Pain/gain share arrangements in target cost contracts
Earlier this year, in the case of AMEC Group Ltd v Secretary of State for Defence  EWHC 110 (TCC), the Technology and Construction Court highlighted the importance of drafting target cost clauses with precision. The court found that the contractor could only recover costs incurred reasonably and properly beyond its cap on liability provided in a maximum price target cost contract.
The secretary of state for defence, as employer, had engaged AMEC Group, as contractor, under a design-and-build contract to provide a nuclear submarine facility on the Clyde.
The project had various issues that led to significant cost increases. Some of the issues encountered did increase the guaranteed maximum price, but many (by value) did not. The parties agreed a pain/gain mechanism, sharing any costs savings and cost overruns up to approximately £140m, after which a further £50m of cost overrun or other liabilities was to be borne by the contractor…
Click on the link below to read the rest of the Addleshaw Goddard briefing.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from Addleshaw Goddard
News from The Lawyer
Briefings from Addleshaw Goddard
Addleshaw Goddard looks back at the key legislative developments for 2014.
Addleshaw Goddard gives an overview of future legislative developements for the coming year.
Analysis from The Lawyer
Which firms are cutting it in this era of slimline rosters, and who are the GC new brooms making clean sweeps? The Lawyer can reveal all
Could Slater & Gordon achieve its stated aim of becoming a top consumer brand by acquiring Pannone?