Guaranteed maximum price with target cost
Risk allocation and pricing approaches, guidance note, published by the Government Commercial Function in May 2021 suggests that a guaranteed maximum price with target cost (or target cost incentive fee) is: ‘Based on a ‘target cost’ and a ‘guaranteed maximum price,’ under this mechanism, there is gain and pain share between the parties depending on the extent to which there is a difference between actual costs and the target cost. The supplier is wholly responsible for costs above the guaranteed maximum price.’
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