from original value.

Target + Cost Contract

Applied reimbursement method (CLAIM)
Tendering
Open tender, or
Closed tender, or
Direct negotiation

The contractor would bill the client after

Stages completion, or
Monthly progress, or
Project finish

TARGET + COST CONTRACT

The contractor and owner agree to a target
estimate of construction.
Bonus or penalty arrangements are tied to t
his target figure.
The work must have a fairly definite nature.
Drawings and specifications must be
s
ufficiently developed to enable a reasonably a
ccurate cost to be determined.

Pain & Gain Relation

CONDITION
BASED ON
AGREEMENT

Profit

Loss

Client

Shares 0-50%
cost saving

Shares 0-100%
extra expenditure

Contractor

Shares 50-100%
cost saving

Shares 0-100%
extra expenditure

ADVANTAGES
Encouragement to finish the work quickly
and as economically as possible.
The client also stands to benefit through
the contactor's efficiency.
Contractor able to estimate future inflation
in order to maintain the cash flow of
project.

DISADVANTAGES
Revising target cost due to major variations or
cost inflation might cause difficulty/dispute.
A tight cost control must be exercised, which
may be difficult and costly.
Under-quote of target cost would affect the
later part of the project.
Workmanship maybe sacrifice by the contracto
r in order to save cash.
Contractor may over inflates the target
e
stimation and could be costly to the client.

SUITABILITY
Among experienced and large company with
strong cash flow.
The company which expert and resourceful in
required field of work.
Large scale project such as construction of airp
ort, port, stadium, dam, etc.