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
Robotics and the construction industry.
ECA comments on CLC's three-phase recovery plan.
Their diplomatic and architectural history.
The origins of the six volume series.
Built to defend British waters, only to serve as pirate radio stations later.
A balanced approach to the office
Wellbeing to influence mix of home and office based working.
An introduction to cobotics.
Survey reports on outlook for the engineering sector.
A simple path to possible error avoidance.
Construction + technology = ConTech.
Social distancing and construction sites
New low and high tech tools enter the marketplace.
Report looks at mental health in the built environment.
Radiant wall heating method to control rising damp.
What future infrastructure provision might look like.
Highlighting the health benefits of home improvement.
Pavilions for music, entertainment, and leisure. Book review.