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.
 Related articles on Designing Buildings Wiki
Featured articles and news
3 ways the world’s fastest growing economies can close the infrastructure gap.
The sooner early warning notices can be appreciated as of mutual benefit rather than one-sided advantage, the better.
BSRIA responds to government green storage announcement.
What is phenomenology and how does it relate to the built environment?
Read about Belgrade's Brutalist landmark - the Western City Gate.
Read about the measures that can be taken by individuals to protect and minimise exposure to outdoor sourced air pollution.
Government announces leaseholds on new-build houses will be banned.
Transport Secretary announces public consultation into London's funding of Crossrail 2.
Have a look at some of the most impressive concert stage designs of all time, including Pink Floyd, U2, Rolling Stones, and more...
What is the Home Quality Mark? Find out how it can help you when buying/renting a new home.
Business Secretary launches £246m Faraday Challenge to establish UK as world leader in battery technology.
Government announces new plans for regulations to improve safety and security awareness of drone users.
Read our introductory article to the various different types of fuel.