Target contract for construction
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] Related articles on Designing Buildings Wiki
Featured articles and news
The benefits of writing articles for your organisation
How to create a profile for your organisation and publish for free.
No Falls Week. The importance of safe working at height
What to expect and what is on offer to avoid accidents.
Scottish Government action to reach net-zero targets
Retrofit expert group highlight critical actions needed.
A forward thinking, inclusive global community of members.
From engineered product life-spans, to their extension.
Circular economy in the built environment
A brief description from 2021. Where are we now?
Mental Health Awareness Week with ABS
Architects Benevolent Society programme of activity.
CLC publishes domestic retrofit competency framework
Roadmap of Skills for net zero.
May 13-19: Moving more for our mental health.
Understanding is key to conservation.
Open industry engagement survey seeks responses
Institutions and the importance of engagement.
National Retrofit Hub unveils new guide
Digital Building Logbooks and Retrofit: An Introduction.
Enhancing construction site reporting efficiency
Through digitisation and the digital revolution.
Noise in the built environment
BSRIA guide TG 20/2021.
17,000 people suffer conditions as a result of exposure to excessive noise at work.
Turning down the noise: Auditory health
A pervasive risk with far-reaching consequences.
Getting the most out of heat pumps and heating
How heat pumps work and how they work best.
Electrotechnical excellence, now open for entries.