Target contract for construction
See also Target cost contract.
NEC was first published in 1993 as the New Engineering Contract. It is a suite of construction contracts intended to promote partnering and collaboration. The third edition, NEC3 was published in 2005.
The suite of documents includes a range of contract forms. Of these, the Engineering and Construction Contract (ECC), Professional Services Contract (PSC) and Term Service Contract (TSC) offer target contract options:
- Option C is a target cost contract with an activity schedule where the out-turn financial risks are shared in an agreed proportion.
- Option D is a target cost contract with a bill of quantities where the out-turn financial risks are shared in an agreed proportion.
Effectively, these are a form of target cost contract, or ‘gain/pain’ share arrangement. They introduce a mechanism enabling the contractor, and/or the consultant team, to share in the benefits of cost savings, but also to bear some of the cost when there are cost overruns. Contracting the contractor and the consultant team on a target cost basis can be an effective way of ensuring good collaboration.
NEC describe the target contract option as ‘…a type of pricing mechanism that allows the employer and the contractor (in the ECC) an approach for sharing risk and opportunity. The employer retains the cost and time risk linked to contractual changes, the financial effects of cost overruns can be shared. Target contracts should encourage delivery of a project on time and to budget, allowing a greater emphasis on Contractor’s cost than other arrangements.’
For more information see: Target cost contract.
[edit] Find out more
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
The talent pool in the LGBT community
The rainbow JCB will be making a welcome return to the London Build Expo on 23 and 24 October at Olympia.
An introductory article to external works - all activities carried out to the external environment of a building project.
With the clock ticking, RIBA say that a 'no deal Brexit' will be "disastrous" for the architecture profession.
The focus is generally on the lime binder, but the aggregate is actually the most significant element.
Planning construction projects
The importance of communication, collaboration and simplicity when planning construction projects.
New working group is set up to consider options for raising standards across the property agent sector.
BSRIA provide a top 10 list of recent legislation and guidance affecting buildings.
Record third-time winner of the RIBA Stirling Prize - our profile of one of the world's most celebrated architects.
Foster + Partner's London Bloomberg HQ building wins the 2018 Stirling Prize.
A release schedule is prepared if not all required information has been prepared or issued when the contract is executed.